Bitcoin: The ASX-listed opportunities

Elsewhere, Bitcoin exchange traded funds (ETFs) are fast emerging offshore. Photo by Ozan KOSE / AFP

If you must, there is another way into Bitcoin. We don’t yet have Bitcoin Exchange Traded Funds, but we do have listed ASX exposures.

In fact a slew of crypto plays bobbed up in 2017 and 2018, offering exposure to crypto exchanges, bitcoin generation (“mining”) and blockchain, or the underlying “distributed ledger” technology that underpins cryptos.

Most were ahead of their time, to put it politely. Budding crypto exchange operator Byte Power Group delisted last year, while Ookami (OOK) has been in voluntary suspension since April 2019 and has all but abandoned its quest to develop an “ecosystem of advanced tech solutions”.

Fintech Change Financial (CCA) owns a 33 per cent stake in IvyKoin, a blockchain-based cryptocurrency for business transactions. In 2018, the company did not exercise its option to acquire the remaining two-thirds of the enterprise.

Apart from dabbling in the buy now pay later sector, the Singapore-based venture capitalist Fatfish Group (FFG) is also on trend with investments in Bitcoin “miners” and crypto exchanges.

Honourable mention goes to the ASX itself, which is replacing its ageing CHESS settlement system with a blockchain-based platform.

Let’s hope the IT geeks do a better job with that one than the bourse’s “improved” website …

Indeed we believe there’s only one pure-play ASX crypto exposure, DigitalX (DCC). The company runs two open-ended Bitcoin funds for wholesale investors, but plans to tweak its structures to attract wider investor cohorts such as the $650bn self-managed super fund sector.

As of the end of December the funds had $17.8m under management.

DigitalX also consults with enterprises to design and develop blockchain applications. While the consulting fees come in handy, executive director Leigh Travers admits the aim is more of a “trojan horse” to check out the potential market for company-built blockchain products.

Off its own bat the company already is commercialising Drawbridge, which enables public companies to automate director share trade disclosures and approvals.

Via a pilot program, the company is getting feedback from listed companies including Vulcan Energy and Little Green Pharma.

DigitalX is also a backer of Bullion Asset Management (BAM), a Singapore tech minnow focused on “tokenising” gold bullion to avoid the hassle of owning the physical stuff.

While attitudes are a changin’, DigitalX still has some way to go, having reported December quarter receipts of $150,000 and operating outflows of $428,000.

DigitalX shares have risen from 3c over the past 12 months to a recent high of 12c, with collateral support from the pending $US50bn Nasdaq listing of Coinbase, the world’s biggest crypto exchange.

DigitalX’s still humble $65m market cap is supported by liquid assets of $20.8m, including $8.1m of bitcoins and $3.5m of old fashioned Aussie dollars.

Travers notes the success of the New York Stock Exchange-listed Grayscale, which now has $US30bn of cryptos under management.

“We have seen the tremendous growth in international markets, especially with the Grayscale fund,” he says. “In their first year they got to $20m — a similar level to us.”

Apart from the wee size variance, a key difference between DigitalX and Grayscale is that the latter is a closed-end fund, which means that unit prices can vary markedly from the underlying value of the assets.

DigitalX’s fund members always buy and sell at net asset value (the funds charge a base fee of 1.65 per cent, compared with Grayscale’s 2 per cent).

Elsewhere, Bitcoin exchange traded funds (ETFs) are fast emerging offshore.

In a North American first, Canada’s Purpose Investments has won Canadian approval for their Purpose Bitcoin ETF, to be launched on the Toronto exchange (the TSX).

Bloomberg reports that proponents of at least four other funds have filed for Canadian approval, including Evolve Funds, Horizons ETFs, Accelerate Financial and Arxnovum Investments.

In the US, VanEck Associates Corp and Bitwise Asset Management have pending ETF filings. To date, US regulators have frowned on crypto ETFs, but this is expected to change under the Biden administration.

Other ETFs track the bitcoin futures price, but investors pay a premium for the privilege.

On a cautionary note, for every crypto enthusiast there’s still an ardent sceptic — and investing demigod Warren Buffett ain’t impressed.

It’s certainly disconcerting when a crypto launched as a joke (Dogecoin) now has an issued value of $US9bn. So investors didn’t get the joke, but they laughed all the way to the (virtual) bank anyway.

Tim Boreham edits The New Criterion

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