Just a day after throwing shade on Bitcoin, investment firm VanEck files with the US Securities and Exchange Commission for a Bitcoin ETF.
There are times when irony is so, so delicious. Cryptocurrency, with Bitcoin leading the way, has been fighting tooth and nail to get into the financial mainstream ever since its inception. Global financial and investment houses openly scoffed at the notion of digital currency that lay outside the realm of traditional regulators and financial institutions, but they’ve started singing a different tune lately as Bitcoin continues to rise and rise in value.
Two of the most recent changes of heart were Fidelity Investments integrating cryptocurrency through Coinbase and Goldman Sachs telling its clients that they should no longer ignore Bitcoin. Now onto the stage steps VanEck, a firm who specializes in gold-related investments, as they filed for a Bitcoin ETF just a day after one of its managers called Bitcoin a fad.
Labeling Bitcoin a Fad
Joe Foster, a portfolio manager and strategist with VanEck, recently wrote a blog post where he compared and contrasted Bitcoin and gold. Needless to say, Bitcoin came up far short when compared to gold. Concluding his analysis, Foster wrote:
Bitcoin and other digital currencies are a fad that has attracted the attention of programmers, speculators, and early adaptors. Given the fundamental characteristics of gold and digital currencies, we do not believe digital currencies will ever replicate or replace gold’s unique role as a form of portfolio insurance and as a hedge against tail risk. It is my opinion that governments will not allow digital currencies to reach the critical mass needed to challenge the utility of fiat currencies. At best, digital currencies may eventually occupy some middle ground as a niche product. At worst, they become a failed experiment that ends in tears. For now, the only thing we can forecast with confidence in the digital currency space is more volatility.
Foster does list some of the issues facing cryptocurrency, such as distributed ledgers not being as unhackable as promoted and that digital currency has not yet stood the test of time. He notes that gold has been a standard for wealth exchange for thousands of years, and gold, unlike digital currency, does not need electricity to be used to buy or sell goods. However, he also includes the usual fear mongering that we’ve seen over the last year of how digital currency is being used for illegal activities, such as money laundering, computer ransom attacks, and as a means to avoid taxes.
Complete Turnaround Just a Day Later
You would think that such an opinion posted on the official VanEck website would bear the weight of actual practice by the investment firm. Yet it appears that the massive potential windfalls exhibited by cryptocurrency are too much for VanEck to pass up. Just a day after Foster’s blog post was published, VanEck filed with the US Securities and Exchange Commission to create the VanEck Vectors Bitcoin Strategy ETF (exchange-traded fund) that would invest in Bitcoin futures and be publicly traded.
Investors of the ETF fund will be able to bet on whether Bitcoin will rise or fall in price without having to purchase the digital currency itself. In a statement to CNBC, VanEck wrote:
Joe Foster makes a great case for gold relative to bitcoin as a currency and store of value. VanEck believes that the technology underlying digital assets, known as distributed ledger technology, has tremendous potential to revolutionize finance and trade. Digital assets are an investable asset class in their own right and continue to be integrated into the broader economy.
Overall, it’s ironic that an investment firm would publicly pooh-pooh Bitcoin one day but then set up an ETF for it the following day in order to get a piece of the pie created by digital currency.
What do you think about the 180-degree turnaround by VanEck in regards to Bitcoin? Let us know in the comments below.
Images courtesy of AdobeStock, The Guardian/Linda Nylind