1. Digital assets have become a new asset class
We believe that digital assets have become an established, distinct asset class with growing acceptance among retail and institutional investors. Bitcoin’s investment case is centred around its ‘digital gold’ status as an incorruptible, trustless, independent monetary system with a predefined currency supply based on a peer-to-peer network. The appeal of blockchains such as Ethereum is underpinned by decentralised finance as a global, open alternative to the existing financial system, granting all users free access to financial products such as borrowing, lending, saving, trading and payments without the need for traditional intermediaries and in a 24/7 set-up. Finally, non-fungible tokens, or NFTs, extend the technology’s use cases beyond finance and into areas such as gaming, fine art, licensing and digital identity.
A significant milestone for the asset class has been the approval of several spot bitcoin exchange traded funds (ETFs) in the US in January 2024, which subsequently attracted considerable capital. The sector also experienced significant technological advancements, such as major upgrades to the Ethereum blockchain, which allowed the broad investor audience to access the steady income from staking rewards.
2. The company is more than a simple proxy on an investment in bitcoin
The company’s asset management platforms include passive investment products and the ETF platform, which generate regular income from management fees. Its capital markets infrastructure division is active in liquidity provisioning, fixed-income investments, decentralised finance investments and proprietary trading based on low-latency delta-neutral (ie non-directional) strategies aimed at exploiting market inefficiencies. Consequently, the company is more than a simple beta play on the bitcoin price, as it provides the opportunity to benefit from both overall progress in terms of digital asset adoption (and the potential accompanying increase in the market capitalisation of major cryptocurrencies) and market volatility in the sector.
3. CoinShares International is a well-established, experienced player in the industry
CoinShares International is one of the pioneers in the emerging digital assets sector, formed in 2013 and headquartered in Jersey, with offices in London and New York. It is a well-established player in a nascent, high-growth industry and one of the largest digital asset companies globally. The company has recently made forays into the US market through its newly launched hedge fund solutions business, as well as the acquisition of Valkyrie Funds, which manages several investment products linked to digital assets, including a US spot bitcoin ETF. We believe that the high-profile collapses of poorly regulated players in the crypto sector in 2022, coupled with recent legislative progress in the sector, support the market position of regulated and transparent investment products offered by CoinShares International.
4. CoinShares International has recently become a dividend payer
The company has recently introduced a dividend policy to pay out between 20% and 40% of its total comprehensive income adjusted for currency translation differences. It has already declared its first dividend, paid out of FY23 earnings, at 13 pence per share. Based on the share price at the time of the declaration, it implies a dividend yield of around 3%.
