Now let's say that both traders simply hold the January 9 contract to expiration. If price settles at 440, 10% higher, then Bob will get a 50% return on his initial margin (+0.1btc, 5x leverage enhances his 10% gain on the notional 1 bitcoin of the contract) and Ann will lose 50%. (-0.1btc). This is one of the most powerful parts of futures: higher leverage means higher returns on your trades. The leverage feature is essential for hedgers and speculators trying to get the most out of their capital when managing risk. And better yet: you don't pay daily interest or any margin fees on this leverage with bitcoin futures!
The CFTC, in conjunction with other federal regulators, also recently proposed stricter margin requirements for certain swap transactions. If adopted, the proposed requirements could increase the amount of margin necessary to conduct many swap transactions, limit the types of assets that can be used as collateral for such transactions, and impose other restrictions. The rule proposal may affect the ability of the Funds to use swap agreements (as well as futures contracts and options on futures contracts or commodities) and may substantially increase regulatory compliance costs for the Advisor and the Funds. As of the date of this SAI, the ultimate impact of the rule proposal on the Funds is uncertain. It is possible, however, that any adopted rule may adversely affect the Advisor’s ability to manage the Funds, may impair a Funds’ ability to achieve its investment objective and/or may result in reduced returns to Fund investors.
Options give the holder of the option the right to buy (or to sell) a position in a security or in a contract to the writer of the option, at a certain price. There may be imperfect correlation, or even no correlation, between price movements of an options contract and price movements of investments underlying an options contract. Lack of correlation (or tracking) may be due to factors unrelated to the value of the investments being hedged, such as speculative or other pressures on the markets in which these instruments are traded. Consequently, the effectiveness of bitcoin options in providing exposure to the price movements of options will depend, in part, on the degree of correlation between price movements in the derivatives and price movements in underlying bitcoin markets. Exchanges can limit the number of positions that can be held or controlled by the Fund or the Sub-Adviser, thus limiting the ability to implement the Fund’s strategies. Options are also particularly subject to leverage risk and can be subject to liquidity risk.
• Lack of regulation. Digital commodities and their associated platforms are largely unregulated, and the regulatory environment is rapidly evolving. As a result, blockchain companies may be exposed to adverse regulatory action, fraudulent activity or even failure. Blockchain companies may face political or legal challenges from competitors, industry groups or local and national governments. New regulations may have a negative impact on blockchain technology and blockchain technology companies.
Changes in the Bitcoin Network could have an adverse effect on the operation and value of bitcoin, which could have an adverse effect on the value of Bitcoin Futures Contracts and the value of Fund Shares. The open source nature of the Bitcoin protocol permits any developer to review the underlying code and suggest changes to it via “Bitcoin Improvement Proposals”, or “BIPs.” If accepted by a sufficient number of miners, BIPs may result in substantial changes to the Bitcoin Network, including changes that result in “forks.” Such changes may influence
According to PricewaterhouseCoopers, four of the 10 biggest proposed initial coin offerings have used Switzerland as a base, where they are frequently registered as non-profit foundations. The Swiss regulatory agency FINMA stated that it would take a “balanced approach“ to ICO projects and would allow “legitimate innovators to navigate the regulatory landscape and so launch their projects in a way consistent with national laws protecting investors and the integrity of the financial system.” In response to numerous requests by industry representatives, a legislative ICO working group began to issue legal guidelines in 2018, which are intended to remove uncertainty from cryptocurrency offerings and to establish sustainable business practices.
After the Transfer Agent has deemed an order for redemption outside the Clearing Process received, the Transfer Agent will initiate procedures to transfer the requisite Fund Securities and the Balancing Amount (minus a redemption Transaction Fee or additional charges for requested cash redemptions), which are expected to be delivered within two Business Days, and the Cash Redemption Amount (by the second Business Day (T+2) following the transmittal date on which such redemption order is deemed received by the Transfer Agent).
A cryptocurrency is a digital coin, designed to be transferred between people in virtual transactions. Cryptocurrencies exist only as data and not as physical objects; you cannot actually hold a Bitcoin in your hand or keep Ethereum in your safe. Owning a Bitcoin means you have the collective agreement of each and every computer on the Bitcoin network that it is currently owned by you and – more importantly – that it was legitimately created by a miner.
