Brazilian startup Hashdex, a crypto asset investment manager, announced on Wednesday that it raised BRL 135 million in a round led by Valor Capital Group, alongside Softbank, Coinbase Ventures (Coinbase‘s investment arm), and Globo Ventures (the venture capital fund by Brazil’s leading communications conglomerate Grupo Globo). Canary, Igah, Alexia, Fuse, Endeavor Scale Up Ventures, and Norte Ventures followed the round.
Co-founders Marcelo Sampaio and Bruno Caratori created Hashdex in 2018, inspired by the potential of crypto assets. The idea was to simplify the blockchain investment process, from the famous bitcoin to the more than 5,000 cryptocurrencies on the market. Crypto assets are high-friction investments, subject to high volatility. Just look at Dogecoin, which started as a social media joke in 2013 and went up over 700% last month.
Today, Hashdex creates investment products for crypto assets within the Brazilian Securities and Exchange Commission (CVM, in its acronym in Portuguese) regulations. A cryptocurrency exchange (as Coinbase has, for example) is not illegal, but the Brazilian Central Bank does not regulate the bitcoin market.
Explaining the Hashdex indices for predicting crypto assets‘ appreciation
To make life easier for those wanting to invest in crypto assets but find it difficult to identify which currency is likely to go up and how to store these assets safely, Sampaio and Catori created the Hashdex crypto-asset indices (especially with long-term investments in mind). The idea was to test the exposure of crypto assets to the market through these indices. In the United States, these indices usually pinpoint the big winners in terms of valuation.
In February, the startup listed the world’s first cryptocurrency ETF (exchange-traded fund) on the Bermuda Stock Exchange (BSX) in the Bermuda Islands. The ETF replicates the Nasdaq Crypto Index (NCI), an index co-developed by Hashdex and the U.S. stock exchange.
“This index (NCI) has several eligibility criteria to assure the market that the assets are not going to disappear overnight, that [they] are on a trusted exchange; to show that we are not dealing with money laundering,” explains Roberta Antunes, Hashdex’s chief of growth, in an interview with LABS.
According to Antunes, the market’s champion bitcoin now accounts for 70% of NCI’s index. “If bitcoin grows a lot and becomes 100% of the market and all the other cryptocurrencies die, this index will become 100% bitcoin. But that is not what we believe. We believe that other projects will start to ramp up and gain share within the index,” she comments.
The ether, for example, reached a record high on Wednesday, almost 500% for the year, amid growing interest from investors, including institutional ones, in decentralized financial applications.
In March, Hashdex launched HASH11, a regulatory innovation in Brazil. It is the country’s stock exchange B3‘s first digital asset ETF, which also replicates the NCI.
The fund went live after raising more than BRL 600 million in an initial offering led by Genial, and followed by BTG, Itaú and Banco do Brasil. A week later, the product had more than BRL 1 billion in net worth and was among the three largest ETFs on the Brazilian stock exchange.
Hashdex created four other investment funds in Brazil that replicate HASH11’s portfolio in different proportions. Currently, there are five regulated funds, different for each investor (retail, qualified or professional), and the listed ETF fund, which are available for application in traditional brokerage houses, such as XP and BTG Pactual.
According to Antunes, only one of the funds charges a performance fee, but in general, Hashdex makes money from the assets’ administration fee. In the ETF, for example, the fee is 1.3% per year.
Last year, Hashdex had BRL 4 billion under its management, which indicates a turnover of approximately BRL 40 million in 2020. “If we maintain this growth curve this year, we are talking about a much larger amount,” she added.
Hashdex has been growing its investor base monthly due to its market education work, according to Antunes. The manager had 70,000 investors in 2020, and when it launched the ETF in February, it gained 70,000 new investors. From March 2020 to March 2021, Hashdex’s user base grew 5470%.
Latin America is a growing crypto industry target
Latin America has been targeted by challengers in the crypto market. On Wednesday, Hong Kong-based platform Crypto.com announced the launch of zero-fee Brazilian real bank transfers and the option of real as a payment currency on its app, in a strategy to reach cryptocurrency users in Latin America.
“These users can now deposit Brazilian reals into their wallet using bank transfers or PIX [Brazil’s instant payment system] transfers. They can use their funds to buy over 100 major currencies at real cost,” it said in a press statement. Now, the Chinese platform also has Portuguese as a language option.
Another major player that has debuted in Brazil is the Mexican crypto asset platform Bitso. The startup raised a $250 million round earlier this month and is valued at $2.2 billion. Bitso has 2 million customers in Mexico and Argentina.
With the new investment, Hashdex wants to consolidate itself as the leading crypto-asset investment manager in Brazil and expand its international presence (the company didn’t disclose the next countries on its road map). The expectation is to triple its current team, hiring at least 50 professionals from the crypto market and the traditional financial market by the end of the year, Brazilians or not.
“We believe that every investor should seek crypto exposure. Always very responsibly, with a lease of 1% to 5% of the portfolio, depending on the investor’s profile. But it is expensive to have zero. It is expensive to have nothing invested in crypto today, considering the global scenario of inflation and Brazil risk.”