- Steven McClurg is the investing chief for Valkyrie Investments, which manages about $500 million.
- He told Insider about the firm’s bitcoin ETF plans and why it skipped investing in ethereum.
- He also makes the case for 5 under-the-radar altcoins for which the firm has launched trusts.
As optimism for the SEC’s approval of up to four bitcoin futures ETFs this month builds, a Nashville, Tennessee-based crypto asset manager could be first in line to reap the rewards of a long-anticipated fund launch.
Valkyrie Investments, which manages about $500 million in assets, filed for a physically backed bitcoin ETF and two bitcoin futures ETFs under the Investment Company Acts of 1933 and 1940, respectively.
As a small issuer, Valkyrie was able to file for the ’33 Act-related fund confidentially, but a Nasdaq filing in August revealed the firm as the frontrunner.
With 19 bitcoin ETF applications pending at the SEC, Chairman Gary Gensler has voiced support for those registered under the ’40 Act. He believes that the ’40 Act products, which would have to partly invest in fixed income and Treasuries, would better protect investors than the ’33 Act products that would only invest in bitcoin futures.
Steven McClurg, chief investment officer at Valkyrie Investments, told Insider in an interview at the Chicago Trading Show that while he hopes the SEC staff allows the firm to launch the ’33 Act fund, he thinks the ’40 Act fund stands a better chance of coming to market earlier.
McClurg said a futures-based bitcoin ETF would likely draw more institutional investors into crypto as many of them have had no problem following the futures market when it comes to trading new asset classes such as oil, gold, and other commodities.
“Bitcoin trades everywhere, so it’s hard for regulatory agencies to get their hands around that whole market,” he said. “But CME futures are only in the US, so it is already a regulated product. That gives them a lot more comfort to put into an ETF wrapper.”
From bitcoin to ethereum competitors
McClurg, a veteran in private equity and fixed income, has been following bitcoin since 2011. A macro analyst at heart, he especially resonates with the underlying philosophy of bitcoin.
“After 10 years or more of monetary stimulus, we are finally hitting inflation. If you have inflation of 5%, then that’s essentially a tax on everybody holding dollars,” he said. “But you can’t print more bitcoin because there’s only 21 million of them.”
He is also bullish on bitcoin’s adoption curve as El Salvador embraces the cryptocurrency as a medium of exchange.
“With layer-two solutions like Lightning and Strike, it makes bitcoin transactions so much faster and easier without necessarily giving up security,” he said. “I think more people are going to want to hold and transact in bitcoin.”
Having built two crypto companies, one of which Galaxy Digital acquired, McClurg is always on the lookout for the next disruptive blockchain technology. Unlike most investors who went from bitcoin to ethereum, he skipped investing in ethereum altogether because the once “great technology” is “already a little bit outdated.”
“There are new protocols that compete with ethereum that are much faster, lower-cost, and safer,” he said.
He compared the competition among smart contract platforms to when the iPhone came out to disrupt BlackBerry.
“When the iPhone first came out, everybody was just starting to build applications for BlackBerry,” he said. “Then everybody stopped and started building applications for Apple because they saw that as the future. That would have been a really good time to short BlackBerry.”
5 under-the-radar altcoins
Instead of “shorting” ethereum, McClurg has opted to launch products for under-the-radar altcoins where developers are building better technologies and decentralized applications.
To vet the projects, his team, which includes cybersecurity and mining experts, spends much time talking to developers and conducting in-depth due diligence. Aside from bitcoin, they have launched five trusts for what they believe to be undervalued tokens.
One of them is polkadot (DOT), which was created in 2016 by ethereum co-founder Gavin Wood. Given its ability to operate across multiple chains, polkadot has been called “the internet of blockchains.” It aims to enable different public and private blockchains to connect with each other.
Algorand (ALGO), a smart contract platform launched in June 2019, is created by Silvio Micali, a computer science professor at the Massachusetts Institute of Technology. Like many ethereum rivals, it claims to provide faster transaction speeds, lower costs, and improved security.
McClurg said the protocol is built from the beginning to support Know Your Customer and Anti-Money Laundering rules, which is an important feature given today’s regulatory scrutiny of crypto.
While polkadot and algorand are catching up to ethereum in the US, Tron (TRX) is winning the war in Asia, in his view. “There are now more tether transactions occurring on Tron than all other blockchains put together and they also have a massive NFT market,” he said.
Also based out of Asia, Zilliqa (ZIL) is a decentralized smart contract platform built to scale and claims to have a transaction speed that’s a thousand times faster than that of the ethereum network.
“Even though there’s not a lot of attention around it now, we see the technology behind it,” he said. “We think that it’s going to be what polkadot or algorand is today a year or two years from now.”
Valkyrie also stakes the assets it holds in various trusts, which is the main reason why the firm launched a Dash trust, according to McClurg.
Dash (DASH), a fork of litecoin, is a decentralized cryptocurrency that aims to emulate bitcoin while offering more scalability and security. With 18.9 million in fixed supply, the digital token has been used as a medium of exchange in some parts of South America and Africa since its creation in 2014, he added.