Michael Bodley

iConnections — historically known for its annual Miami traditional finance get-together — has made a substantial push into digital assets over the last several years.



CEO Ron Biscardi founded the parent company of iConnections Global Alts in 2020, after he cut ties with Context Summits, a now-rival conference business that he co-founded.&nbsp;



At iConnection’s recent flagship conference in Miami, Biscardi — clad in the Wall Street-y business attire that is the get-together’s standard — Biscardi told Blockworks the expansion into digital assets has been bearing some fruit.



And doing so despite organizing a sprawling and in-person event in the midst of markets that have been difficult for institutional crypto traders and their traditional finance counterparts.



The basic idea behind iConnections Global Alts is to connect big-money allocators with portfolio managers and related opportunities to pull the trigger on a range of alternative strategies.



Incorporating digital assets, according to conference participants, has been quite the challenge. It’s not easy, sources said, to mesh Wall Street’s way of looking at things — <a href="https://blockworks.co/news/inside-crypto-lp-big-leagues">not to mention due diligence processes</a> — with all things Web3.&nbsp;



Still, there’s been a <a href="https://blockworks.co/news/regulators-speeding-up-crypto-timeline">growing appetite in and around iConnections</a> for digital asset plays.&nbsp;



Those have included, allocators and portfolio managers alike said, actively managed spot cryptoasset market neutral strategies and passive exposures with low fees, as well as fundamental and macro-informed approaches.&nbsp;



Biscardi said the “primary reason” behind his team’s initial expansion into cryptocurrencies was the “significant uptick in interest” from both limited and general partners. The trend really started with allocators, though, according to Biscardi.



At 2022’s iConnections Global Alts, there were (approximately) 17 firms that self-identified as having an affiliation with digital assets, the chief executive said. There were approximately 8,200 overall meetings between investors and their backers last year.



That handful of crypto participants accounted for about 750 meetings overall — equating to about 50 meetings per firm.



Biscardi, speaking from the Fontainebleau hotel in Miami Beach, said he’s “never seen a concentration like that.” He was surrounded by a swirling sea of traditional finance types, clad in tailored business attire.&nbsp;



Deal flow murmurs filled the main iConnections atrium, where Biscardi had set up shop for the interview. Hush-hush conversations of business getting done and business getting lost flooded the surrounding hallways. That kind of thing is why the conference, and others like it, really matter to institutional investors, they say.



The programming itself is far from an <a href="https://iconnections.io/" target="_blank" rel="noreferrer noopener">iConnections</a> afterthought, in the eyes of its attendees. It’s evolved into a go-to source for market observations from prominent players.



But participants said their observations of crypto interest is the most important thing.



The interest has certainly tailed off during digital assets’ extended bear market. Biscardi first added a dedicated digital assets conference track at an event in June 2022, which he said was prompted by the statistics he mentioned.



What follows is additional context from the interview about how that concentration came to be — and where Biscardi and his company sees the intersection of digital assets and Wall Street going.



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Blockworks: How have digital assets shaped up in terms of interest this year?



Biscardi: That crypto winter that we’re in the midst of?



The expectation of the market is that crypto has really been put on pause by the institutional allocators. And I don&#8217;t really disagree with that. But there still is interest.



I frankly think — if we could get the regulatory infrastructure in place — I do believe there&#8217;s still legitimate interest in this.&nbsp;



Blockworks: What’s the institutional crypto opportunity set right now? What’re the challenges?



Biscardi: Starting something new right now, in anything, is difficult. Starting anything new in digital assets now is very, very difficult.



The challenge the category faced before FTX was already tough. Now, it’s incredibly tough. Post-FTX, the focus reminds me of what happened after the financial crisis.&nbsp;



Not only did investors just avoid risk at all costs, they were specifically avoiding business risk right after the crash. It didn&#8217;t really matter what your performance was. If you were a smaller fund, it was really difficult to raise assets as an emerging manager — because no one wanted the business risk that comes with how an emerging manager wants to operate.&nbsp;



Blockworks: There are also different buckets of risk, especially in crypto, that often get lost in translation.



