CoinShares enjoys record breaking growth on back of crypto roller coaster

Jean-Marie Mognetti, CoinShares

This week, the hedge fund trade association, AIMA, published its third annual report on crypto hedge funds, which revealed that they returned, on average, an astonishing 128 per cent in 2020, against 30 per cent in 2019. 

The same week, and in the same rapid growth vein, sees digital asset investment group CoinShares publishing its first quarter results, revealing that it received total management fees of GBP17.1 million in the first quarter 2021 compared to GBP3.2 million reported in the comparable 2020 period, an increase of GBP13.9 million.  

Total comprehensive income for the first quarter 2021 was GBP32.1 million compared to GBP7.4 million reported in the comparable prior year period, a year-on-year improvement of GBP24.7 million or 334 per cent. On a sequential basis when compared to the fourth quarter ended 31 December 2020, total comprehensive income increased by GBP27.7 million or 634 per cent and marked an improvement of GBP13.4 million or 72 per cent when compared to the full year ended 31 December 2020. 

Group assets under management as of 31 March 2021 were GBP3.4 billion compared to GBP380 million as of 31 March 2020, representing a year-on-year increase of approximately GBP3.0 billion or 784 per cent. A significant portion of this increase was experienced in the period post the financial year ended 31 December 2020, with AUM rising 93 per cent (GBP1.6 billion) in the first quarter 2021. 

The Company's net asset position as of 31 March 2021 was GBP101.4 million compared to GBP56.5 million as of 31 December 2020, an improvement of GBP44.9 million or 79 per cent. 

The firm writes that the year-on-year improvement was primarily driven by the significant price increases in digital assets for the comparable periods. Total management fees also increased by GBP10.0 million on a sequential basis when compared to the fourth quarter ended 31 December 2020. 

Commenting on the results’ announcement, Jean-Marie Mognetti (pictured), Chief Executive Officer of CoinShares says: "The momentum built throughout 2020 has carried into this year, and in Q1 we delivered the strongest quarterly results in our seven-year history. We reported significant increases in trading revenues, AUM, and management fees, and our bottom-line performance in Q1 exceeded the entirety of 2020.  

“Year to date, we launched a new institutional-grade ETP platform to complement our XBT Provider platform, with four new asset management products, expanding beyond bitcoin and Ethereum. We also added trade pairs, yield, and staking to our capital markets and trading infrastructure. As market demand is growing, we are expanding our customer and partner base, and continue to evaluate strategic investments which can further strengthen our business." 

Mognetti comments on the extreme volatility the cryptocurrency market has experienced over recent weeks, reaching as high as USD2.6 trillion and as low as USD1.4 trillion. “While the asset class can be volatile, even the lower of these figures reflects over half a trillion dollars of market growth since the start of the year,” Mognetti says. “These are impressive numbers, and it's important to note that the crypto asset class only comprises 35 basis points of global wealth, highlighting the opportunity for growth.” 

Mognetti says that CoinShares plans, by the end of this year: “To introduce a business segment focused on the Consumer Finance market, which will leverage our technology and compliance capabilities to bring innovative solutions directly to a new type of user.  

CoinShares reports trading gains generated by CoinShares Capital Markets for the first quarter 2021 were GBP22.7 million compared to GBP5.6 million for the period ended 31 March 2020, an increase of GBP17.1 million. 

The year-on-year improvement was primarily driven by gains relating to non-directional proprietary trading, fixed income activities, and liquidity provisioning for the Company's own products and for other products and platforms, the firm says. Additionally, total trading gains increased by GBP17.6 million on a sequential basis compared to the fourth quarter ended 31 December 2020. The first quarter 2021 trading gains were in fact in excess of those generated in the entirety of 2020 by GBP6.4 million or 39 per cent, the firm says. 

Taken together, total management fees and trading gains in the first quarter 2021 were GBP39.9 million compared to GBP8.8 million in the first quarter 2020, a year-on-year improvement of GBP31.1 million, and increased GBP5.2 million or 15 per cent when compared to the full year ended 31 December 2020. 

