Why did a well-known institution managing $1.8 billion choose to invest in BTC ETF?

Source: Bitcoinist

Compiled by: Blockchain Knight

Patient Capital is a well-known asset management company managing over $1.8 billion in assets.

According to a recent portfolio holding report, the company has submitted an application to the SEC (U.S. Securities and Exchange Commission) requesting permission to allocate up to 15% of its funds to a BTC ETF.

This move by Patient Capital comes at a time of significant inflows into the BTC ETF market, reflecting the growing interest from both institutional and retail investors in these newly approved index funds.

According to the documents submitted by Patient Capital on March 11, the company plans to seek investment in BTC through exchange-traded products (referred to as "BTC ETPs"). These products were registered under the Securities Act in 1993.

This marks a shift for Patient Capital from previously investing in Grayscale's BTC Trust Fund GBTC to BTC ETFs.

In addition to direct fees, the fund will also proportionately bear management fees and other costs associated with the BTC ETF, and incur brokerage commissions when trading shares of these ETFs.

While Patient Capital is very interested in BTC ETFs, the document also emphasizes some concerns regarding the broader Crypto asset market and BTC itself.

Patient Capital points out that the auditing standards for BTC may differ from those for U.S. registered securities.

The company highlighted the "lack of regulation" and "lack of transparency" of digital asset platforms, stating that these platforms are susceptible to fraud, manipulation, security failures, and operational issues.

That said, while Patient Capital is willing to participate in the newly launched BTC ETF market, the company also acknowledges that the value of BTC and its investment value in the BTC ETF market may be adversely affected by these risks.

The documents submitted by Patient Capital also note that countries, including the United States, may impose restrictions on the future acquisition, use, or sale of BTC, or even ban BTC altogether.

Furthermore, the asset management company pointed out that U.S. regulation of Crypto assets is "still evolving," and current and future regulatory actions may significantly impact the nature of investments in Crypto assets.

Importantly, Patient Capital also recognizes that classifying digital assets as securities under federal securities law remains "complex and unpredictable," which could affect the value of the assets.

Additionally, market volatility in the secondary market and limited trading activity may lead to significant premiums or discounts on the net asset value of BTC ETFs.

The company warns that the lack of an active stock trading market may result in limited market liquidity, potentially causing losses when selling shares.

The limited number of authorized participants, market makers, and liquidity providers for BTC ETFs may affect trading dynamics and could lead to significant discounts on net asset value, wider bid-ask spreads, trading halts, or even delisting.

Patient Capital's application to allocate a portion of its fund to BTC ETFs indicates that the asset management company recognizes the increasing interest of institutions in Crypto assets.

However, the document also emphasizes the so-called risks of the Crypto asset market, including regulatory uncertainty, market volatility, and limited liquidity.