Biscardi: At the moment, I just don’t think there’s much appetite at all for the business risk associated with emerging crypto managers. If there’s an opportunity to accumulate assets, it’s going to go to the larger firms, for sure.&nbsp;



This interview was edited for clarity and brevity.



<hr class="wp-block-separator has-alpha-channel-opacity"/>



There were scores of large digital asset natives — depending on how you define “large” — at 2023’s conference. Biscardi, speaking generally and not specifically about the conference, cited Brevan Howard Digital’s emergence last year as a bellwether moment for the industry.&nbsp;



Even if things now are rocky.&nbsp;



Biscardi has orchestrated a conference specific to digital assets in the past. There are no plans to add a similar event at the moment, he said. Market conditions being what they are. This time around, there were more than 300 allocators who checked off digital assets as one area of investment interest — good for about 30% or so.



There were more than 50 fund managers at the conference running a “primary strategy of crypto,” according to Biscardi. Up from just 17 last year.



Digital assets are now one of four main iConnections Global Alts tracks. The three other categories remain tied to Wall Street.



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Crypto Interest Still Kicking at iConnections in Face of Bear

Sebastian Sinclair

<div id="highlights-block_63491ea876e15" class="highlights">
 <ul>
 <li>Despite raising hundreds of millions of dollars for its institutional bitcoin fund, NYDIG has let a third of its staff go</li>
 <li>The firm had raised $1 billion in October of last year with a valuation of $7 billion</li>
 </ul>
 
</div>



Crypto investment management and trading firm NYDIG has laid off more than a third of its staff, despite having raised hundreds of millions of dollars for its bitcoin fund earlier this month.



According to a report by the <a href="https://www.wsj.com/articles/crypto-broker-nydig-lays-off-one-third-of-staff-in-effort-to-narrow-focus-11665707545" target="_blank" rel="noreferrer noopener">Wall Street Journal</a>, around 110 staff were let go late last month as the company seeks cost-cutting measures amid the crypto downturn. According to the company’s <a href="https://www.linkedin.com/company/nydig/" target="_blank" rel="noreferrer noopener">LinkedIn profile</a>, NYDIG’s staff count is estimated to be around 286.



Blockworks attempted to contact the trading firm but did not receive a response by press time.



Despite replacing its CEO Robert Gutmann and President Yan Zhao earlier in October, NYDIG said its bitcoin balances had hit an all-time high during the third quarter.&nbsp;



But it appears that record balance has had little impact on the firm’s decision to reduce employee numbers. The company had been on solid ground in late 2021 when it closed a <a href="https://cms.blockworks.co/nydig-closes-1b-funding-round-raising-valuation-above-7b/" target="_blank" rel="noreferrer noopener">$1 billion funding round</a> with a valuation of $7 billion.



Tejas Shah and Nate Conrad are the latest to take on NYDIG’s CEO and president roles, respectively. Both Gutmann and Zhao will continue to work at the firm’s $12 billion parent company, Stone Ridge Holdings, which they co-founded with Ross Stevens in 2012.&nbsp;



<a href="https://cms.blockworks.co/nydig-raises-720m-for-institutional-bitcoin-fund/" target="_blank" rel="noreferrer noopener">NYDIG also raised $720 million</a> for its institutional bitcoin fund on Oct. 4 with contributions coming from 59 investors.



Crypto markets remain on shaky ground following the fallout of the lending crisis earlier this year. That event, triggered by the fall of Terra’s ecosystem, has all but wiped billions of dollars from the market, which has been repeatedly testing the highs of the 2017 bull market cycle.



NYDIG, like others, is attempting to navigate rough seas as retail and institutional investors take a risk-off approach to otherwise seemingly risky digital assets.



