A somewhat secretive but promising hedge fund has reportedly been approved to make investments in the Bitcoin (BTC) futures markets.
As noted in a document dated March 30, 2020, the US Securities and Exchange Commission (SEC) has now permitted Renaissance Technologies’ Medallion Funds to offer products and services involving the Bitcoin futures market.
Renaissance will begin offering cash-settled BTC contracts from the Chicago Mercantile Exchange (CME) Group, which is one of the two oldest Bitcoin futures providers. The CME Group began offering Bitcoin futures back in December 2017.
The SEC confirmed:
“The Medallion Funds are permitted to enter into Bitcoin futures transactions, which Renaissance will limit to cash-settled futures contracts traded on the CME.”
The value of Renaissance’s $10 billion cryptocurrency hedge fund reportedly increased by 24% year to date, even though the markets have experienced significant volatility due to the Coronavirus (COVID-19) outbreak.
In statements shared with the Wall Street Journal on April 17, 2020, investors noted that March 2020 saw the Bitcoin price drop by over 50% in a single one day. However, they pointed out that the fund still managed to provide almost 10% returns.
Meanwhile, BTC futures markets have been recovering after experiencing significantly reduced participation in recent weeks.
CME’s Bitcoin futures recorded all-time highs in terms of the number of new or unique accounts in March 2020, as they registered a 161% annual growth rate.
Renaissance Technologies is one of the world’s biggest hedge funds. The fund is well-known for introducing quantitative-based investing.
At present, it remains unclear whether the company has acquired any Bitcoin futures.
Renaissance’s ADV form, which provides information to potential investors about the firm’s business operations, points out the risks associated with trading Bitcoin and cryptocurrency derivatives.
The form states:
“The underlying commodity for these futures transactions, Bitcoin, is a relatively new and highly speculative asset. Bitcoin and futures based on bitcoin are extremely volatile, and investment results may vary substantially over time. These instruments involve substantially more risk and potential for loss relative to more conventional financial instruments.”
It adds:
“Investments of this type should be considered substantially more speculative and significantly more likely to result in a total loss of capital than many other investments.”
Renaissance Technologies works with thousands of stocks. The firm regularly bets against shares of equities, commodities, and major currencies.
Established in 1982, the company is managed by mathematician James Simons.
Medallion’s funds have yielded an average annual return of 40% from 1988 to 2018.
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