Cryptocurrency funds are larger in number and diversity. Photo: 4artrachen.
Previously despised and stigmatized, cryptocurrencies have definitively established their flag in the Brazilian capital market. This is because from January to December 2021, institutions specializing in the niche and big names in finance, such as BTG Pactual and ItaĂş, constituted 37 funds anchored in cryptoassets. Thus, it increased by 146% the total number of products of this kind registered with the Securities and Exchange Commission (CVM). In addition, five cryptocurrency index funds (ETFs) began operations.
Some responses to these movements include, for example, B3’s decision to explore this segment with cryptocurrency-related products and services. As well as the progress of bill 2305/15 with guidelines for regulating cryptocurrencies.
“We are just scratching the surface of a huge iceberg. Cryptocurrencies will be irreversibly integrated into the so-called new economy”, comments Rodrigo Monteiro, executive director of the Brazilian Association of Cryptoeconomics (ABCripto). Monteiro also highlights another indicator of the Federal Revenue on the massification of these virtual applications. “The total number of investors in crypto assets jumped from 94,000 to 592,000 between December 2019 and last May, and is still on the rise.”
A good part of the novelties that have emerged recently bear the signature of Vitreo. Of the manager’s ten funds fully or partially backed by crypto-assets, eight were introduced to the market in 2021. In fact, one of the most recent and popular has its portfolio focused on the so-called metaverse, which aims to promote the integration of the real and virtual universes.
Assorted cryptocurrency funds
Launched in early December, the Metaverso Ações FIA BDR Level I allocates 90% of its resources to shares and Brazilian Depositary Receipts (BDRs) from leading companies in structuring this hybrid scenario. This includes, for example, Nividia, AMD, Roblox, Unity and Meta, the new name for Facebook. In addition, the remaining portion is invested in cryptocurrencies linked to play-to-earn games, which guarantee prizes to participants, and NFT (non-fungible tokens), widely used in the tokenization of works of art.
“The new fund, which attracted 4,000 shareholders in its first two days of operation, already has a net worth of R$30 million”, according to George Wachsmann, partner and head of management at Vitreo. Created in 2018, the manager made its initial foray into cryptos in February 2020 with CriptoMoedas, a hedge fund.
The product has assets of R$ 450 million and 9 thousand shareholders. And it presented some innovations in the niche, such as active management focused on results superior to the established benchmark. As well as full allocation in virtual assets and applications from Brazil. But it is aimed at qualified investors, with investments in excess of R$ 1 million.
However, the house’s flagship served as inspiration for an open fund for investments from a modest R$100, which totals R$83 million and 12,300 shareholders. “CryptoMoedas Light, with 80% of the portfolio in CDIs and the rest in virtual assets, was the ‘on the rocks’ version of the main fund of the class. This, yes, an authentic ‘cowboy’ with 100% in crypto assets”, jokes Wachsmann. However, in August 2020, Vitreo switched from CDIs to metals. This is because these have countercyclical behavior in relation to crypto assets. That’s why it’s now called Crypto Metals Blend.
Cryptocurrency Seasoning
Thus, from 2020, Vitreo began to “spice up” its other funds with homeopathic doses of cryptoactives. Allocations are in the range of 1% to 2% of portfolios. It also reinforced the investment options grid more related to crypto-assets. These already add up to assets of around R$ 746 million and 59 thousand shareholders.
In this way, crypto-assets hold an 8% share of the BRL 4 billion of resources managed by the house. And the bias is resources is high. “For 2022, we have scheduled two new funds and our first two ETFs,” says Wachsmann. “By the middle of the decade, we believe that cryptocurrencies could account for something around 20% to 25% of the portfolio.”
ETFs da Hashdex e QR Asset
Two major highlights of 2021 in this new investment frontier, however, were Hashdex and QR Asset Management, responsible for launching the first crypto-asset index funds in the local market. Hashdex took the lead in April with HASH11, pegged to the Nasdaq Crypto Index (NCI). Developed by the New York electronic stock exchange with the collaboration, among other institutions, of the Rio de Janeiro manager. The basket has eight crypto-assets, among which bitcoin and ethereum stand out, which hold the largest weights in the basket.
“The boom in bitcoin and other crypto-assets, from the end of 2020, aroused the interest of the market in general”, says João Marco Cunha, portfolio manager at Hashdex. “Proof of this is that institutional investors, including the renowned Verde Asset Management, hold one third of the shares of HASH11. The Brazilian market follows in the footsteps of Canada, where feedback applicators, such as pension funds, make increasing allocations in crypto-assets.”
HASH11 has assets of R$2.4 billion and 120,000 shareholders. Encouraged by the good reception of the new market, Hashdex launched two more options. BITH11 is referenced on the Nasdaq Bitcoin Reference Price (NQBTC), while ETHE11 is centered on Ethereum, the main platform for decentralized applications like NFT, Web3, decentralized exchanges (DEX) and decentralized finance (DeFi). “In total, the three ETFs have 141,000 shareholders and equity of R$2.7 billion,” says Cunha.