Bellwether crypto bitcoin has fallen more than 70% from $69,000 seen in November last year to just under $20,000.



Established in 2016, NYDIG was later spun off into a separate entity in 2017. Its main mission has been to “make Bitcoin accessible to all” by providing technology and financial services solutions to banks, FinTech companies, investment managers, and institutions, among others.



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NYDIG Lays Off a Third of Its Staff: Report

<div id="highlights-block_626ac81083669" class="highlights">
 <ul>
 <li>The firm&#8217;s Nasdaq Crypto Index Europe ETP will trade on the SIX Swiss Exchange</li>
 <li>The product which will track the performance of bitcoin, cardano and ether, among others</li>
 </ul>
 
</div>



Crypto asset manager Hashdex has branched into the European market for the first time with its latest ETP that tracks an underlying basket of cryptocurrencies. 



The Brazillian firm&#8217;s Nasdaq Crypto Index Europe ETP (exchange-traded product) will trade on the SIX Swiss Exchange under the ticker symbol SIX: HASH SW, beginning May 2, according to a Thursday <a href="https://www.globenewswire.com/news-release/2022/04/28/2431733/0/en/Hashdex-Announces-Launch-of-the-Hashdex-Nasdaq-Crypto-Index-Europe-ETP.html" target="_blank" rel="noreferrer noopener">statement</a>. 



It marks the manager&#8217;s first product available for European investors, a spokesperson confirmed to Blockworks. &#8220;The launch of HASH SW is a natural next step in Hashdex’s commitment to serving the region,&#8221; the spokesperson added.



Asset managers <a href="https://cms.blockworks.co/21shares-combines-bitcoin-and-gold-in-newest-etp/" target="_blank" rel="noreferrer noopener">continue</a> to roll out crypto-related exchange products and funds despite stalled upward market performance in recent months. Some managers are even seeking to launch products that take advantage of the trend reversal — including proposals for <a href="https://cms.blockworks.co/issuers-race-to-launch-a-short-bitcoin-futures-etf/" target="_blank" rel="noreferrer noopener">ETFs that short bitcoin</a>.



Hashdex&#8217;s latest product tracks the performance of Nasdaq&#8217;s Crypto Index Europe (NCIE) which, in turn, tracks the showings of avalanche, bitcoin, cardano, ether, litecoin, polkadot, polygon and solana.



Hashdex and Nasdaq previously co-developed the Nasdaq Crypto Index. The NCIE is an extension of the effective methodology established by the NCI and has been tweaked to conform to eligibility requirements of European exchanges.



Ahead of its first ETP for the European market, Hashdex <a href="https://cms.blockworks.co/brazilian-cryptoasset-manager-poaches-exec-to-lead-european-expansion/" target="_blank" rel="noreferrer noopener">recently hired</a> its inaugural managing director and head of Europe, Laurent Kssis, in March. 



Kssis was formerly global head of ETPs at Swiss manager 21Shares, where he brought to market more than 25 crypto ETPs across several European regulated exchanges.



&#8220;We believe with this index and subsequently delivering this institutional-grade ETP, we have represented exactly what investors have been demanding by offering a product with diversified exposure that mitigates risk in cryptoassets,&#8221; Kssis said.



In February&nbsp;2021, Hashdex&nbsp;launched the Hashdex Nasdaq Crypto ETF&nbsp;(HDEX), which tracks the Nasdaq Crypto Index on the Bermuda Stock Exchange.&nbsp;The Hashdex Nasdaq Crypto ETF became the&nbsp;world’s first crypto-based ETF&nbsp;and&nbsp;is currently available on the BSX to accredited non-US investors.&nbsp;



Seeking to leverage Hashdex&#8217;s momentum, the first bitcoin futures ETF in the US to gain the SEC&#8217;s blessing under the Securities Act of 1933&nbsp;may be seeking a <a href="https://cms.blockworks.co/teucrium-bitcoin-futures-etf-now-carries-hashdex-brand/" target="_blank" rel="noreferrer noopener">name change</a> from Teucrium Bitcoin Futures Fund to Hashdex Bitcoin Futures ETF.



