Love in the time of the bear
In today’s edition, institutional investors are embracing crypto and Celsius caught in a lie.
Good morning! Welcome to The Daily Moon. Tornado Cash is now almost dead. Following the sanctions, the signatories of the multi signatories community fund have disbanded. Now, all that remains is the dao. RIP. Anyway, let’s get this week started.
The markets were down Monday, with Bitcoin trading at around $24,000, and Ethereum down 4%. Nasdaq was slightly down in early trade. Indian markets were closed because of Independence Day.
Crypto’s Long March To Mainstream
Pension funds and large institutions are not giving up on crypto. According to a report by Wall Street Journal, multiple pension funds had invested in the crypto ecosystem through 2020 and 2021 and these investments have cost them deeply but more than a handful aren’t done with the asset class yet.
Breaking it down
A Quebec pension fund invested and lost $150 million after Celsius filed from bankruptcy. The pension fund, which manages the retirement fund for the Houston firefighters, invested $25 million in BTC and ETH. The firefighters fund doesn’t plan to exit any time soon. The value has halved ever since. In May, two Virginia-based pension systems, approved a three-year plan of investing $70 million in crypto assets.
Is it just these funds?
This is curious. It’s not just funds but large institutions, which are finding love in the time of the bear market. Recently, BlackRock tied up with Coinbase to offer crypto trading to its investors. Why would they? Simple answer, because there’s demand. BlackRock then launched a spot Bitcoin private trust. Meanwhile, Charles Schwaba, a US broker and investment fund, sparked an exchange traded fund to give investors access to digital assets without exposing them to the tokens. UK asset manager Schroders, too, has bought a stake in crypto firm Forteus.
FYI: BlackRock founder in 2017 once said that Bitcoin was a tool for money laundering and not much else. It is now creating a bridge between its trading platform, Aladdin, and Coinbase.
Why the love?
The answer is simple: yields. So far, these pension funds and institutions have been investing across asset classes and are in search of high yield assets. Since these funds are capitalised by pensions, they have to promise aggressive returns. Most funds of this type lean on bonds. While bonds are safe they don’t have the ability to chase high returns. So, pension funds have to come up with imaginative solutions. In this case, be it crypto lenders or the asset itself. Many of these funds have a multi year horizons and can afford to wait out the bear.
The shift to digital assets also points to the maturing of the ecosystem. The former president of the NYSE, Thomas Farley, said that soon crypto will be part of every institutional investor’s portfolio. He did add that the volatility will be a feature of these investments. In fact, as of June, ~6.5% of all Bitcoin was held by institutional investors.
The hope now is that a large swath of institutional investors will start entering the crypto space and will start to resemble the traditional market.
What about the little guy?
Yes, the retail investor. No mainstream market is complete without the retail investor. And they have been the ones that have taken a battering during the crash. And crypto is still largely driven by the retail market. But with the prices low and increasing involvement of institutional investors, this is about to change fast.
Celsius In A Deeper Hole
The skeletons don’t stop tumbling out for Celsius. The bankrupt crypto lender has debt worth $2.5 billion compared to ~$1.2 billion it stated earlier. This indicates that the lender had misstated its liabilities earlier to everyone, including the courts.
What’s the damage?
The company reportedly has liabilities over ~$6.5 billion and AUM of $3.8 billion. In the filings with the court, it had insisted it had assets worth $4.3 billion vs liabilities of $5.5 billion.
Where has it lost this?
A large part of it is Bitcoin. Investors had deposited over 100,000 BTCs in the company. Celsius has lost ~62,000 BTC already. WarpedBTC accounts for ~65% of the company’s debt. Earlier, Ripple, which is mired in a regulatory battle, had indicated its interest in purchasing Celsius’s assets.
Meanwhile
The man who caused the contagion, Terra’s Do Kwon, has given an interview to tell his side of the story.
Needless to say, it hasn’t gone down well.
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