Six years after setting up a company to extract and analyse blockchain data, the team behind ByteTree has launched an asset management business.
Buoyed by “growing institutional appreciation of the potential of digital assets”, the team at ByteTree Asset Management will offer professional investors the means to access the asset class in a regulated manner.
This will be done “with the highest quality operational and legal structures”, the firm added.
Founder and chief investment officer Charlie Morris, who spent 17 years at HSBC Global Asset Management as head of absolute return; recognised that, while there were many data sources for crypto currencies, few went beyond the provision of price and performance data.
With little-to-no analysis, it was very difficult to determine price movements and hence position portfolios to capture the best opportunities.
So, in 2014, Morris created ByteTree to address this gap in the market.
The team went on to access multiple blockchains and were able to deliver a range of statistics including coin counts, total output volume, hash rates and transactions numbers – data fields that are still widely used today across the asset class.
In a bid to gain a higher-level understanding of the network by linking transactions together, the team built a first-of-its-kind terminal which collects, collates and indexes over 80 metrics for each blockchain network.
It brings analytical discipline to the asset class with a greater understanding of price formation.
The ByteTree Asset Management team will look to leverage this proprietary real-time intelligence when they launch their first fund later this year.
It will invest in Bitcoin alone and will be available only to professional investors.
A spokesperson for ByteTree confirmed to Expert Investor that it will be available to investors in Europe.
Having been an investor in ByteTree since 2017 Charlie Erith joined the company in 2020 as chief executive of ByteTree Asset Management.
Previously, he spent 25 years in equity sales, hedge fund and long only fund management, starting his career at Cazenove, working initially in the Asian offices before becoming a director for institutional sales in London.
In 2006, he moved to Boyer Allan to comanage a long/short Asia focused fund and in 2012 he co-founded Stone Drum Partners where he started a long-only fund with a focus on small and medium size companies, which subsequently moved to Asian boutique Coupland Cardiff in 2015.
Increasingly institutionally investable
Commenting on the launch of the fund, Morris, said: “Institutional investor interest and appetite has grown enormously in digital assets and demand is unlikely to abate anytime soon. This is a major sea change in an asset class once dismissed by many as a ‘fad’. Investors are seeing its huge potential as a store of value and a credible diversifier, which will increasingly be sought in an environment of negative interest rates and slow economic growth.
“Many myths surrounding digital assets have been dispelled and the infrastructure is now of enterprise grade. As with any asset class, there will always be winners and losers so experience and analysis is everything.
“That is where ByteTree Asset Management has a distinct advantage by tapping in to our proprietary, first-to-market and unparalleled analysis engine, helping us to mitigate risk in real-time for more sophisticated and rigorous investors.”
Erith added: “It is abundantly clear that this is an industry becoming increasingly institutionally investable.
“Custody and liquidity provision are now of institutional quality, while regulatory structures, transparency and analysis continue to improve.
“It is little surprise that serious investors are starting to pay attention. The bubble is past, the criminal insinuations have been largely rooted out and usage and ownership numbers continue to grow.
“Bitcoin has been intensely roadtested and hugely de-risked. It has proved itself a survivor. Yet the philosophy behind it and its elegant construction remain intact. I see it having the properties both of a transactional currency and a store of value.
“In a world of negative interest rates, parlous balance sheets, slumping corporate profitability and unhinged equity valuations, it surely makes sense to have a toehold in a balanced portfolio.”