Adjusted Earnings Before Interest, Taxes, Depreciation and Amortisation (EBITDA) for the first quarter 2021 was GBP34.1 million compared to GBP5.8 million in the first quarter 2020, a year-on-year increase of GBP28.3 million. Adjusted EBITDA includes unrealised gains/(losses) on digital assets held by the Group, which, under FRS102 are recognised in other comprehensive income. When compared to the full year ended 31 December 2020, adjusted EBITDA increased by GBP11.8 million or 53 per cent. 

The first quarter of 2021 and year to date second quarter were significant for CoinShares. Milestone dates included January 2021, when, the firm writes, with more than USD202 million in XBT certificates changing hands on the market's first day of trading in 2021, CoinShares had the highest volume traded in any European listed crypto ETP.  

CoinShares Physical Bitcoin, the first product released on the Group's new institutional-grade ETP platform, was launched to provide investors with passive exposure to Bitcoin. This product, traded on the regulated SIX Swiss Exchange under the ticker symbol BITC, initially launched with approximately USD200 million in AUM. 

February 2021 saw CoinShares align with the Massachusetts Institute of Technology (MIT) Media Lab, making a four-year, USD 0.5 million donation to the Digital Currency Initiative to help support open-source software development and advance the security of the bitcoin protocol. CoinShares Physical Ethereum, the second product released on the new ETP platform, was launched with USD75 million in AUM, and is traded on the SIX Swiss Exchange under the ticker symbol ETHE. 

In March this year, CoinShares completed its public listing on the Nasdaq First North Growth Market, raising SEK151.1 million, which equates to approximately USD17.8 million, prior to listing related costs, and received retail subscriptions of more than 20x the retail offering and overall subscriptions of more than 4x the total offering, bringing in over 2,000 new shareholders. 

In April this year, CoinShares extended its alliance with the DeFi Alliance and launched a new chapter in Europe as a founding partner. “This alliance brings together other leading European crypto companies with a vision of supporting European DeFi startups with capital and liquidity and collaboration with partners to build a robust DeFi ecosystem in Europe” the firm writes.  

In addition, April saw CoinShares Physical Litecoin and CoinShares Physical XRP commence trading on the SIX Swiss Exchange under the ticker symbols LITE and XRPL, respectively, providing eligible institutional and individual investors throughout Europe access to an expanded range of digital asset products.  The 3iQ CoinShares Bitcoin and Ethereum13 ETFs also launched on the Toronto Stock Exchange (TSX), following a strategic investment made into 3iQ in December 2020. 

In this month, CoinShares also joined the Crypto Climate Accord, an initiative designed to make the cryptocurrency industry run entirely on renewable energy by 2025. “Led by Energy Web and the Alliance for Innovative Regulation (AIR), and inspired by the Paris Climate Agreement, the Accord is aiming to decarbonise the entire cryptocurrency industry, while developing an open-source accounting standard for measuring emissions for players in the industry to adopt.” 

CoinShares also surpassed USD5 billion in AUM on its two ETP platforms, XBT Provider and CoinShares Physical. 

May saw CoinShares reach a new milestone in AUM on Saturday, 8 May 2021, when the Group temporarily crossed USD6 billion of AUM across its two ETP platforms. As of market close on Wednesday, 19 May 2021, the Group's AUM stood at approximately USD3.95 billion. The firm writes that digital assets can be volatile, as seen over the last two weeks, and the Group's AUM balances are always visible in real-time via Armanino's real-time Trust Explorer, claiming its place as the world's first and only digital asset manager to provide real-time attestation of its AUM and the assets backing it. 

On Wednesday, 19 May 2021, more than USD490 million in CoinShares ETPs changed hands amidst significant market volatility. The firm writes: “This marked the highest volume traded of any European crypto ETP provider and a new milestone for CoinShares.” 

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Beverly Chandler
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