It&#8217;s unclear what role Hashdex will play, though Bloomberg Intelligence ETF Analyst Eric Balchunas said last week the name change could signal a partnership similar to that between Ark Invest and 21Shares.&nbsp;



In April 2021 Hashdex&nbsp;<a href="https://www.b3.com.br/en_us/news/b3-begins-trading-the-first-hashdex-etf.htm" target="_blank" rel="noreferrer noopener">launched</a>&nbsp;another version of its flagship fund, the Hashdex Nasdaq Crypto ETF, on Brazil’s B3 exchange. Hashdex followed up by partnering with Nasdaq and Victory Capital in August to&nbsp;<a href="https://www.businesswire.com/news/home/20210804005624/en/Victory-Capital-Launches-Crypto-Index-Fund-for-U.S.-Accredited-Investors">launch</a>&nbsp;a private fund tracking the performance of a basket of USD-traded cryptos available to US accredited investors.



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Hashdex Expands Offerings to Europe With Latest Crypto ETP

Ben Strack

<div id="highlights-block_615cb6332c02c" class="highlights">
 <ul>
 <li>42% of respondants said they are most bullish about Ethereum, compared to 18% for bitcoin, investments into the two crypto assets are nearly equal, the report finds</li>
 <li>About 35% of investors see their investments into digital assets as mainly a speculative one, while 25% see it as a diversification tool</li>
 </ul>
 
</div>



More fund managers see greater potential in Ethereum than bitcoin, according to a <a href="https://coinshares.com/research/digital-asset-survey">CoinShares report of survey data</a> published Tuesday, despite the total value locked in Ethereum decreasing this year amid more competition in the layer-1 space.



Forty-two percent of investors see Ethereum as having the most compelling growth outlook, compared to bitcoin at 18%, the survey found. The findings come as market share of Ethereum investment products has risen from 11% at the beginning of the year to 26%.



“The conversations we were having two years ago were bitcoin and crypto is a joke,” CoinShares Investment Strategist James Butterfill — who authored the report — told Blockworks.



<blockquote class="wp-block-quote">”A year ago it was, OK, bitcoin’s a really interesting concept, tell me more. And this year the trend I’m seeing amongst investors is, I want to look at the altcoin space, I want to diversify, I want to see what else is out there.”&nbsp;</blockquote>



The first report of its kind by CoinShares — with data as of September 15 — reflected the views of fund managers representing more than $400 billion in assets under management. Buterfill plans to publish a survey with the same questions every two months.



Despite survey respondents’ bullish feelings about ether, roughly the same percentage of fund managers reported investing in bitcoin. While the two largest cryptocurrencies by market capitalization remain at the core of digital asset investment portfolios, allocations to Cardano and Polkadot are increasing.



<div class="wp-block-image"><figure class="aligncenter size-large"><img decoding="async" loading="lazy" width="1024" height="733" src="https://blockworks-co.imgix.net/wp-content/uploads/2021/10/CoinShares-Chart-Most-compelling-asset-1024x733.jpg" alt="" class="wp-image-8971" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2021/10/CoinShares-Chart-Most-compelling-asset-1024x733.jpg?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/CoinShares-Chart-Most-compelling-asset-1024x733.jpg?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/CoinShares-Chart-Most-compelling-asset-1024x733.jpg?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/CoinShares-Chart-Most-compelling-asset-1024x733.jpg?w=359 359w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/CoinShares-Chart-Most-compelling-asset-1024x733.jpg?w=365 365w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/CoinShares-Chart-Most-compelling-asset-1024x733.jpg?w=306 306w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/CoinShares-Chart-Most-compelling-asset-1024x733.jpg?w=80 80w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/CoinShares-Chart-Most-compelling-asset-1024x733.jpg?w=1512 1512w" sizes="(max-width: 1024px) 100vw, 1024px" /></figure></div>



Jan van Eck, CEO of fund manager VanEck, said during a virtual panel last week that the big development for crypto in 2021 was ether’s performance and the Ethereum network’s upgrade from proof-of-work to proof-of-stake.



