A group of Cincinnati investors has launched its second cryptocurrency fund, which they say is the first of its kind in the nation.
Downtown tax attorney Bob Buechner heads a group that has started the Cincinnati Exchange Fund L.P., which enables cryptocurrency investors to exchange their cryptocurrency for a stake in the fund. It’s aimed at giving investors in cryptocurrency such as Bitcoin a way to manage the tax implications of their investment.
“This allows investors to be tax compliant and gives them the opportunity to diversity their investment,” Buechner told me. “We think this can be very attractive for investors. When the crypto market gets hot, wise investors know they can do well by diversifying.”
He believes it’s the first such fund in the country that enables investors to invest with cryptocurrency on a tax-free basis and diversify their holdings.
The fund takes investors cryptocurrency and stores it while exchanging it for a share of the partnership, much like an investment in a mutual fund. The fund also invests in a variety of cryptocurrencies or even in other investments such as hedge funds.
“If the market falls, we have the ability to get out quickly, if needed,” Buechner said.
When investors want to take their money out, they can get it in the form of cryptocurrency, dollars or both. The cryptocurrency they initially paid might have increased in value, plus the fund’s investments might provide returns. Investors would pay taxes on their investment gains, but not on the initial cryptocurrency investment.
“A lot of people who have big gains in crypto often have big tax liabilities,” Buechner said.
The cryptocurrency market is notoriously volatile, making the diversification and management aspect a key for investors. Bitcoin, the best-known cryptocurrency, was above $60,000 in April, fell below $40,000 in May and is now just below $33,000. But it’s still double its price in mid-November.
“We’re trying to help people with crypto investments be tax compliant and sleep well at night,” Buechner said. “It’s an unpredictable market. It’s been hit and gone down, but it’s on a long-term upward trend.”
Cryptocurrency is becoming more commonly accepted among traditional investors, too. Investment firms are starting investment funds focused on it.
“It’s gradually emerging as another asset class,” Buechner said.
The fund started last week with a $50,000 investment from Buechner following a $25,000 investment from the general partner that operates it, Buechner said.
“Now we have cash to invest and can open it to other investors,” he said.
Investors have to be accredited, meaning they have to meet minimum levels of total net worth or current income.
He expects the fund to grow quickly.
“We believe we’ll get to $5 million within a year,” Buechner said.
Buechner, who is shareholder, chairman emeritus and co-founder of downtown law firm Buechner Haffer Meyers & Koenig, teamed with Michael Hiles and Stacey Strasser on this fund and on the Cincinnati Crypto Fund, which they launched in 2018. Hiles is an entrepreneur and blockchain/cryptocurrency expert who is founder and CEO of Cincinnati-based financial technology company 10XTS Inc. Strasser is business solutions manager with Ascendum, a digital, staffing and technology consulting firm based in Blue Ash.
The Cincinnati Crypto Fund already has $5 million invested in it.
