South Korea’s pension fund, the National Pension Service (NPS), bought almost $20 million worth of Coinbase (COIN) shares in the third quarter of this year, according to its latest filing to the US Securities and Exchange Commission (SEC). NPS bought 282,673 Coinbase shares at an average price of $70.50, amounting to an overall investment of $19.92 million.
While Coinbase shares have risen by approximately 4% since NPS made its purchase – and the fund posted a 40% profit in the third quarter – the move has proved to be controversial in South Korea. For one, Coinbase is perceived as a risky investment owing to its tumultuous performance on the NASDAQ since listing in April 2021.
The company floated at $342.00 per share but has struggled to maintain that value ever since. With the onset of a bear market for cryptoassets in 2022, as well as an ongoing legal battle with the SEC, Coinbase shares plunged to a low of $33.26 in January 2023.
Although the shares have strengthened considerably since then, currently trading at $99.05, the valuation remains some way off the IPO price. This is despite considerable optimism in crypto markets that the BlackRock spot Bitcoin ETF, which is expected to receive regulatory approval imminently, could open the doors to much greater institutional investment in crypto.
South Korea’s National Assembly has criticised the pension fund in the past for obtaining exposure to digital assets companies, with policymakers arguing that the only way to make profit from digital assets with no intrinsic value is to sell them on to another investor willing to pay more. Many policymakers in South Korea say that this is a risky and unsustainable way to generate consistent returns.
However, this has not stopped the world’s third largest pension fund taking a major step into the world of cryptocurrency, even if the fund has refrained from purchasing digital assets directly.
Wonku Lee, a private equity professional in Seoul, told Disruption Banking that “the NPS is not interested in directly investing in cryptocurrencies, but nevertheless appears open-minded and willing to act when investing in a relevant business that appears to be a profitable move.”
“However, NPS does not yet seem to accept cryptocurrencies as a separate asset class, considering that crypto is not included in its strategic allocations,” he added. Lee therefore believes that the significance of this move is “quite limited” – indicating not that the NPS has become particularly pro-crypto, but that “it is simply striving to make profitable investments, and this seems to be just one of them,” especially given how low Coinbase shares are currently trading.
The South Korean market is generally accommodative to digital asset products, with Seoul emerging as a hub in Asia for crypto activity and digital asset-related quantitative trading. Lee is sceptical, however, as to whether the NPS will continue to increase its exposure to crypto-related stocks or assets.
“Personally, I think pension funds should and will refrain from investing in cryptocurrency until it has real substance and truly becomes part of the mainstream economy.”
Author: Harry Clynch
#Crypto #Coinbase #SouthKorea #Asia #DigitalAssets
