One of the rules of thumb on the stock market is that the higher the volatility of an asset, the higher the risk. The ratio, which describes the range in which prices fluctuate, is relatively high for Bitcoin. On a 12-month view, for instance, its historic volatility stands at just under 44, while for the S&P 500 it comes to just 10. The high fluctuations for Bitcoin are not unusual, however – crypto currencies are, after all, a young investment class and a relatively new technology that still needs to gain acceptance among the general stock market public. This high volatility presents a challenge to investors, however, because it can trigger emotional reactions such as fear. That is why an investment in cryptos is considered highly speculative. To ensure that even rather conservatively-minded investors can engage in this sector, Leonteq has added a refined strategy for minimising risk to its product range. The ETP+ on the Adaptivv Downside Control Bitcoin ETF Index enables investors to both protect their nerves and share in the potential of the cyber currency.
The strategy offers a risk-adjusted way of gaining an exposure to Bitcoin through a sophisticated investment process. It is enabled by the innovative Adaptivv Ssensor technology. Adaptivv is a spin-off of ETH Zurich which is regulated by FINMA. Founded with a focus on progressive statistical methods and financial technology, the company has been offering successful drawdown management solutions since 2016. In the case of Bitcoin, the mathematical model ensures dynamic adjustment of the portfolio based on market stability, i.e. the exposure can be anywhere between 0% and 100%. This allows risks to be minimised and protects the Bitcoin investment. The remaining cash portion, should the strategy not be fully invested in the digital asset, earns interest. With an additional mechanism to protect against large drawdowns – in the past Bitcoin has suffered setbacks of up to 80% – the mathematical concept ensures the security and stability of the investment in what is still a young asset class.
Investors can bring the professional Adaptivv Downside Control Bitcoin ETF Index into their portfolio conveniently and at low cost with an ETP+ from Leonteq. The ETP+, which can be traded on the SIX and the BX Swiss and thus ensures daily liquidity, offers enhanced security for investors, as a pledge is deposited with SIX SIS AG for every exchange traded product. If the price of the certificate rises, Leonteq increases the pledge – and vice versa. If Leonteq were to enter into payment difficulties, the trustee SIX Repo would sell the pledge and the equivalent of the investment product would then be distributed to the holders of the ETPs. Other advantages of the ETP+ are that investors do not own Bitcoin directly, since this is also laden with risks. Potential risks include hacker attacks or even the loss of the storage medium. That is not the case with the ETP+, which has a secure place in the custody account. With a fee of just 0.75% p.a. plus a 10% performance fee, the relatively new product offers a marked added value compared with a direct investment in Bitcoin.
We look forward to answering all of your questions about our products and how they are traded. Please don't hesitate to get in touch! Phone: 058 800 11 11, email info@leonteq.com or contact us here.