The frenzy surrounding Coinbase Global Inc.’s listing on the Nasdaq this week may subside, but fund managers will have to reckon with heightened investor interest in bitcoin in the wake of the crypto exchange’s direct listing, one asset manager says.
“If you’re not talking about it, you’re really stuck in the past,” Rick Lear, founder and managing partner of Lear Investment Management, said in an April 14 phone interview. “Having another currency creates a whole lot more problems out there, but it’s happening, and you got to be ready to deal with it.”
For Lear, whose Dallas-based firm oversees more than $500 million of assets, bitcoin may merit 1% to 3% of investment portfolios. While it’s a bet that he likes to express through GrayScale Bitcoin Trust
Lear said Coinbase’s direct listing on April 14 opened up an opportunity for “loose” exposure to bitcoin.
Most of his firm’s investors, which include high-net-worth individuals and institutions, are asking about how they might get exposure to bitcoin, he said. That includes a chief investment officer at a multibillion-dollar pension fund with zero allocation to crypto, who Lear said he spoke with just this week as it’s been a top area of conversation for the retirement fund lately.
But buying bitcoin is only for those investors who can “take the volatility,” said Lear. While an individual may open up an account at Coinbase, the largest U.S. crypto exchange, he said it not easy for a pension to fund a Coinbase account. And although investing in shares of Coinbase is now possible, Lear considered the company’s market value on the day it went public too high to immediately jump in.
rose 31 percent from its reference price in its debut on the Nasdaq, valuing the company at $85.8 billion at the close of trading on Wednesday. Shares of the company, which traded under the ticker COIN, were down more than 1% in late Thursday afternoon trading.
The Dow Jones Industrial Average
closed at a record above 34,000 Thursday, while the S&P 500 index
booked its own record all-time high and the Nasdaq Composite Index
topped 14,000 for the first time since February, all getting a lift from an improving economy.
Lear expects other blockchain companies also will get on “investors’ radar screens,” and says that his firm will be monitoring Coinbase’s stock as a potential investment opportunity. But right now, amid the excitement, many people may be seeking to buy Coinbase no matter what the cost, creating a lot of “noise” around its valuation, according to Lear.
Richard Rosenblum, co-founder of crypto trading firm GSR, says the bitcoin industry stands out for being “retail driven,” meaning that individuals rather than institutions have led the way in establishing the market. But banks and financial institutions are increasingly stepping in and will help the industry mature, he said in a phone interview on April 14. He pointed to moves by Goldman Sachs Group and Morgan Stanley as recent examples.
“We’re at this point now, it’s not just a head fake,” said Rosenblum, who started his career at Goldman in commodities trading and worked at two hedge funds before co-founding GSR in 2013. As more “sophisticated entrants” step into crypto and strengthen its infrastructure, “the better it’s going to be for everybody,” he said.
While Lear sees bitcoin as an asset class worthy of investors’ attention, he says he does not really view it as an actual currency at this point.
“Even if it was a currency, and you liked it, and you thought it was going up, why would you spend something that you thought was going to go up?” Lear asked. “It’s still really hard to spend it online.”
rose to above $64,000 on April 14, the day Coinbase went public, before closing around $62,000, according to CoinDesk prices. That compares with the record close of $63,196 on April 13, with trading pushing above that level Thursday afternoon.