The first crypto blockchain ETF to be listed on digital exchanges by Kryptoin ETF Systems, is on its way, having launched its Blockchain 10 Index in November of last year.
Kryptoin CEO Donnie Kim explains that the Kryptoin Cryptocurrency Blockchain ETF systems is a patent pending platform upon which ETF tokens can be created to track and encapsulate indices formulated to represent the evolving digital currency markets.
“We started off by identifying two big megatrends,” Kim explains. “We had been developing fintech applications for four years and saw a huge trend in the usage of ETFs. The assets that were going into them had been increasing for 18 years straight and then we saw another megatrend, with the increase in market capitalisation of bitcoin. When we started we didn’t know it would take off to this extent but we realised that people would need access to the crypto market in the form of ETFs.”
Existing, and, so far, unsuccessful attempts to create bitcoin ETFs are dismissed by Kim because they are attempting buy the value of bitcoin through equity exchanges.
“Our ETF is totally different,” he says. “We are creating units and indexes from cryptocurrencies and offering access to those ETFs on digital exchanges.”
Amongst the team of eight at Kryptoin is a specialist ETF adviser, Jason Toussaint, former CEO of SPDR GLD ETF, the largest Gold ETF in the industry. November 2017 saw the firm’s first crypto Blockchain 10 index composed of the top 10 coins by market capitalisation and, since then, the firm has observed that the potential ETF closely mimics the cryptocurrency market capitalisation.
“We have an app that enables the exchange trading creation and redemption of the underlying,” Kim says. Currently bitcoin, ethereum, ripple and bitcoin cash dominate the index. The path to launching the ETF lies through the ICO of the KRP token, a process that Kim is confident will be completed in a few months. Kryptoin is seeking USD50 million, mostly to purchase underlying assets (95 per cent) while the balance will go to marketing & operations and development & system upgrades.
“Once the ICO is completed, it will be launched on the major digital exchanges just like a regular ETF does on an equity exchange,” Kim says. “There has to be a mechanism to direct exchange trade digital currencies so there may be a way to integrate fiat currencies in the future.
“We have lots of interest from people who think that this is the future and see a lot of money waiting to invest in an index of the cryptocurrency market through a single coin.” The Kryptoin platform is able to calculate the NAV of the token and that NAV is the value of the underlying.
“When we started, the NAV was USD20 and when bitcoin hit 19,000 it went to USD150 and now it’s down to USD51. It’s less volatile than buying individual coins. When the cryptocurrency market is really roaring it can get volatile but it is a basket so less volatile than any single one coin.
“The market cap of the crypto market at the moment is about USD400 billion and that is projected to increase to USD10 trillion in the next three years, so we project that the NAV will go to USD2,200.”
Kim reports that his firm is getting a lot of interest from people in the ETF industry. “There is a natural interest to see the progression of what is going on in the market and we are early and the first firm to have created something like this.”
Only 100,000 tokens will be sold in the Pre-ICO in a Dutch Auction Format on September 1, 2018.
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