South Korea’s National Pension Service (NPS), the country’s largest pension fund, has made its first foray into the cryptocurrency sector by acquiring nearly $20 million worth of Coinbase (COIN) shares in the third quarter of 2023. The investment, revealed in the NPS’s latest stock holding report to the U.S. Securities and Exchange Commission (SEC), marks a significant step for the institution, which has previously refrained from direct exposure to cryptocurrencies due to concerns over their volatility.
The NPS snapped up 282,673 Coinbase shares at an average price of $70.5 per share, totaling an investment of $19.92 million or approximately 26 billion Korean won (₩). The shares have since appreciated in value, reaching a collective worth of around $27.74 million based on Coinbase’s closing price on Wednesday. This surge in value contributed to a 40% profit for the fund in the third quarter.
Coinbase, a Nasdaq-listed cryptocurrency exchange, has seen its share price rise by 4% in the third quarter and a staggering 177% year-to-date. The company’s growth reflects the increasing interest in cryptocurrencies, despite lingering concerns about their regulatory status and potential risks.
The NPS’s decision to invest in Coinbase has drawn mixed reactions. While some view it as a prudent move to diversify the fund’s portfolio and capitalize on the burgeoning crypto market, others have criticized the exposure to virtual assets, citing their lack of cash flow generation and reliance on price appreciation for returns.
Despite these concerns, a survey conducted by Pensions Age earlier this year revealed that pension schemes overwhelmingly regard digital assets as a major part of the investment landscape and view them as an opportunity for portfolio diversification. This growing sentiment suggests that pension funds are increasingly open to embracing cryptocurrencies despite their associated risks.
The NPS’s investment in Coinbase signals a shift in the institution’s stance on cryptocurrencies and reflects the growing acceptance of digital assets within the traditional financial sector. As the cryptocurrency market matures and regulatory frameworks evolve, it is likely that pension funds and other large institutional investors will continue to explore opportunities in this emerging asset class.