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Wednesday, June 16, 2021

Goldman Sachs Registers Proxy Bitcoin Investment Product

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Key Takeaways

  • Goldman Sachs has announced an investment note with indirect exposure to Bitcoin.
  • The linked note will be based on the price of the Ark Innovation ETF which adds Bitcoin from time to time.
  • Besides institutions, the retail investment sector in the U.S. has seen an influx of many products with BTC allocation.

Goldman Sachs has launched a fixed-return note based on the Ark Innovation ETF’s performance, which has the liberty to allocate add Grayscale’s Bitcoin Trust shares. 

Goldman Sachs Dips Toe in Bitcoin 

Goldman Sachs announced the formal sale of $15.7 million shares of Coupon ETF-Linked Notes backed by ARKK’s performance in an SEC filing

The investment bank’s ETF-Linked Notes offers a discount of 4.1% at face value and a monthly return of 8.125% if Arkks’ ETF value does not fall below 60%. 

This means that for every $941 invested— after a 4.1% discount on $1,000—the note holder will receive $8.125 every month if the Arkk’s ETF holds at least 60% of its value. 

The policy matures in March 2026, when the investor redeems $1,000, plus the pre-defined returns based on the ETF’s performance. 

The fund’s investors will only see an indirect exposure to Bitcoin during the months Ark decides to add GBTC to the ETF.

Ark Invests’ Cathie Wood told CNBC that the probability of a Bitcoin ETF approval has certainly gone up. She added: 

“We expected institutional interest to pick up this year and it certainly has, but the way in which it’s picked up has surprised us. I don’t think we ever thought there would be broad-based substitution of Bitcoin for cash on corporate balance sheets. We find that very interesting.”

While the Innovation ETF currently does not have any Bitcoin exposure, the largest shares in the ETF, Tesla, and Square, with more than 16% allocation in ETF, have 7.8% and 5% Bitcoin in their balance sheet, respectively. 

Proxy Bitcoin Investment Vehicles

The financial world now has a plethora of options for Bitcoin investments beginning with proxy equities. The most prominent of them is MicroStrategy which has converted all of its cash balance to Bitcoin and added more raising debt via senior-convertible notes.

Presently, several top asset management and mutual funds from Blackrock, Morgan Stanley, Ruffer LLC, and Vanguard, among others, have between 1%-13.9% MSTR allocation, which effectively means a Bitcoin investment.

Mutual Funds with MicroStrategy exposure. Source: Money.cnn

Further, other proxy Bitcoin investment products in the U.S. include equities in RIOT, Longfin Corp., and Canadian ETFs from 3iQ and Purpose Investments.

The benefit of adding Bitcoin via ETFs provides tax benefits—by adding to investment allowance brackets—that are not available to crypto investors otherwise.

Disclosure: The author held Bitcoin at the time of press.  

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