“People understand that a lot of the blockchain applications are built on top of this smart contract software” he explained.



Competition in the layer-1 space <a href="https://cms.blockworks.co/competition-in-layer-1-space-continues-to-heat-up/" target="_blank" rel="noreferrer noopener">has heated up</a> in recent months amid a growing demand for lower transaction fees and greater throughput than what the proof-of-work Ethereum network currently provides.&nbsp;



Ethereum’s TVL dominance has dropped from 98.22% on Jan. 1 to 68.78%, as of Monday, according to <a href="http://defillama.com/" target="_blank" rel="noreferrer noopener">defillama.com</a>.&nbsp;



Buterfill said he was surprised that less than 5% of respondents labeled Solana (SOL) as having the most compelling growth outlook, but expects to see that number grow in future surveys. The coin has the seventh-largest market capitalization at about $48 billion, according to <a href="https://www.coingecko.com/en" target="_blank" rel="noreferrer noopener">CoinGecko</a>, and its price was up about 19% over the past seven days, as of 3:30 p.m. ET.&nbsp;



“Though not technically as quick as something like Solana, they like Ethereum because it’s much bigger and more decentralized essentially,” the CoinShares strategist said about some investors.&nbsp;



Brian Brooks, former CEO of Binance.US, noted in the same panel as Van Eck that while layer-1 competitors will battle Ethereum to be the smart contract platform king, bitcoin will remain as a coin crypto investors allocate to.&nbsp;



“Bitcoin is really the tracking stock of decentralization overall,” Brooks explained. “It is the relatively price-stable energy-based replacement for gold, and that’s always going to be there for a bunch of reasons.”



<h3>Who is embracing digital assets and why?</h3>



Respondents who have digital assets in their portfolio were mixed on whether they thought inflation was permanent or transitory, suggesting that some do not invest in crypto as a hedge against inflation, the report indicates.&nbsp;



About 35% of investors see their investments into digital assets as mainly a speculative one, while 25% see it as a diversification tool, it found.



“What it implies is that people are buying without looking at any fundamentals, and I don’t think that’s necessarily the case,” Buterfill said. “Maybe it reflects that investors still don’t fully understand the asset class, but they know there’s a lot of hype around it, and they want to be a part of that. It is a complex asset class to understand.”



The report revealed stark contrasts in allocations to digital assets from different types of investors.&nbsp;



While family offices have the highest allocation to crypto at 23%, retail and institutional investors remain hesitant, with surveyed wealth managers allocating just 0.1% to digital assets.



<div class="wp-block-image"><figure class="aligncenter size-large"><img decoding="async" loading="lazy" width="1024" height="715" src="https://blockworks-co.imgix.net/wp-content/uploads/2021/10/CoinShares-Chart-Portfolio-Positioning-1024x715.jpg" alt="" class="wp-image-8972" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2021/10/CoinShares-Chart-Portfolio-Positioning-1024x715.jpg?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/CoinShares-Chart-Portfolio-Positioning-1024x715.jpg?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/CoinShares-Chart-Portfolio-Positioning-1024x715.jpg?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/CoinShares-Chart-Portfolio-Positioning-1024x715.jpg?w=368 368w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/CoinShares-Chart-Portfolio-Positioning-1024x715.jpg?w=374 374w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/CoinShares-Chart-Portfolio-Positioning-1024x715.jpg?w=314 314w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/CoinShares-Chart-Portfolio-Positioning-1024x715.jpg?w=80 80w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/CoinShares-Chart-Portfolio-Positioning-1024x715.jpg?w=1530 1530w" sizes="(max-width: 1024px) 100vw, 1024px" /></figure></div>



Of the survey respondents who said they had not invested in crypto, 21% said regulation was the main reason, while 19% cited corporate restrictions.



