by Robert DeVoe
Swissquote Bank is now offering an investment product aimed at giving investors access to bitcoin but without the associating risk due to the asset’s volatility called a certificate. The certificate is an exchange-traded investment vehicle that is somewhat like a futures contract, but open-ended.
Swissquote and Bitcoin
The idea behind it is that a machine learning based algorithm takes advantage of price trend data and social media sentiment to predict price rises and falls. It then takes this information to making buying and selling decisions, in an attempt to maximize profits for investors, and shield them from massive downswings in price.
Swissquote is not new to bitcoin and cryptocurrency. The company has offered shares in bitcoin much like an exchange-traded product. The company claims that the service keeps buyers protected from hacking, and does not require any technical skills to set up a wallet. However, they do charge a fee for their service, and buyers can not directly transfer BTC in or out. Transaction fees for their service range from 0.5 percent to one percent depending on volume.
The company has also stated that they intend to support other cryptocurrencies in this way some time “at a later date.”
Peter Rosenstreich, Head of Market Strategy at Swissquote Bank, had this to say regarding the bank’s direction:
“Even though we believe that bitcoin represents the future, the volatility can be massive, which tends to deter typical stock investors. We built our strategy to focus on reducing volatility by increasing the amount of traditional currency on periods of uncertainties and downturns. This strategy is designed to create more consistent return potential in the long run.”
The certificate program works like this; data is collected and pieced together to form a technical analysis of bitcoin price movements. The machine learning algorithms use this information to plan and enact buying and selling measures.
The overall portfolio is allocated “between 60 percent and 100 percent” in bitcoin, and the rest in USD. Assets are moved either to take advantage of upward bitcoin price movements or to protect value by switching a portion back to USD.
This process happens automatically. Buyers of the certificate need only to hold onto their shares, and the program will do the rest.
At present, the fund is trading at just over $1,250 per share. As the investment program only began this month, historical performance data is not yet available.
Cryptocurrencies on Exchanges as a Trend
In 2017, we have seen quite some exchange-traded products, futures, and shares in investment trusts launch. This trend is representative of the growing positive sentiment towards cryptocurrency as a new asset class. It also represents an increasing demand from traditional investors to get exposure to the huge upswings that cryptocurrencies at large are experiencing.
It is quite likely that more of these sorts of products and investment vehicles will continue to sprout up across the market over the next several years.