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Scottish Mortgage manager doubles bet on cryptos

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Representations of cryptocurrency Bitcoin
Representations of cryptocurrency Bitcoin

Baillie Gifford, the fund giant behind Britain’s largest investment trust, has made its second foray into cryptocurrency with an investment in Canadian Bitcoin mining group Blockstream.

This follows a £72m investment into Blockchain.com, a British cryptocurrency trading site, in April this year. As of July, it was 0.3pc position in the £19.2bn Scottish Mortgage investment trust, which is known for backing pioneering companies in healthcare and technology.

Blockstream was founded in 2014 and is involved in an array of cryptocurrency related operations, such as building Bitcoin mining centres, trading the currency and acting as a liquidity provider for cryptocurrency exchanges.

Baillie Gifford led a $210m (£152m) funding round, valuing Blockstream at $3.2bn, with Allen Farrington, an investment manager, now acting as an observer to the board.

The investment comes as cryptocurrencies staged a comeback. One Bitcoin now costs $47,000, lower than its $63,000 peak in April but up from the $30,000 price in July. Ethereum, a rival cryptocurrency, has risen 48pc in the past month.

It is expected Blocksteam will be added to Scottish Mortgage, alongside Blockchain.com.

Ryan Hughes, of fund shop AJ Bell said: "Given the unquoted nature of the company and the long term nature of the investment idea, it seems likely that the investment will be for Scottish Mortgage or the Baillie Gifford US Growth Trust, or maybe both.

"The investments fits well with the approach of both trusts and therefore existing investors shouldn’t be surprised if it appears in the next portfolio update," he said.

Mr Hughes added that Blockstream would be less volatile investment than owning cryptocurrency directly as it was involved in building the infrastructure behind digital assets.

"This will reduce some of the noise surrounding the volatility of the likes of Bitcoin, Ethereum and many others that causes cryptocurrency to be seen as speculation tools rather than credible investments," he said.

Baillie Gifford would not confirm which fund Blockstream would be in. A spokesperson said: “Baillie Gifford is committed to backing transformational growth companies at their early stages. We have enormous respect for Blockstream’s founders and management team, and we believe its settlement network for Bitcoin-based assets and securities has the potential to transform the design and operation of capital markets.”

Mr Farrington said Blockstream’s work expanding Bitcoin mining and building a “liquid network”, where securities are traded as tokens, were key to the decision to invest.

“I am convinced tokenised securities on the 'liquid network' will be transformative for markets,” he said.

Cryptocurrency investments have become more mainstream. Investment manager Ruffer announced a 2.5pc position in Bitcoin in its Ruffer Investment Company in November last year, but sold its holding in March after the price rose six-fold.

Cryptocurrency exchange Coinbase listed shares on Nasdaq, an American stock exchange, in April this year and has become a £40bn business.

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