Politics, government bans and regulation make up 58% of the perceived key risks for digital assets. Nearly 15% reported volatility as a key risk.



“I think it’s right for investors to be concerned,” Buterfill said. “It’s a known unknown. You can’t stick the regulators’ mindset into a spreadsheet and figure out what’s going to happen, so it’s just a case of sitting and waiting and seeing.”



<hr class="wp-block-separator">
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CoinShares Survey: Ethereum Most Compelling For Growth

<div id="highlights-block_6112e73dfc28b" class="highlights">
 <ul>
 <li>Off The Chain Capital uses its network of motivated sellers of blockchain assets to negotiate discounts and bolster returns </li>
 <li>The four models Off The Chain uses to value bitcoin each indicate that the cryptocurrency is undervalued</li>
 </ul>
 
</div>



With many different investment options providing exposure to a maturing cryptocurrency market now available to investors, Blockworks is asking fund managers about the strategies they employ for their clients.&nbsp;



One such firm is <a href="https://offthechain.capital/about/" target="_blank" rel="noreferrer noopener">Off The Chain Capital</a>, which was founded as a family office in 2016. The company expanded beyond just serving family and friends in 2019 by opening up the fund to qualified outside investors.



To learn more about what makes <a href="https://cms.blockworks.co/off-the-chain-capital-announces-160-million-fund/" target="_blank" rel="noreferrer noopener">Off The Chain Capital’s</a> fund different from other investment offerings in the space, Blockworks recently spoke with Brian Estes, the firm’s CEO and CIO.



Strack: How would you describe your fund to a prospective investor?



Estes: “If I was an institutional investment consultant and I looked at what we were doing, I wouldn’t classify what we’re doing as a blockchain fund. I would classify it as a value investment fund with a specialty niche in blockchain assets.



“We’re looking for undervalued equity and mispriced digital assets, so we’re using … the Graham and Dodd value metrics &#8211; Warren Buffett uses these same metrics &#8211; to find undervalued value opportunities. We’re just focused on finding those in the blockchain space.”



Strack: What are the goals of the fund? How do you achieve those goals?



Estes: “The two primary goals are to outperform bitcoin and to do it with less volatility. There’s only two funds over the last four years that have outperformed bitcoin. Our fund is one of those, and the other one is <a href="https://privatefunddata.com/private-funds/polychain-fund-i-lp/" target="_blank" rel="noreferrer noopener">Polychain Fund I</a>.&nbsp;



“It was a big decision for us to actually open up the fund to outside investors because what I’ve told people for a long time is just buy bitcoin … and hold it for the next 10 years and you’ll do just fine. I didn’t feel comfortable charging people to manage their money when they can just basically do it for free by owning bitcoin. But once we figured out how to outperform bitcoin and do it with less volatility, that’s when we opened up the fund to outside investors.



“Our strategic advantage is [our] network. I’ve been in this space since 2014 and I have a pretty expansive network to help us source people who are forced or motivated sellers of blockchain assets. These are people who are early seed investors or early employees at blockchain companies, and these companies have been around like three to five years. Now they’re post-A round, they’re profitable, they have little or no debt, and they’re on a path to liquidity.&nbsp;



“What we’re looking for is those types of companies, but we want to buy those from early employees or seed investors who are needing liquidity or are motivated sellers so that we can negotiate a nice discount on those.”



Strack: How is your strategy different from others out there?



Estes: “If you look at where the money’s flowing and where the crypto assets are being managed, it’s almost all in the venture space. There are new venture funds popping up all the time and the existing venture funds like at Polychain, Pantera, Paradigm and a16z.



