From the Desk Of A Trader #17
"The price of a crypto asset may be impacted by the transactions of a small number of holders"
Cheat Sheet -
Support and resistance levels and our daily, weekly and monthly bias on BTC, ETH, CL, ES, and NQ as well as our favorite altcoins.
Today, we are happy to share the thoughts from the desk of a commodities trader. The following views are that of Martijn Bron and do not represent the views of his employer.
From the Desk Of A Trader
I dug into Bitwise, "one of the largest and fastest-growing crypto asset managers".
The firm manages the world’s largest crypto index fund (OTCQX: BITW).
I asked their CEO how he qualified the fund's performance for its investors, attaching the BITW chart from my Yahoo iPhone widget.
I got no response so I had a look at their site and below is what I learned.
BITW is marketed as "a secure way to get diversified exposure to #bitcoin and leading #cryptocurrencies. The fund seeks to track an index comprised of the 10 most highly valued cryptocurrencies, screened and monitored for certain risks, weighted by market capitalization, and rebalanced monthly. The fund provides the security and simplicity of a traditional investment vehicle, with shares tradable in brokerage accounts using ticker BITW.”
There is no diversification at all as 65% of its AUM is BTC and 28% is ETH.
Since inception (Nov '17) the fund's net asset value per share (NAV, blue line) is up 142%.
Since quotation of BITW (the fund's publicly traded share, Dec '20), the fund's net asset value per share is up 45%. It is down 64 % from its highs.
Since quotation of BITW, the fund's share price (green line) is down 63%. It is down 92% from its highs.
I dug into the documentation explaining the difference (premiums and discounts) between the two valuation metrics, so value of the fund's assets divided by its outstanding shares, and more relevant, its share price traded on the OTCQX® Best Market.
My thoughts? It is a casino.
I also dug into the critical chapter, "What does this all mean for an investor?", last updated Nov '21.
If you are interested in financial #markets, #investing, #riskmangement and #crypto I encourage you to read the whole document yourself, but here are some highlights;
"Investors should understand that these premiums and discounts can change rapidly, adding risks and volatility to the investment, which is already very risky. There is no mechanism to keep the price of the shares in line with its underlying assets"
"Understanding the supply/demand dynamics and relationship between the price per share and the NAV of the underlying holdings is an important part of investing in BITW. These dynamics are out of Bitwise’s control and present significant risks. We encourage all investors to evaluate those factors and we expect that this investment will not be appropriate for many investors"
"BITW is a speculative investment involving a high degree of risk and uncertainty, and is only available to accredited investors who can afford loss of the entire investment"
"There can be no assurance that the value of the fund's shares will reflect the value of its net assets"
"Crypto assets are highly speculative"
"The price of a crypto asset may be impacted by the transactions of a small number of holders"
This sounds a lot less fun than "to the moon".
The quotation of BITW is a logical response to the emerging crypto hype at the time.
Its performance is too.
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