More institutional investors are betting big on bitcoin as the digital currency rallied. From gaining acceptance by corporations as a primary reserve asset, the cryptocurrency is now making its way to the portfolio of some of the world’s largest hedge funds.Last month, Bridgewater Associates founder and Ray Dalio called bitcoin an “amazing accomplishment” and hinted at the possibility of his hedge fund adopting bitcoin as a hedge against currency devaluation. For Bill Miller, however, allocating funds to bitcoin is not new. In 2017, MVP 1, a hedge fund run by Miller, invested 30% of its holdings in bitcoin.Miller Opportunity Trust (a flagship of Miller Value Funds) has disclosed that it will invest about 15% of its funds in bitcoin through digital asset management giants, Grayscale
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More institutional investors are betting big on bitcoin as the digital currency rallied. From gaining acceptance by corporations as a primary reserve asset, the cryptocurrency is now making its way to the portfolio of some of the world’s largest hedge funds.
Last month, Bridgewater Associates founder and Ray Dalio called bitcoin an “amazing accomplishment” and hinted at the possibility of his hedge fund adopting bitcoin as a hedge against currency devaluation. For Bill Miller, however, allocating funds to bitcoin is not new. In 2017, MVP 1, a hedge fund run by Miller, invested 30% of its holdings in bitcoin.
Miller Opportunity Trust (a flagship of Miller Value Funds) has disclosed that it will invest about 15% of its funds in bitcoin through digital asset management giants, Grayscale Investments. With the company’s total holdings estimated to be in the region of $2.25 billion, its bitcoin allocation will exceed $300 million and will bring Grayscale Bitcoin Trust (GBTC) holdings close to the $14 billion mark.
The hedge fund, which primarily invests in securities, derivatives, and other financial instruments, is now adding the foremost digital asset to its portfolio. An excerpt from its document filed with SEC reads:
The Fund may seek investment exposure to bitcoin indirectly by investing in the Grayscale Bitcoin Trust, an entity that holds bitcoin. Grayscale Bitcoin Trust is a privately offered investment vehicle, the shares of which are also available over-the-counter. Bitcoin is a digital commodity that is not issued by a government, bank, or central organization. Bitcoin exists on an online, peer-to-peer computer network that hosts a public transaction ledger where bitcoin transfers are recorded (the “Blockchain”). Bitcoin has no physical existence beyond the record of transactions on the Blockchain. The Grayscale Bitcoin Trust invests principally in bitcoin. The Fund will not make any additional investments in the Grayscale Bitcoin Trust if, as a result of the investment, its aggregate investment in bitcoin exposure would be more than 15% of its assets at the time of investment.
Additional Considerations
In its SEC filing, Miller Opportunity Trust lists bitcoin and cryptocurrency tax as part of its principal risks, stating the uncertainty of ‘significant aspects of the U.S. federal income tax treatment of bitcoin investments.’ It expects that its bitcoin investment in Grayscale will be viewed by the authorities as direct investment by the company.