During a time of soaring prices for “hustle” cryptocurrency Dogecoin, perhaps the surest trick to ensure news coverage is announcing an investment in cryptocurrencies.
Guggenheim Partners, which received extensive airplay last December after promising to invest in crypto with its Macro Opportunities Fund, seems to have perfected that trick. The Chicago-based company is out with another fund that, you guessed it, promises to seek exposure to cryptocurrencies and, notably, Bitcoin.
The Active Allocation Fund’s filing states that it will invest in a wide range of fixed income debt and senior equity securities. More importantly, it may also seek indirect exposure to cryptocurrencies through cash-settled derivatives instruments for the asset class.
Last December, Guggenheim Funds Trust filed an amendment with the SEC to allow the Macro Opportunities Fund to invest up to 10% of the fund’s net asset value, amounting to approximately $500 million, in the Grayscale Bitcoin Trust (GBTC), a crypto investing product that trades in OTC markets.
Not An Investment But A Promise
The promise to invest in cryptocurrencies is just part of the show, however.
Guggenheim Partners chief investment officer Scott Minerd has become something of a crypto oracle. He regularly appears on business channels to comment on Bitcoin’s volatility and share his price targets for the cryptocurrency.
In April 2021, when Bitcoin posted a new price record after crypto exchange Coinbase’s debut in the public markets, Minerd played spoilsport. “Things are very frothy and I think we are going to have a major correction in Bitcoin,” he told CNBC. Not long afterwards, prices for Bitcoin and crypto markets crashed. Minerd has predicted a price target of between $20,000 to $30,000 for Bitcoin in the short term and a long-term price of $600,000.
To be sure, Guggenheim is not the only investing firm toying with the idea of crypto exposure for clients. Goldman Sachs and Morgan Stanley reportedly plan to provide crypto access to their wealth management clients. JP Morgan has similar plans. However, these firms have a track record of engaging with and tracking prices for cryptocurrencies.
But it is hard to explain Minerd’s bullish stance or price targets. There is no record of him or his firm making investments in Bitcoin or any other cryptocurrency. Even if Guggenheim Partners does end up putting money into Bitcoin, it will be in a cash-settled derivative, thereby protecting it from the downside of holding an asset whose price could plummet to zero. A derivative will also provide convenient entry and exit points for the trade and save on associated costs, such as custody, for cryptocurrency.
In the meanwhile, it doesn’t hurt to make promises.