Stone Ridge Wants Bitcoin Futures to Join List of Investment Vehicles

Stone Ridge Asset Management wants to launch a bitcoin futures fund. According to a filing with the U.S. Securities and Exchange Commission (SEC), Stone Ridge is looking to register the NYDIG Bitcoin Strategy Fund, a bitcoin futures contract offering that would be entering into an increasingly crowded space. 

If approved, Stone Ridge’s futures product would be significantly different from Bakkt’s own. Primarily, it would be investing in cash-settled bitcoin futures that are traded on exchanges regulated by the U.S. Commodity Futures Trading Commission (CFTC). The fund won’t invest in bitcoin or any other cryptocurrency directly, per the filing.

Stone Ridge will offer 100,000 futures shares at $10 each with no minimum purchases, but the initial capital to be raised would be capped at $25 million. 

“‘Cash-settled’ means that when the relevant future expires, if the value of the underlying asset exceeds the futures price, the seller pays to the purchaser cash in the amount of that excess, and if the futures price exceeds the value of the underlying asset, the purchaser pays to the seller cash in the amount of that excess,” according to the filing.

In addition to the fund’s investments in futures, Stone Ridge would acquire large amounts of cash and government and business securities to provide much-needed liquidity and to “serve as collateral for the Fund’s Bitcoin futures and to support the Fund’s use of leverage,” the filing explains.

Stone Ridge Joining Growing List of Bitcoin Futures and Investment Offerings

Stone Ridge’s filing shows that an increasing number of industry players are exploring bitcoin futures products. As noted above, Intercontinental Exchange’s Bakkt launched its much-anticipated physically settled bitcoin futures in September 2019. 

Although Bakkt’s emergence has been pitched as the spark needed for the next bull run, the results have been underwhelming. Bakkt’s first week did not meet optimistic expectations as the platform settled contracts worth less than $7 million, which some believe is the equivalent of four minutes of trading on many popular cryptocurrency exchanges. 

Meanwhile, Bakkt’s competitor, the Chicago Mercantile Exchange (CME) Group, announced that it would be adding options to its own bitcoin futures contracts in 2020.

“Based on increasing client demand and robust growth in our Bitcoin futures markets, we believe the launch of options will provide our clients with additional flexibility to trade and hedge their bitcoin price risk,” Tim McCourt, CME’s global head of equity index and alternative investment products, said.

In Central Europe, a new form of security is launching on October 4, 2019, on Switzerland’s primary stock exchange, SIX. Swiss cryptocurrency custodian Bitcoin Suisse AG has joined forces with fintech startup Amun AG to list an exchange-traded product (ETP) weighted with 90 percent bitcoin and 10 percent ether. The joint product will trade under the ticker ABBA on the exchange.

“It represents a unique way for investors to add the two major cryptocurrencies globally to their portfolio via a regulated product listed on SIX and backed by a Swiss-based custodian,” Hany Rashwan, CEO of Amun, explained in a statement.

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