Bitcoin is having another moment, as the cryptocurrency's price leapt above $60,000 once more and ProShares launched its bitcoin futures ETF. That's giving Tad Park of Volt Equity a boost as he gears up for his own attempt to introduce bitcoin to the broader market.
"It shows that people are really cheering for bitcoin to enter the mainstream financial markets," he told Protocol.
ProShares had an impressive debut. The ProShares Bitcoin Strategy ETF, with the ticker symbol BITO, climbed 8% on Wednesday, though it gave up some of those gains Thursday. Those movements closely tracked the price of bitcoin itself — which is part of the point.
Entrepreneurs and even established investment management operations have pushed to introduce vehicles which would directly invest in cryptocurrencies and sell shares to the public as exchange-traded funds. So far, the SEC has resisted approving any of the proposed bitcoin ETFs.
But that hasn't stopped Park, who hopes the ongoing crypto boom will mean a similarly warm reception for the Volt Crypto Industry Revolution and Tech ETF, which the SEC approved earlier this month . It's set to begin trading in a few weeks under the ticker symbol BTCR.
The ProShares ETF doesn't actually hold bitcoin, but instead invests in bitcoin futures contracts.
Park's Volt Crypto is taking a different approach: investing in companies that make most of their money from bitcoin and crypto. It likewise doesn't directly hold cryptocurrencies.
The Volt Crypto ETF invests in "bitcoin industry revolution companies," which draw the "majority of their revenue or profits directly from mining, lending, transacting in bitcoin, or manufacturing bitcoin mining equipment." The fund also will invest in tech companies that hold significant bitcoin investments or have begun drawing crypto-related revenue, such as Tesla, Square and Twitter.
"We try to really hit hard on the industry, and try to pick the best companies within the industry," Park said.
Fund giant Invesco has also introduced two crypto-economy ETFs — a sign of the SEC's apparent comfort with this indirect approach to giving investors exposure to the growing sector.
Park began his career as a Silicon Valley engineer before deciding that investing was more exciting. "I'm a software engineer, but I was obsessed about business," he told Protocol. He worked in several startups where people "were working their butts off."
Park said he realized that "I can basically get the equity that they're working their butt off for just in the public markets investing." That led him to launch Volt Equity last year.
In an interview with Protocol, Park discussed how he came up with an ETF that actually won SEC approval and offered a surprisingly upbeat portrait of Gary Gensler, the new SEC boss whose skeptical approach to cryptocurrency hasn't won him many fans in the industry.
This interview has been edited for brevity and clarity.
Tad Park of Volt Equity is betting on bitcoin indirectly. Photo: Volt Equity
How did you develop the idea for a bitcoin-related ETF?
All the colleagues that I interacted with were always talking about bitcoin and cryptocurrency very early on before people were catching on. I actually interact with a lot of people in the industry. I know people who actually started these coins.
I thought it was a natural next step in terms of launching tech ETFs and to focus on what I know for tech and try to launch bitcoin-related ETFs. We actually were trying to crack the code early on.
In January, I was trying to launch a futures-based bitcoin ETF because I thought that Gary Gensler had issues with bitcoin custody. We spent a ton of money. In terms of the regulatory landscape, I feel like I know a lot about that entire world because I spent about $100,000 just figuring out that route.
You mean on legal fees?
Yeah. Lawyers are like $1,000 an hour. In the end, I didn't think [a futures ETF] would really match what we were trying to do. Volt doesn't just want to be a commodity where it's like exactly one-to-one spot bitcoin.
So you are not investing in the coins, but in the companies that are involved in the industry, correct?
I was always trying to find out how to get this bitcoin exposure. I was in bitcoin at $3,000 and basically really bullish on it.
We thought that we could actually come up with a portfolio that would actually have a lot of that exposure [to bitcoin] and potentially have some correlation to bitcoin's price movement.
We actually use a lot of software. We're coding and coming up with algorithms to help figure out the allocations and when to buy and sell.
So it's an actively managed fund. The companies [we invest in] are a vehicle for us to achieve our goals. Microstrategy holds so much bitcoin, for example. That's why they correlate so much with the price.
So you don't acquire bitcoin tokens yourself.
We don't acquire bitcoin itself. People are trying different things to gain that exposure. Even the futures ETFs out right now, all they're trying to do is gain exposure, but they're not touching or holding any real bitcoin.
For Volt, what percentage of your holdings have exposure to bitcoin?
At launch, we are going to have like around 75%, or a majority of it, in those kinds of companies. But that is like a very loose thing because some companies, according to the SEC, don't count as exposure to bitcoin. If we held Coinbase, it doesn't count as exposure to bitcoin because it doesn't get a majority of its income from bitcoin. But the company does have a correlation to bitcoin and crypto prices. So we might have Coinbase or Square or Tesla — still crypto-related. We are pretty all in on the industry.
Also there's this aspect of "and tech" in the ETF name. We're not necessarily going to be constantly full-on, near-100% exposure. We might actually shift in rotating into some of the more stable tech names, like Tesla and Square. We're not mandated to be at full or near 100% the entire time. We might be at least 50% in bitcoin-focused companies.
If bitcoin goes down 80%, these are real companies that are creating things like cars and different things. So hopefully the ETF will not go down 80%.
At the same time, people might say, "Well, then how do you keep up with a bull run, because these bull runs can be really crazy?" That's where we have options.
When we put options on the bitcoin-related companies, then you get this very interesting behavior, basically like a convex behavior. If there's a crazy crash, you don't necessarily lose everything. But if there's a crazy run-up then it can really magnify the returns because there are options on it, and it's all baked in.
People in the community want this. They want to keep up with some crazy run-up. They don't want to lose everything if it goes down to zero.
How do you view Gary Gensler? What do you think of the perception that he is a crypto critic?
Gary Gensler is the best thing to happen for bitcoin in a long time. He is very informed about crypto. In fact, he taught a course on crypto at MIT and in it, he brings up many valid concerns about how to provide a publicly traded bitcoin vehicle.
The main thing he laid out is trying to avoid what happened in 2014 with the Mt. Gox hack where nearly half a billion dollars of investor money was stolen. Gensler is actually pro-bitcoin, but also pro-investor safety, and this is why he approved the recent bitcoin futures ETF and also Volt's BTCR, which are not prone to the hacks he criticized since they don't hold bitcoin directly.
Will we ever see a coin-based bitcoin ETF? I think so, but only if it answers Gensler's carefully outlined concerns. Ultimately, these are the guardrails we need to allow bitcoin to enter the mainstream and to bolster investor confidence in bitcoin in the long term.