Why bitcoin enhanced?
Bitcoin Enhanced seeks to provide -
- Better returns than Bitcoin
- Less downside than Bitcoin
- A store of value outside the fiat system
- A wake up call that people, only people, create monetary value.
Diversify from the greatest risk of all…
You may have a portfolio with a mix of asset classes and geographic distribution. You may even hold tail risk products that deliver upside in the event of a market correction. But does the portfolio carry any protection from the greatest risk of all – institutional collapse? read more...
Institutional Custody
For investors who do not wish to deal with the purchase and holding of Bitcoin Enhanced tokens third parties such as Copper provide secure digital asset custody, acquisition and transfer infrastructure.
Asset Structure
Bitcoin Enhanced is an example of a Self Managed Investment (SMI). The purpose of the asset class is to enable investors to diversify their portfolio away from the systemic risk of financial collapse. As a form of “digital hedge fund”, SMI’s have:
- No collateral
- No counter party risk
- No systemic risk
- & No fees.
Specifically:
- SMI’s are digital tokens that function as a currency – investors give value to the tokens and maintain that value at the Target Price of a simulated trading strategy.
- The simulated strategy keeps token value free from counter-party and systemic fiat risk.
- Investors buy and sell their tokens on a digital exchange.
Investing in SMI - What You Need to Know
In the case of Bitcoin Enhanced investors have two tokens to choose from depending upon their needs. Both are available exclusively on the Waves Decentralised Exchange (DEX)
What to expect
The entire purpose of a Self Managed Investment (SMI) like Bitcoin Enhanced is that the value is generated and held by token holders. This creates independence from the fiat system so that like gold or property, the value of the asset is not lost in the event of systemic market failure.
However, unlike investing in a derivative such an a hedge fund or ETF, where liquidity is present from the outset due to the underlying asset, the liquidity of an SMI depends upon the adoption of the asset. This takes time and like Venture Capital firms, early investors need to consider a medium to long term horizon until liquidity builds. SMIs are also similar to VC investments in that diversification, i.e. holding many SMIs, mitigates the risk of the failure of any specific investment.
Bitcoin Enhanced tokens are each capped at 4 million so this gives the following stages:
(current position)
Strategy
The Target Price is the product of a simulated long/short Bitcoin strategy. The strategy is long Bitcoin except when forecasts are made to short the coin. Forecasts are made by the Phi Algorithm. Since inception in February 2018 forecasts have averaged once every six weeks. During that time the strategy has been long 88% and short 12% of the time.
In Ourselves We Trust
Bitcoin Enhanced tokens represent a return to the basic principles of sound investing, not just with the natural harmony of the Phi Algorithm but in the way they operate. They are examples of Self-Managed Investments (SMIs):
- Like Bitcoin and the US dollar token holders give XBE tokens their value.
- In the same way people kept the value of gold stable for thousands of years token holders grow and then keep the value of XBE pegged to the Target Price of the simulated Bitcoin strategy.
The result is:
- The value of tokens is not dependent upon any external authority, including us the issuer.
- Token value is independent of what happens in the fiat financial system enabling a return to portfolio diversification.
- Tokens and their value reside solely on the decentralised blockchain keeping them secure and away from external interference.
- People with the most vested interest in XBE tokens, token holders themselves, are the ones responsible for maintaining their peg to the Target price.
Compare this with an ETF such as SPDR Gold Shares (GLD). Like all derivatives the value of GLD shares depends upon the value of an underlying asset, in this case the Trust holds near equivalent amounts of physical gold stored in London vaults. The EFT is owned by World Gold Trust Services, LLC. The value of shares is maintained by the continual rebalancing of gold held. In order to do this requires the active participating of fund managers State Street Global Advisors, as well as The Bank of New York Mellon as the trustee of the Trust and HSBC Bank plc is the custodian of the Trust. If any of these institutions should fail then the redemption value of GLD shares could fall to zero. A full disclosure of the risks associated with owning GLD shares can be found in the prospectus pages 6 to 14.