“a16z just raised 2 or 3 billion for <a href="https://cms.blockworks.co/andreessen-horowitz-launches-2-2b-crypto-fund/">their new crypto fund</a>, but all of that money is chasing a limited supply of new startups in the blockchain space, and we’re doing the opposite of that.&nbsp;



“We’re the only value manager I know of that we’re waiting for these new ventures to play out. We come in three to five years later when these early seed investors or employees need liquidity and then we’re buying basically at the same valuation from three to five years ago.”



Strack: Can you share an example of Off The Chain buying at a discount?&nbsp;



Estes: “Our first entry into <a href="https://bitpay.com" target="_blank" rel="noreferrer noopener">BitPay</a> we bought about nine months ago. BitPay has been around for 10 years. It’s the oldest surviving blockchain company, and our first investment was at the seed round valuation 10 years ago.&nbsp;



Their B-round was in 2018 and there were some sellers who wanted liquidity, so we were able to secure a significant discount on what the B-round was three years earlier.



Strack: What is a common misconception about your firm?



Estes: “People think we’re a bitcoin fund and we’re not. We have exposure to bitcoin’s performance but we’re doing it in such a way where we’re getting a discount on bitcoin.



“I’ll give you an example &#8211; 7% of our portfolio is in Mt. Gox bankruptcy claims. Mt. Gox was the largest custodian of bitcoin back in 2014. <a href="https://www.reuters.com/article/us-bitcoin-mtgox-bankruptcy/mt-gox-files-for-bankruptcy-hit-with-lawsuit-idUSBREA1R0FX20140228" target="_blank" rel="noreferrer noopener">They went bankrupt</a> and the bankruptcy trustee was able to recover 141,000 bitcoin, so if you had bitcoin at Mt. Gox, you’re due your proportional amount of the 141,000 bitcoin that they’re custodying today.&nbsp;



“These Mt. Gox bankruptcy claims they’ve been illiquid for seven years, and we started buying these two years ago. Our average cost is $1,247 per claim and there’s about $6,000 worth of assets in each claim if you count the bitcoin, the bitcoin cash and the currency.



“The bankruptcy is coming to an end. The trustee is making arrangements to distribute the assets and within the next year, we’ll be delivered $6,000 bitcoin, bitcoin cash and currency. So that’s what we’re looking for. That’s a way we get exposure to bitcoin but we’re getting like a 70% discount on bitcoin doing it that way.”



Strack: What do you think is a common misconception of the crypto space more broadly?&nbsp;



Estes: “You have to think differently about how to value blockchain assets, because we’re all used to valuing companies using a [price-to-earnings] ratio, or price-to-cash flow or price-to-book. Or we’re used to valuing bonds using credit analysis or real estate using cash flow or location analysis.



“But with blockchain assets, like bitcoin, these are networks, and the way you value a network is different from the way you value traditional assets like stocks, bonds and real estate. We have models that help us value bitcoin based off of network. One of those models is called Metcalfe’s Law, so we have this Metcalfe’s model that helps us value bitcoin.



“The misunderstanding that people have is they don’t know how to value bitcoin, and that’s the first thing you need to understand. Before you determine what price that you’re going to pay for it, you need to know what the value is. We have four models that we use to value bitcoin, and all four of these models tell us today that bitcoin’s undervalued, so now’s a good time to be buying it.”



Strack: Do you plan to launch other funds or strategies in the future?



Estes: “The answer is no, and the reason is that our competitive advantage is the network that we have to source these special opportunities. If we have a second fund, it’d be kind of a similar fund, and then we’re having to decide which fund to put these special opportunities in.



“There’s only a certain number of shares or dollar amount that we can source and we have plenty of capacity in our current fund to bring in new money. We could raise another $200 million in the fund and put it to work in the next 30 days.



“If we had a different strategy &#8211; and we’ve gone through this in our planning committees &#8211; what would that strategy be? One strategy is just to be a bitcoin-only fund, but that doesn’t do anything for investors. You’re charging people just to own bitcoin and they can just go buy bitcoin at PayPal or Coinbase or the Square CashApp or Venmo now. Why compete with that?