Want to start Cryptocurrency Investment Fund - Lots of Questions

[matt608]

Hi,
I am a 28 year old from the UK who has been investing in the cryptocurrency space for 5 years now. I have made a 300x return on my original investment. I realised, this experience combined with my success means I have credentials and I would like to put them to use by starting a cryptocurrency investment fund, where I will take a basic management fee and 'bonus' fee for reaching certain profit targets.

I have very little business experience and I don't really know what the laws are on this or how to actually get started. I have lots of questions - any answers to any of them would be much appreciated!

1. What form should the business take? Does it need to be company with shares or given the largely unregulated nature of cryptocurrency do I even need to register as a company?

2. Do I need any licenses? Ideally I want to be able to accept investment from all over the world, will I need different licenses for each country? Cryptocurrency is largely unregulated though so maybe I don't need any?

3. Any advice on whether I should cater to 'the little guy' or only allow for large investors? There is a big long-tail in ******, a lot of very small investors. It would be great if a system could be developed that accepted small investments, but that would mean I couldn't 'manually' operate the fund, there would need to be a system developed to handle it, and I don't know how to develop such a system. Any advice here would be great - do I need to hire a programmer or is there software that can already do this?

4. Who is it legal to advertise a fund like this to?

5. Who do I need on my team? Ideally once it is up and running I would like to be able to operate the whole thing myself. But I accept that while getting it up and running I'm going to need help from people with various skills, developers, lawyers etc.

6. Form of investment - I could require investors to send me their funds in bitcoin, and I could completely avoid using regular currencies which I would imagine require more legal legwork. Would this be a good approach? (e.g. rather than someone sending me USD via bank transfer).

Thank you

 

[ethical PR]

https://www.fca.org.uk/

 

[Paul Kelly ICHYB]

A currency should not be controlled by a company, ****** or otherwise!

If you want to start your own, invest in proper advice, don't come to a forum (although you will get good feedback).

 

[garyk]

https://www.fca.org.uk/

****** currencies are not a regulated instrument and the FCA do not provide any guidelines for ****** firms.

 

[Alan]

You post is interesting, I have been a member here for quite a while and yours is the first post I recall on ****** currencies. I'm pretty certain the vast majority here haven't any interest or knowledge at the moment.

Currencies may well not be regulated instruments, but I think you are thinking of creating fund, which ( possibly ) start to fall into some area of regulation, certainly if they do then advertising and know your client laws will start to apply. Also anti money laundering laws will apply I would think.

I think you need some expert help. Hopefully your initial investment was not £1 - as you will need a big wedge to kick this off.

Also, I'm not sure, if I have Bitcoin or Etherium in my portfolio, holding on for a another 300 x return, why would I give it to any one else, and what would you do with it?

 

[fisicx]

If you reinvest the 300X return in 5 years you will have 90000x your original investment. That going to be a lot more than you would ever earn as a ****** fund manager. Or have I missed something?

 

[Nochexman]

Is this the sort of thing you have in mind?

http://dlt10index.com/

 

[Alan]

Yes this is the sort of expert help you need
1. " senior leadership globally for top investment banks such as Deutsche Bank, Citigroup & RBS/ABN AMRO."
2. " at Goldman Sachs as a quantitative analyst in their foreign exchange division"
3. "led Emerging Markets Technology for Goldman Sach in Europe"
4. " is a founding investor in Ethereum and has experience with blockchain mining, trading ******-currencies, digital wallets "

I hope your initial investment was £1million, as with £300million you could buy some credible talent.

 

[matt608]

Yes this is the sort of expert help you need
1. " senior leadership globally for top investment banks such as Deutsche Bank, Citigroup & RBS/ABN AMRO."
2. " at Goldman Sachs as a quantitative analyst in their foreign exchange division"
3. "led Emerging Markets Technology for Goldman Sach in Europe"
4. " is a founding investor in Ethereum and has experience with blockchain mining, trading ******-currencies, digital wallets "

I hope your initial investment was £1million, as with £300million you could buy some credible talent.

The initial investment wasn't that big. This makes it sound impossible. There is so much money being thrown around in ****** I'm not actually worried about the problem of attracting investors. Total shitcoins get a valuation of 10 of millions.

The main issues are how to do it legally and whether I should try to appeal to large (accredited) or smaller (unaccredited) investors, or both. Whether I should make a company or not or launch my own cryptocurrency to use as a share-token. I could launch a funding round on bnktothefuture, a UK equity crowdfunding website, that's an option. But if I did that I wouldn't know how to provide an 'exit' for investors as the only thing I know about shares is that they are sold after an IPO. I just don't know anything about companies. As well as the technical set up (I know how to make a wordpress blog, thats about it).

Lots of cryptocurrencies do what are called "ICOs" (initial coin offerings) where they call the investment a "token" and say in the terms and conditions that it is "not an investment" in order to get around the regulation. Even though everyone talks about it as an investment. So I could do it the ****** route. I could call the token "basket coin" or something like that, and it would represent a share in an investment fund that invests in a basket of cryptos. The profits, rather than being paid out as a dividend, which I think is illegal for unregistered securities could be used to buy and what is called 'burning' of the currency, reducing the supply of the coin, making it go up in value. I've seen that method done before.

Just thinking out loud, there's too many ways to it, I'm a bit lost. All the routs I can think of present lots of challenges Thanks for your replies.

