An investment vehicle for the virtual currency bitcoin has gained backing from some prominent investment firms, according to its parent company Pantera Capital Management.
Pantera Bitcoin Partners is an investment fund focused exclusively on bitcoin, other digital currencies, and companies which focus on them. Pantera announced Tuesday that Fortress Investment Group, a global investment firm based in lower Manhattan, will acquire a stake in its fund as well as California-based venture capitalists Benchmark and Ribbit Capital.
“These shareholders and their principals will generally make their purchases of bitcoin and other digital currencies via investments in Pantera,” Pantera said.
For Wall Street’s Fortress, an investment in this new technology might not come as a surprise with Michael Novogratz, a principal at the company, being a high profile advocate of the cryptocurrency. In October, he recommended buying bitcoins when speaking at a panel discussion in New York. He said that bitcoins would be worth a lot in a few years, adding that they could be used as a cheaper way of transferring money in countries with weak banking systems.
Fortress has approximately $61.8 billion in assets under management. In its financial review for 2013 it revealed that it had purchased of $20,000 of the digital currency, but had also recorded $3.7 million in unrealized losses on bitcoin during the year, leaving it with a $16,298 holding.
Even before Tuesday’s announcement speculation has been ongoing that Pantera Capital Management was on the verge of directing its efforts towards the digital currency. The firm was founded by Daniel Morehead in 2003 with a focus on global macro hedge fund investments but a filing on December 5 with the Securities and Exchange Commission revealed that it had already raised $147 million for the bitcoin vehicle.
In Tuesday’s press release, Novogratz said that Fortress sees potential for the broader adoption of bitcoin and related technologies to reshape the global payment space.
“This partnership brings together leading companies with a range of relevant expertise, well-positioned to lead and capitalize on a potentially transformative evolution,” he said.
Bitcoin is a “virtual” currency that allows users to exchange online credits for goods and services. While there is no central bank that issues those, bitcoins can be created online by using a computer to complete difficult tasks, a process known as mining. This new fund would follow hot in the footsteps of SecondMarket, a U.S. online marketplace which launched The Bitcoin Investment Trust in 2013. This is a private, open-ended trust that it says invests exclusively in bitcoin without the challenges of buying, storing, and safekeeping bitcoins.
Tom Robinson, the co-founder of London-based bitcoin services company Elliptic, said Pantera’s deal was indicative of the increasing interest from established financial institutions. He believes that they are beginning to appreciate the transformative potential of the technology behind cryptocurrencies.
“I believe we will see much more of this as regulators and tax authorities around the world further clarify their approach to these currencies,” he told CNBC via email.
Image credit: CC by Antana