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.
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.
Looking to invest?
Think like a Venture Capitalist.
Venture Capital firms invest in illiquid start-up companies yet are the most successful asset class over the last 20 years. Bitcoin Enhanced is an example of a Self-Managed Investment (SMI) - Download PDF . A form of digital hedge fund SMIs are also illiquid in their start up phases. The key to the success of the Venture Capital model is the way it manages risk. We suggest the same model can be applied to SMIs. Here is why.
SMIs are similar to VC backed start-up companies because both create new value. Investors are acting as creators. The act of creating, as opposed to simply owning value gives SMIs important potential benefits for the investor:
- Diversification – because the value of tokens is created by investors rather than depending upon an underlying asset, that value lies outside of the risks of the fiat financial system. In this way holding SMIs enables portfolios to diversify away from these systemic risks.
- Independence – storing tokens on a digital ledger (blockchain) removes dependence on counterparties to access the token’s value. It is another way SMIs are independent of the fiat system.
- Capital Efficiency – because the first tokens are discounted early investors have the greatest potential gain for the minimum capital outlay.
- No Fees – Unlike a hedge fund SMIs have no fees. This can make a significant different to returns over time. Learn more.
SMIs are similar to VC backed start-up companies because both create new value. Investors are acting as creators. The act of creating, as opposed to simply owning value gives SMIs important potential benefits for the investor:
- Illiquid – until there are enough buyers on the exchange it may not be possible to exit your investment.
- Business Failure – an SMI like Bitcoin Enhanced may fail at any time for a number of reasons. For example the Phi Algorithm may fail to provide better returns than Bitcoin. This could lead to the value of the tokens falling to zero if there are no buyers for the tokens.
Risk Management
The Venture Capital model effectively manages these risks with:
- Diversification –Venture Capital firms rely on the 60% of start-ups that do succeed to more than compensate for those that do not. Applied to SMIs the approach suggests investing in more than one SMI to spread the risk of not all SMIs succeeding.
- Patience – Venture Capital firms accept start-up companies are illiquid in their early stages and it takes time to grow a great company. They are patient with their investment and do not expect too much too early.
- Participation – Venture Capital firms actively help their start-ups grow. They provide expertise and assist with introductions that help promote their firms. In the same way SMIs can benefit from the support and promotion by token holders through simple strategies such as communicating their SMI investment with others.
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.