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SecondMarket has launched the first U.S.-based bitcoin fund, which allows investors to buy into the value of bitcoin without having to buy the digital currency directly.
The Bitcoin Investment Trust is an open-ended private trust that invests only in bitcoin. The fund is raised by Alternative Currency Asset Management, a wholly-owned unit of SecondMarket, which is acting as the broker-dealer for the fund. SecondMarket, which offers a variety of services to buy into illiquid private assets, itself has also invested a $2 million seed investment into the fund.
Institutions and accredited individual investors can buy into the fund. Typically, buying bitcoin, particularly in large amounts, requires buying, storing and securing the currency (one offline storage method is called“cold storage”). But the BIT fund will enable investors to avoid those issues because they will not have to actually buy bitcoins, according to SecondMarket.
Investors who buy into the bitcoin trust can get liquidity through auctions that will start in 2014. The value of bitcoin will be calculated daily.
“We incubated the BIT to alleviate the problems of direct bitcoin ownership, including having to wire money to newly-established and potentially unregulated entities around the world,” said SecondMarket CEO Barry Silbert in a statement.
Bitcoin has been a hot area for startups and venture capitalists recently. One startup seed fund has moved to focus just on bitcoin. The currency, which has mysterious origins, is designed to be free of national borders and is backed by mathematics, not fiat.
Bitcoin has drawn interest because it has many uses, including as a currency, storer of value, an anti-inflation hedge, for international money transfer or for payment processing. It also has become popular as a pseudo-anonymous way to buy things like illegal narcotics. Angel investor Naval Ravikant recently called bitcoin “programmable cash,” which could allow people to do things with money that they could never do before without involving banks and other large financial institutions.
The SecondMarket fund is not the only fund in the works. The Winklevoss twins, ofFacebook fame, have also filed with the SEC for a bitcoin ETF.
