Investment firms Fortress Investment Group (FIG), Benchmark Capital and Ribbit Capital have teamed up with Pantera Capital to launch a bitcoin investment fund.
The new fund will be known as Pantera Bitcoin Partners LLC and, as the name implies, it will be controlled by Pantera. Fortress, Ribbit Capital and Benchmark Capital will be minority equity partners.
Fortress became the first Wall Street investment firm to enter the bitcoin space. Last year it was rumoured to be acquiring bitcoins and a regulatory filing published in February revealed it had set aside $20m for bitcoin investments in 2013.
The company also reported a loss of $3.7m on its bitcoin investment.
Crunching numbers
Fortress has an estimated $58bn in assets under management, so it might be unfazed by the initial loss.
Back in December Pantera Capital (which manages money for FIG executives) created an investment advisor entity named Pantera Bitcoin Advisors LLC. At the time it was listed as a hedge fund with a total value of $147m. Pantera reportedly invested $10m in Bitstamp last year.
Fortress, Benchmark and Ribbit just recently invested in Xapo, a bitcoin storage and security service. In the past, Fortress has dabbled in high-tech investments such as Twitter and eBay, and Ribbit has invested in Coinbase and BTCJam.
The launch of Pantera Bitcoin Partners LLC comes hot on the heels of a digital currency regulatory push in New York. Earlier this month New York State started accepting applications for digital currency exchanges.
The decision was the culmination of an initiative launched by Benjamin Lawsky, superintendent of financial services for the State of New York. The New York Department of Financial Services (NYDFS) held several highly publicised hearings on the matter in January.
Pantera goes all-in
According to the Wall Street Journal, Pantera is shifting its investment focus “solely to bitcoin ventures.”
Pantera chief excutive Dan Morehead says he is fascinated by the promise that bitcoin can fundamentally change the way people interact with money. “So about a year ago, I decided to begin investing in bitcoin and devoting my full attention to it,” he said.
The firm’s staff is now fully focused on digital currencies, a far cry from macroeconomic hedge-fund strategies, currencies and interest rates that were Pantera’s main focus in the past.
Changing the bitcoin landscape
Over the last few months bitcoin’s public image has been eroded by arrests, bitcoin heists and, of course, the collapse of Mt. Gox. However, these headline-grabbing events did not deter investors, quite the opposite in fact.
The pieces of the puzzle may be shifting, but they are starting to fall into place. Regulation might not be a problem, at least not in New York and a few other jurisdictions.
Is the Mt. Gox debacle a good argument for regulation? Some argue that it will attract investors to secure platforms headed by Wall Street veterans. Why deal with shady exchanges set up by enthusiasts and coders if there are regulated alternatives set up by reputable investment firms? That is a question many parties will undoubtedly ask if more institutional investors get on board.
Perseus Telecom recently teamed up with Atlas ATS to announce the launch of a globally integrated bitcoin exchange. Perseus also launched the Digital Currency Initiative (DCI) with the aim of making sure that bitcoin investors get the same level of financial institution security as other public market investors.
Pereus is a major provider of high-bandwidth communications platforms used by trading firms, hedge funds and financial media. It has a strong presence in numerous markets, including financial hubs like London, New York, Tokyo and Singapore.
Telecom EMEA head of business development Carl Weir described the collapse of Mt. Gox as a “learning opportunity.” It was also a way of saying bitcoin investors were taught a painful lesson.
Oddly enough, the arrest of Charlie Shrem coincided with the NYDFS hearings, while the collapse of Mt. Gox occurred just a few weeks before Perseus, FIG, Pantera and other players made their move.
In the grand scheme of things, could Shrem’s and Karpeles’ falls from grace be the excuse institutional investors and regulators were looking for all along?
Investment image via Shutterstock