 

[AllUpHere]

Invest your money in some serious computing power and make your money mining.

 

[Alan]

Invest your money in some serious computing power and make your money mining.

Boat has sailed.

So I could do it the ****** route. I could call the token "basket coin" or something like that, and it would represent a share in an investment fund that invests in a basket of cryptos. The profits, rather than being paid out as a dividend

I think the issue here is that your tokens would be exchangeable ( by definition of bitchain technology ) and so would have a market value, rather than a valuation you set for your basket. In theory your market value would be the value of your basket, in a perfect world, sophisticated investors would arbitrage your coin again the underlying coins and unless you had very cleaver quants, you'd likely get smashed.

Also, I'm not sure, if I have Bitcoin or Etherium in my portfolio, holding on for a another 300 x return, why would I give it to any one else, and what would you do with it?

You avoided this question. What makes a business is the value add. If you can't explain the value add to a layman like me, its likely not to appeal to the masses.

 

[matt608]

You avoided this question. What makes a business is the value add. If you can't explain the value add to a layman like me, its likely not to appeal to the masses.

Well the idea would be that a lot of people don't want to have to research the hundreds of cryptocurrencies listed on coinmarketcap.com and just want to invest in the ecosystem without having to do all that research and coin storage. I would take care of their coins for them keeping them safe in cold-storage and do the research to pick good coins to invest in, saving them time.

 

[simonswords]

@matt608 I'm bullish on ****** not just as a currency but for a digital platform where a relationship between two parties currently has a central trust authority (think bank) that can be done away with. I'm a long term holder of both of BTC and ETH.

So I get that there's a big future for ******. But I'm not sure what you're offering is enough of a value add.

Anybody who gets in to ****** at this stage is an evangelist, and happy to roll up their sleeves and get under the hood of the technology. They're not likely to trust a middle man like you - especially when there is zero regulation.

If you were to go down the wealth/fund manager route you would typically say to a client hey - invest in our fund because our history shows that you'll get a yield higher than that of another fund or some mutual fund/index/bond etc.

Problem with ****** right now is that it's mega high risk and high reward. You could never say to a potential customer that this is an investment with a guaranteed return - it's the wild west out there at the moment. Historically prices are way up, but that's only one part of the story.

As somebody else just pointed out, ****** is unregulated - which is why I make the wild west comments without any sarcasm. My BTC or ETH could be stolen tomorrow or the exchange they're on (if I didn't keep a paper wallet) could be hacked or whatever and I have zero recourse. Literally nothing I can do, the police will not help me.

So given that the tech is fairly raw, the regulations are non-existent, and most of what ****** can do is either early days or completely unproven, what guarantees can you make to your customers that mean they might make you their "****** fund manager" for want of a better term?

All of that is not to say that I don't think you're on to something here. It's definitely a market that's going places, but perhaps you're a tad early? Or taking a slightly incorrect approach?

 

[matt608]

Hi everyone.

I had found the solution! I was doing some research into new cryptos to add to my portfolio and i came across one called Iconomi. It turns out they are developing a digital asset platform that will allow me to do exactly what I want to do. So I will start a ****** investment fund on their platform when they launch in a couple months time. The terminology they are using is calling it a "digital asset array". I'm super excited to have found this solution and many thanks for all of your comments.

- Matt

 

[quikshop]

Several years ago the was a flood of virtual property asset websites; you could buy actual ownership of these virtual assets, a digital representation of land and property. It was bollocks of course as many of us pointed out at the time.

The value of any asset always comes down to supply and demand heavily influenced by visibility - Rightmove, Zoopla and maybe OnTheMarket at a stretch have real value, the other 497 property websites my house was recently listed on by HouseSimple have no value whatsoever.

I wonder how many of the ****** currencies or assets have any value at all? If their visibility is as a virtual asset on one of what will become tens of thousands of ****** investment platforms, where is the actual value?

 

[Alan]

I think you hit on a key issue.

A ****** currency ( or token ) is just that a currency. A currency isn't an asset, it doesn't give you the right to anything. My five pound notes say 'I promise to pay the bearer the sum of five pounds' - Bank of England. Five pounds of what - certainly not 5 pounds of gold. So a five pound is a promise to give you something of no specific value.

So now we have got the concept that a currency or token is a promise for something that may or may not have a market value - but not an asset, then investing in a currency doesn't really exist - as investing is something you do to get growth in value.

You could say holding GBP in a perverse way, that you are 'investing in the growth of the whole economy', but you are not as there is nothing stopping governments doing a bit of quantitative easing. But at least a sovereign currency is sort of back by an economy.

So ****** currency like bitcoin, isn't backed by anything, it is true that some of the ****** tokens are promissory notes for some future thing, like processing power. But lets assume they are currencies => they are not investable, you can either hold currencies or trade currencies ( Forex ).

The money to make is in trading, but to be good at trading you do need some pretty niffy maths - otherwise its just a gamble, or in an unregulated market some dodgy morals ( pump & dump )

Of course you can look back and say if I bought £1,000 of bitcoin 6 years ago I'd be a multi millionaire. but then If I bought £1,000 of bit coin 4 and half years ago and bailed out in January this year - I'd simple would have washed £250 down the drain.

Its not investable - but it is tradable

 

[folpips1]

Another way of investing in Bitcoin I would say is through Mining itself,I have been doing this for a while now.Check out this,it might be of interest to you or Pm me if you want to know more.