By Saumya Vaishampayan, MarketWatch
NEW YORK (MarketWatch) — SecondMarket on Thursday will begin raising capital in the Bitcoin Investment Trust, an open-ended trust that only invests in bitcoin.
The minimum investment is $25,000. Accredited and institutional investors will be able to purchase shares in the bitcoin trust through SecondMarket, the trading platform best known for allowing investors to buy and sell Facebook Inc. (NASDAQ:FB) shares before the social network went public in 2012.
The trust aims to make bitcoin more accessible to investors, said Barry Silbert, chief executive of SecondMarket, in an interview. “The process of purchasing and safekeeping bitcoin is quite challenging, especially if an investor wants to invest a meaningful amount,” he told MarketWatch.
Bitcoin is a decentralized virtual currency that attracted attention for its wild price swings in April. Bitcoins are created through a process called mining, in which a computer solves a cryptographic problem, and the supply is capped at 21 million.
The bitcoin space has been hit by regulatory uncertainty as government officials try to better understand virtual currencies. In August, the New York Department of Financial Services released a notice of inquiry on virtual currencies and issued subpoenas to bitcoin-related companies.
“All of the regulatory chatter that’s out there, to us it kind of validates that there’s a need for this safe, trusted, regulated way to invest in bitcoin,” said Silbert.
Bitcoin’s lack of accessibility also led Cameron and Tyler Winklevoss to file to register a bitcoin exchange-traded fund called the Winklevoss Bitcoin Trust with the Securities and Exchange Commission in July.
The Bitcoin Investment Trust is the first private investment vehicle in the U.S. to solely invest in bitcoin, according to a statement from SecondMarket released Wednesday.
SecondMarket invested $2 million in the bitcoin trust, which has also received initial interest from money managers, traders, family offices and technology entrepreneurs, said Silbert.
The private bitcoin trust has annual administrative and safekeeping fee of 2%. The front-end fee, which is waived for investments made in 2013, will be 1.5%. Once investors are allowed to sell shares on SecondMarket in 2014, the back-end fee will be 1.5%.
The trust’s sponsor is a wholly-owned subsidiary of SecondMarket called Alternative Currency Asset Management, which has retained the services of Sidley Austin LLP, Ernst & Young and Continental Stock Transfer & Trust.
New York-based SecondMarket has established relationships with more than 100 players in the bitcoin space, including miners, early adopters, and exchanges, in order to be able to meet demand in the trust, said Silbert.
The net asset value of the fund will be set every day, taking into account prices across several exchanges. Prices across bitcoin exchanges vary. The recent price of one bitcoin on the two largest exchanges, Mt. Gox and Bitstamp, was $135.99 and $124.60, respectively.
Silbert said he was first exposed to bitcoin in the summer of 2011. “Like most people, my initial reaction was skepticism,” he said. “I came to appreciate that bitcoin has the potential to disrupt three very large markets.”
That includes the opportunity for bitcoin to be used as a store of value like gold, as a global currency and as a global money-transfer network, he said. “There’s a significant upside for price potential for investors who get involved,” Silbert said.