Bitcoin’s adoption has been on a generally continuous climb since bitcoin first gained mass media attention in 2013. Businesses are starting to accept bitcoin as payment, either directly or, more commonly, through an intermediary service which converts bitcoin payments into local currency. The adoption of bitcoin as a means of payment, however, has been limited when compared with the increase in the price of bitcoin as determined by the Bitcoin Exchange Market, indicating that the majority of bitcoin’s use is for investment and speculative purposes. The continued adoption of bitcoin will require growth in its usage as a means of payment and in the Bitcoin Blockchain for various applications.
You could imagine the spread going the other way, though. If everyone really was clamoring to short bitcoin, and if the futures offered a more convenient way to do it than the bitcoin exchanges, then you'd expect the short sellers to pay a premium to short via futures. Instead of selling a bitcoin at $18,000 today, they'd be willing to sell a synthetic bitcoin for $17,500, paying the spread to an arbitrageur who was willing to do the actual shorting for them. But the fact that the spread is mostly positive, and that bitcoin's price has been mostly going up, suggests that the demand has mostly been for synthetic long positions, not short.
The Board has determined that its leadership structure is appropriate in light of the characteristics of the Trust and each of the Funds. These characteristics include, among other things, the fact that all Funds are organized under one Trust; all Funds are exchange-traded funds; all Funds have common service providers; and that the majority of Funds are geared funds, with similar principal investment strategies. As a result, the Board addresses governance and management issues that are often common to all or most of the Funds. In light of these characteristics, the Board has determined that a four-member Board, including three Independent
• In order to qualify for the special tax treatment accorded a regulated investment company (“RIC”) and its shareholders, a Fund must derive at least 90% of its gross income for each taxable year from “qualifying income,” meet certain asset diversification tests at the end of each taxable quarter, and meet annual distribution requirements. A Fund’s pursuit of its investment strategies will potentially be limited by the Fund’s intention to qualify for such treatment and could adversely affect the Fund’s ability to so qualify. A Fund can make certain investments, the treatment of which for these purposes is unclear. If, in any year, a Fund were to fail to qualify for the special tax treatment accorded a RIC and its shareholders, and were ineligible to or were not to cure such failure, the Fund would be taxed in the same manner as an ordinary corporation subject to U.S. federal income tax on all its income at the fund level. The resulting taxes could substantially reduce the Fund’s net assets and the amount of income available for distribution. In addition, in order to requalify for taxation as a RIC, the Fund could be required to recognize unrealized gains, pay substantial taxes and interest, and make certain distributions. Please see the Statement of Additional Information for more information.
I feel compelled to spread the word; cryptocurrency is an amazing chance to make a fuck ton of money with a relatively small investment. The problem is, the window is closing. Many coins have already doubled in value many many times, the more a coin doubles in value, the harder it gets for it to double again and you to make a tidy 100% on your portfolio…
When rolling futures contracts that are in contango, the Short Bitcoin Fund may buy the expiring bitcoin futures contract at a lower price and sell a longer-dated bitcoin futures contract at a higher price, resulting in a positive roll yield (i.e., a gain). When rolling futures contracts that are in backwardation, the Short Bitcoin Fund may buy the expiring bitcoin futures contract at a higher price and sell the longer-dated bitcoin futures contract at a lower price, resulting in a negative roll yield (i.e., a loss).
If the Fund holds the foregoing kinds of securities, it may be required to pay out as an income distribution each year an amount which is greater than the total amount of cash interest the Fund actually received. Such distributions may be made from the cash assets of the Fund or, if necessary, by disposition of portfolio securities including at a time when it may not be advantageous to do so. These dispositions may cause the Fund to realize higher amounts of short-term capital gains (generally taxed to shareholders at ordinary income tax rates) and, in the event the Fund realizes net capital gains from such transactions, its shareholders may receive a larger Capital Gain Dividend than if the Fund had not held such securities.
Note that you could just keep bitcoin on CryptoFacilities waiting to make the trade so you don't have to wait to move the bitcoin you bought over. This is called see-saw arbitrage model, where you keep funds on both exchanges to avoid having to wait. This is fine, but you can't ignore that there is extra capital being used in the play, so it affects your rate of return and capital utilisation. We will not use this method, we will do a full, complete, legitimate arbitrage process.