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Global Advisors (Jersey) Limited (GAJL) recently announced that the Channel Islands Securities Exchange (CISE) has approved the Global Advisors Bitcoin Investment Fund plc (GABI). The open-ended fund has become the first digital asset-related listing on the Exchange and is, “the first regulated bitcoin fund to be listed on any exchange globally,” according to both company announcements.
The Channel Islands are an archipelago in the English Channel, off the French coast of Normandy. They include two Crown dependencies, Jersey and Guernsey, which have become major offshore financial centres on the scale of the Cayman Islands or Bermuda, according to commercial think-tank Z/Yen.
Having launched in December 2013 after acquiring the Channel Islands Stock Exchange , the CISE currently has over 2,000 listed securities on its official list with a total market capitalization of more than £300 billion. It is headquartered in Guernsey with an office in nearby Jersey, both of which are located inside the European time zone but outside of the European Union.
The exchange is an Affiliate Member of both the International Organisation of Securities Commissions and the World Federation of Exchanges. It is considered a Recognised Stock Exchange by the UK tax authority, Her Majesty’s Revenue & Customs, for the purposes of investment by Self-Invested Personal Pensions and Individual Savings Accounts. In addition, it is recognized by the Australian Stock Exchange.
GAJL has experience as a regulated investment manager covering stocks, commodities and bitcoin for accredited investors, although not for retail clients. The firm was founded in 1999 and relocated from London and New York to Jersey in 2009. The firm launched GABI in August 2014, after it received certification as an Expert Fund, targeting only Expert Investors, from the Jersey Financial Services Commission.
In preparation for CISE listing, the firm added new regulated US-based custodians for GABI in October. Gemini Trust Company, LLC and itBit will provide secured IT storage systems and cold storage vault systems for GABI’s bitcoin holdings. The two custodians meet the capitalization, reserve, compliance, consumer protection and cyber-security requirements of the New York State Department of Financial Services.
The first custodian, digital asset exchange Gemini, is also trying to list its Winklevoss Bitcoin Trust on Bats BZX Exchange Inc. under the symbol ‘COIN.’ The US Securities Exchange Commission is currently still examining the Trust’s filing. “The visible prospect of a US retail ETF in the USA in 2017 is a game changer for bitcoin,” Global Advisors wrote in its November Investment Strategy.
The second custodian exchange, itBit, launched in 2013. The exchange offers bitcoin trading services for institutions and trading professionals. The company obtained a trust company charter and opened the first regulated bitcoin exchange in the U.S in May 2015. It claims to be the only company in the space that offers bitcoin traders access to both a global exchange and OTC trading desk.
The use of dual custodians adds further de-risking in the storage of the fund's investments.
Several analysts are now covering the price trends for bitcoin. Needham & Company set a bitcoin pricetarget of $848 in September, which was recently surpassed on December 22. Canaccord Genuityreportedly estimated in November that bitcoin will be worth $5,739 by 2025. The financial services firm bases their prediction off both the transactional demand and the store of value estimation, which they feel will both grow many times in the next decade.
Danish investment bank, Saxo Bank, released its annual Outrageous Predictions for 2017 earlier this month, which predicted "huge gains for Bitcoin." Under certain circumstances including Russia and China accepting bitcoin as a partial alternative to the USD, bitcoin could triple in value to $2,100, Saxo Bank suggested. However, the bank said these predictions should not be considered its official market outlook, “it is instead the events and market moves deemed outliers with huge potentials for upsetting consensus views.”
GAJL also made some price predictions earlier this year, including price ranging between $2000 and $4000 in 2017. “In the short term however resistance at $800 is strong,” the firm’s November Investment Strategy states.
While attempting to outperform bitcoin, GAJL uses leverage, cross-market arbitrage, futures-to-cash arbitrage, pair-trading as well as coin lending to manage GABI. The manager can also use Crypto Delta One securities for risk management and yield enhancement. These derivative products are similar to traditional Contracts for Difference that offer indirect exposure to the price of bitcoin without explicit ownership of the digital currency.
To further protect and enhance GABI returns, the manager maintains an account with Interactive Brokers LLC to trade certain non-bitcoin commodity futures contracts including oil, metals and currency pairs. However, no more than 25% of the Net Asset Value will be allocated to non-bitcoin based commodities, the firm states.
GABI has returned 56.95% year to date, compared to 37.42% in the previous year. According to the November Investment Strategy. GABI\'s total return was 80.97%, which outperformed the USD price of bitcoin by 16.41%.
“The time is right. Bitcoin now has a market capitalisation of over $12.4 billion, an all-time high, with approximately 16 million coins in issue. Bitcoin is the leading digital currency, ranking 73rd in total amount in circulation on the global list of M1 forms of money.”
In addition to GABI, Global Advisors also manages two Bitcoin Exchange Traded Certificates, both listed on NASDAQ’s OMX in Stockholm. Bitcoin Tracker One and Bitcoin Tracker EUR are issued by XBT Provider, a company acquired by Global Advisors in June after its previous guarantor, KnC Miner, filed for bankruptcy.
The number of certificates outstanding and the asset under management associated with the two exchange-traded certificates are increasing slowly but steadily, according to the firm’s November Investment Strategy. This trend indicates that “in the shorter term – bitcoin is simply becoming more investable,” Global Advisors states.
GAJL also has investments in three other companies operating in the blockchain ecosystem. Gradbase Limited, for instance, is a blockchain startup created to make it easy for employers to verify academic qualifications. The startup offers ‘robust authentication of academic credentials’ while storing them all on bitcoin’s blockchain.
Glint Limited is another GAJL investment. The Jersey-based marketing startup offers bitcoin rewards to Twitter users for tweeting or re-tweeting positive messages about certain products or services. The third investment, Aventus Systems Limited, offers a blockchain for secure, efficient, and transparent Digital Rights Management (DRM).