Meanwhile Group, a Sam Altman-backed crypto startup, has launched a bitcoin private credit fund via its investment management subsidiary Meanwhile Advisors amid the ongoing crypto rally.

The fund, dubbed Meanwhile BTC Private Credit Fund LP, aims to provide institutional investors access to bitcoin with an additional targeted 5% bitcoin-denominated yield, Meanwhile said Thursday. The fund aims to generate that yield by lending bitcoin to borrowers.

The fund seeks to raise $100 million and expects to close by the end of the first quarter of 2024, Zac Townsend, co-founder and CEO of Meanwhile Group, told The Block. The launch comes as bitcoin has rallied in recent weeks and is currently trading around $43,800. "Our view is that bitcoin will be worth much more in the future," Townsend said, adding, "We are giving investors a first-of-its-kind investment product to increase their exposure to the asset."

Meanwhile BTC Private Credit Fund

The fund is a single close, closed-end fund, Townsend said. Participating limited partners or LPs will contribute U.S. dollars to the fund, and Meanwhile will then convert all those dollars to bitcoin "immediately following the single close," Townsend said. That bitcoin will then be lent by Meanwhile to borrowers to generate the targeted 5% return denominated in bitcoin. "This allows for exponential outperformance of bitcoin if the price of bitcoin goes up during the fund's lifecycle because our investors are accumulating more bitcoin at higher prices without paying more principal for it," Townsend said.

The minimum investment amount in the fund is $250,000 per LP, and there is no maximum limit, Townsend said. The fund's investment period is three years, with a four-year harvest period resulting in a seven-year total term, he added. But capital gets returned to investors during the harvest period, so the majority of capital will likely be returned well before the seven-year mark, Townsend noted.

The fund will charge a 2% management fee and 20% carried interest fee, charged in bitcoin, Townsend said. "This is important because it means if bitcoin goes to the moon, we don't get to take any carried interest on the price appreciation of bitcoin. We receive carried interest when we turn our LP's bitcoin into more bitcoin," he added.

When asked how Meanwhile would avoid a situation similar to ones that collapsed crypto lenders like BlockFi and Celsius last year, Townsend said the closed structure removes the risk of a "run on bank" where spooked investors demand their money out, which can lead to insolvency. BlockFi and Celsius were also "lending to retail investors at much higher rates. We are making conservative loans to creditworthy institutional borrowers," Townsend added. The fund's custodian is Anchorage Digital.

Launch comes amid spot bitcoin ETF hype

The launch comes when there is increased optimism about approval of a spot bitcoin exchange-traded fund in the U.S. When asked how Meanwhile plans to attract investors for its own fund, Townsend said the spot bitcoin ETF, if approved, will actually help promote the Meanwhile fund. "With the increase in demand from institutional allocation to the space, the anticipation is that it will drive the relative price of bitcoin up, which makes our bitcoin-denominated returns that much more attractive," he said.

"You can think about it this way: for an investor to increase their exposure to bitcoin via the ETF, they will need to enter at higher entry prices (assuming bitcoin goes up) over time, meaning for each dollar invested, they will, in turn, have exposure to a smaller and smaller fraction of a bitcoin. Our fund is a way for them to increase their exposure to bitcoin at a rate regardless of the price of bitcoin, without having to make any additional principal investments."

Bitcoin insurance product

In June, Meanwhile Group's insurance unit launched a bitcoin-denominated life insurance policy with premiums and claims in the world's first and largest cryptocurrency. "We are actively binding policies," Townsend said, adding that "100s of people" are in the waitlisting process.

Meanwhile Insurance plans to also launch an accidental death coverage policy in bitcoin.

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