Several prominent investment firms are joining forces to buy stakes in one of the biggest Bitcoin operations in the world.
The publicly traded New York private equity and hedge fund firm Fortress Investment Group and two other investors are buying a stake in Pantera Bitcoin Partners, a San Francisco-based hedge fund operator that buys and sells virtual currencies.
The creation of the partnership represents a significant step in the push to move Bitcoin into the financial mainstream at a time when several well-publicized claims of theft have pointed to potential weaknesses in the digital currency economy.
Pantera Capital, the parent of Pantera Bitcoin, was founded in 2003 by Dan Morehead, a veteran of the hedge fund giant Tiger Management. For most of its existence, Pantera was a macro hedge fund. But since 2011, Mr. Morehead has grown increasingly fascinated with Bitcoin, he said in an interview on Tuesday. In recent months, he said, the firm’s staff of 16 has shifted its attention to work full time on investments in the virtual currency world.
“We’re very excited about the promise of Bitcoin and how it can transform the way we move money,†Mr. Morehead said. “The promise and possibilities here are very broad.â€
When Pantera made its first regulatory filing in December, its Bitcoin fund was worth $147 million. That is significantly larger than the Bitcoin Investment Trust, a $55 million fund run by the New York firm SecondMarket that holds virtual currencies on behalf of investors.
The big venture capital firms Benchmark Capital and Ribbit Capital are taking stakes in Pantera Bitcoin Partners, along with Fortress. All are committing to buy and sell Bitcoin and other virtual currencies through Pantera.
Michael E. Novogratz, an executive at Fortress, had previously talked about his interest in Bitcoin, but until now it has been unclear how the firm was approaching digital money as an investment. Moving forward, Fortress said that it would make all of its Bitcoin purchases through Pantera.“This partnership brings together leading companies with a range of relevant expertise, well positioned to lead and capitalize on a potentially transformative evolution,†Mr. Novogratz said.
In the years after the Bitcoin program was released by an anonymous founder known as Satoshi Nakamoto in 2009, most of the dominant players were small start-ups with few links to the traditional financial world. Part of the allure of Bitcoin was that it allowed users to move and store money outside the banking system.
Recently, however, a number of pioneers, like the Japanese exchange Mt. Gox, have run into trouble, shaking confidence in the entire Bitcoin network.
At the same time, investors and financial firms with more established credentials have been expressing their growing interest in Bitcoin. Last week, Goldman Sachs became the latest Wall Street firm to issue a research report on Bitcoin’s potential to shake up different parts of the financial system.
Much of the research has been focused on Bitcoin not just as a form of digital money, but also as a new payment system, buttressed by the computers linked into the Bitcoin network. The system is run according to a prewritten set of rules, which determines how the coins are created and moved between digital wallets.
Mr. Morehead’s management firm is giving up some of its ownership in Pantera Bitcoin Partners, which manages the Bitcoin fund. But all of the companies involved in Pantera Bitcoin Partners will continue to make their own investments in virtual currency start-up companies.
Earlier this week, all four firms teamed up to make a $20 million investment in Xapo, a start-up that offers to secure the information needed to unlock Bitcoins in guarded vaults so that they cannot be reached by hackers.
