Doug Goodwille from Kayne Anderson speaks to Drew Meredith from The Inside Network on market thinkers.
While a surging gold price is on hold as the world adjusts to a Trump presidency, all the factors that saw its price rise more than 50 per during his first term in office – trade disputes, fiscal deficits and geopolitical tensions – are almost certainly guaranteed the second time around.
Zerocap & Stropro introduce a new strategy to invest in Bitcoin with lower risk
Recent falls in the stock market pale in comparison to those being seen in the crypto world. We’re talking 54 percent falls in Bitcoin alone with the price now below US$30k for the first time since July 2021.
The crypto market has shed close to $1.6 trillion in market capitalisation since November 2021. Some of it partly due to investors fleeing from the riskiest assets in markets, i.e. cryptocurrencies and tech stocks. Long gone is the notion that Bitcoin is a ‘safe haven’ asset.
One fund manager and platform have been looking for ways to capture upside potential without the downside risks. Fund manager Zerocap together with Stropro, a structured products provider, who operates an alternative investments platform that houses the fund, have devised an investment strategy that allows investors to gain exposure to Bitcoin minus the risks.
Zerocap have launched a Principal Protected Note (PPN). According to the firm, it’s a “financial instrument that returns the principal amount invested at maturity regardless of the underlying assets price movement. An investor will also receive a percentage of the upside benefit of price appreciation of the underlying asset – whilst mitigating downside price risk with the full principal returned if the price decreases below the strike level at the expiry of the term.”
This effectively solves the downside and timing dilemma but still allows an investor to participate in the upside return profile. Below is the payoff table –
To explain, Bitcoin is trading at AUD$40,785k at the time of writing. Investors will receive the original amount invested if Bitcoin is below the strike level of $50k, when the note expires. When Bitcoin rises above $50k, investors will receive 50c for every $1 price increase up to $100k.
Bitcoin and digital currencies are all experiencing significant downside risk to investor’s principal capital. “This creates large timing and drawdown risk to investors looking to enter the space. Zerocap’s PPN looks to solve this investment dilemma.”