Growing dispute between companies
With three years on the road and BRL 5 billion under management, Hashdex is entirely dedicated to virtual assets. In addition to the trio of ETFs, its grid has six more funds invested fully or partially in cryptoassets. “In 2022, our product range will be reinforced with at least three or four funds and ETFs,” says Cunha. “The dispute in the crypto space is heating up: we started first in ETFs, but we gained a competitor shortly after and others are on the way.”
QR was one of the first managers to be present in the area. In 2020, after presenting three funds 100% backed by cryptoassets, it returned to the load in 2021. It launched a product aimed at DeFi, in a second partnership with Vitreo, and two ETFs. QTBC11, focused on bitcoin, and QETH11, on ethereum. Launched between June and August, the duo has assets of R$ 447.74 million and accounts for 40% of the resources managed by the house.
“With more advantageous tax treatment in the local market and lower operating costs, ETFs have been gaining ground all over the world”, observes the investment director, Alexandre Ludolf. Like Vitreo and Hashdex, QR plans to expand its menu of options anchored in virtual assets in 2022.
In addition to three new crypto-asset index funds (ETFs), the launch of two to three thematic funds with active management and one with a pension profile are planned, that is, the first of the manager that will open space for conventional applications, such as income bonds. fixed and shares. Due to the fluctuation of cryptocurrency prices, “our funds, as a result, are not necessarily 100% allocated to crypto assets. We always look for some protection in less volatile liquid assets”, says Ludolf.
Institutional investors eyeing
According to the executive, the strong rises in bitcoin and ethereum contributed to the inclusion of previously undervalued crypto assets in the range of options for higher caliber investors. This happened especially abroad. The decisive factor for the definitive break of prejudice, however, was the monetary policies adopted by most nations during the pandemic. By reducing interest rates, they opened up the appetite of institutional investors for alternative assets in general.
“The arrival of major players in 2021 marked the consolidation of the local market for digital assets. Thus, it began to rely on more sophisticated investment strategies, taking away space from speculators.”
The good winds that blow in the niche also allowed the Bitcoin Market become a unicorn. At the end of June 2021, the platform received a contribution of US$ 200 million from Softbank. Thus, the startup’s market valuation stood at $2.1 billion. In November, it received another US$ 50.3 million from investors. The trajectory of the business, created in 2013, illustrates the development of the virtual currency market.
“When we started, bitcoin was worth R$190 and there were, at most, two thousand people in Brazil who knew crypto assets,” says CEO Reinaldo Rabelo. “Today, we have more than 3 million users registered in our system.” The corporate name, it must be said, did not adapt to the expansion of scope and volumes. After all, the company that was focused on bitcoins currently enables transactions with around 100 coins and virtual assets – 70 more than a year ago.
In 2022, Bitcoin Market begins international expansion
The list, which tends to continue growing, includes, for example, options pegged to the dollar (USDC) to tokens that guarantee shares in the transfer values ​​of football players from Vasco da Gama and Santos. “I created Token Vasco to help my club at heart, which at the beginning of 2021 wanted to tokenize the transfer of striker Talles Magno to New York City,” says Rabelo.
“After the launch, in November, of Token Santos, we started talks with teams from other centers in South America and also in Europe. In the European market, there is great interest, especially from clubs in the so-called bridge countries, such as Portugal, Greece and Turkey.”
In addition, with cash reinforced by the injections received, the start of operations in Argentina, Chile, Colombia and Mexico is planned for the first quarter of 2022. It is the first stage of a project aimed at the entire subcontinent. “The Latin American cryptocurrency market is expected to grow significantly in the next two years. The region has an estimated potential of 20 million users, double the projected for Brazil”, according to Rabelo.
Real digital should help market expansion
Also adopted by Singaporean Crypto.com, the use of sponsorships and partnerships in the sports area is already configured as one of the main strategies for the dissemination of crypto assets. The Mexican Bitso, for example, a stock exchange that is also a unicorn, closed such deals. One of them is with SĂŁo Paulo Futebol Clube (SPFC). However, a great challenge to be faced by agents in the sector is to offer financial education to the general public.
“Traditional banks and brokers, who are tired of throwing stones at crypto assets, are already surrendering to this innovation. However, most of its professionals still do not have enough knowledge to offer products related to virtual assets to investors”, says Bruno Diniz, partner at Spiralem consultancy and author of the recently released “A Nova Lógica Financeira” (Editora Gente).
“Fortunately, the system tends to rely on the collaboration of the federal government, more specifically the Central Bank, which prepares for the launch of the digital real by 2024. This project will facilitate the sale of assets and digital currencies in general to the population”, adds Diniz.