Swissquote Group, Switzerland’s leading provider of online trading services, has expanded its crypto offering with an actively managed Bitcoin certificate, powered by its machine learning algorithm. The exchange-traded product is listed on Switzerland’s largest stock exchange, the Six Swiss Exchange.
Swissquote’s offering removes one of the barriers to the introduction of a Bitcoin ETP to institutional investors as the new investment vehicle allows them to buy into the cryptocurrency market without directly investing in Bitcoin, which regulations prohibit them from doing.
The objective of the ‘crypto’ certificate is to achieve capital growth by using an actively managed approach that shifts holdings between cash and Bitcoin.
The investment dimensions of Swissquote’s algorithm are over or underweighting the cryptocurrency position depending on the predicted future direction of Bitcoin’s price. The company said that between 60% and 100% of the certificate’s portfolio is allocated to Bitcoin.
It further explains: “With the likelihood of a downturn rising, the cash position is increased to up to 40%, thereby reducing volatility. If prices are expected to rise, up to 100% of the certificate is invested in Bitcoin.”
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The product trades under the symbol SQX/BTQ, with Bitcoin priced in USD as the underlying asset. The certificate has a three-year term. The first day of trading is on November 23, 2017, and the last day of trading will be on November 11, 2020. Between those dates, investors will be able to trade the Swissquote certificate on the secondary market, i.e. buy or sell at the applicable bid/offer prices.
Swissquote is employing its accumulated Bitcoin experience. Just a few months after launching Bitcoin trading on its platform, the company designed a unique algorithm-driven systematic approach to appeal particularly to investors who require exposure to the digital asset without necessarily wanting to be fully exposed to the risks associated such as hacking attacks or management of access keys.
The risks have been demonstrated in the recent past as many crypto wallets and exchanges have been hacked, and customer data has been compromised.
Commenting on the news, Peter Rosenstreich, Head of Market Strategy at Swissquote, said: “Even though we believe that Bitcoin represents the future, the volatility can be very high and considered too much of a risk by the average investor. This is why our strategy focuses on reducing volatility by increasing the amount of cash in periods of uncertainties and downturns.”
He added: “With the certificate, the average investor gets a regulated and transparent gateway to Bitcoin, without needing a special Bitcoin wallet, managing public and private keys or having to fear theft or hacks. We expect that investors will be willing to accept slightly lower returns in exchange for better protection against downside risks.”