BitSpread Outperforms The Bitcoin Market - Essay Example

Considering the price of bitcoin crashing by 50% in 2014, one can no longer increase one’s wealth by investing in bitcoin directly.

We Will Write A Custom Essay Sample On
ANY TOPIC SPECIFICALLY
FOR YOU

For Only $13.90/page


order now

Today investors need to play by a different set of rules for capturing opportunities in Bitcoin.

Bitcoin trading is becoming more and more sophisticated, as it is highly volatile and on a bearish trend since 2014.

Therefore, the days of the novice turned trader will be over soon, no matter how many candle charts he learns to read.

From a very speculative investment directly in bitcoin, many investors have switched for seed and private equity.

Venture Capitalists now turn to funding blockchain-oriented technology startups with $230 million invested in blockchain related startups during the first quarter 2015.

Does this mean that bitcoin holds value merely as a technology?

There is a new breed of bitcoin enthusiast who thinks otherwise. This is where the science of making money meets the world of professional financiers.

What we are seeing today is an exciting phenomenon which highlights the shifting trend towards synthetically creating a support for the price of bitcoin in the market place.

Increasingly, new companies in this space, set up by finance professionals coming from top investment banks, are trying to capture opportunities for their investors, whatever the level or dynamic of the bitcoin price.

One such company is UK based digital FX wealth manager, BitSpread.

BitSpread, is a UK digital FX wealth management firm based in London, which runs exclusive trading strategies that generate alpha returns and achieve diversification on digital currency and cash holdings.

Bitspread has been successfully running hybrid trading strategies on bitcoin and traditional FX on the major digital currency exchanges.

It also provides custom solutions to digital currency businesses that need a platform to hedge their exposure to bitcoin.

Primarily funded by qualified investors such as high net worth individuals, family offices and asset managers, these are the sections who are increasingly looking towards Bitcoin today as a new asset class.

In BitSpread’s one year of operation, it has run a number of statistical arbitrage trading strategies.

Its market neutral liquidity strategies run on bitcoin exchanges achieved an annualised return of 31.45%, outperforming the price return of bitcoin, and even the returns on traditional financial asset classes.

BitSpread’s CEO, Cedric Jeanson notes, that executing these trading strategies on digital currency exchanges has contributed to greater liquidity and volume on these exchanges, that is encouraging trading and promoting price stability. These attributes are essential for the ecosystem to grow.

The return over volatility or Sharpe Ratio for BitSpread’s trading strategy was +5.59, far greater than bitcoin itself (-0.57), or traditional asset classes like the Eurostoxx 50, the S&P 500 and US Treasury Bonds.

The Sharpe Ratio (SR) is calculated by dividing the annualized return with the annualized volatility.

As a market maker, Bitspread provides liquidity to a number of exchanges. The Liquidity Provider specifies the price, size, direction, and instrument.

BitSpread is increasingly leading the way in developing trading strategies and solutions for high net worth individuals and asset managers who are looking for uncorrelated portable alpha performance to achieve risk diversification of their portfolios, while bitcoin exchanges profit from increased liquidity and volume.

The portable alpha performance simply adds an uncorrelated return to other traditional financial returns. This diversification allows investors to make their existing portfolio more efficient and profitable, thanks to a risk diversification.

This is instrumental in supporting the Bitcoin ecosystem while bringing new interest to this asset class.