Renaissance, capital investor and hedge fund giant that boasts relatively $166 billion in assets, revealed in a new filing with the US Security and Exchange Commission that it will invest in Bitcoin (BTC) futures.
The hedge fund giant revealed permission was given to go ahead with its $10-billion Medallion Funds flagship, which was meant to enter the futures market for Bitcoin.
Bitcoin Futures, The Medallion Funds are allowed to enter into futures transactions with Bitcoin, which Renaissance will restrict to cash-settled futures contracts traded on the CME.
Bitcoin, the underlying commodity for such futures transactions, is a relatively new and highly speculative asset.
Bitcoin and bitcoin-based futures are extremely volatile, and the results of the investment can vary considerably over time.
These instruments entail significantly more risk and loss potential compared to more conventional financial instruments.
This type of investment should be considered substantially more speculative and far more likely to result in total capital loss than many other investments.
The firm also listed the risks in investing in Bitcoin Futures in the filing. The risks are listed in the filing below as outlined by Renaissance.
- Its limited history.
- The absence of any recognition of bitcoin as legal tender by any government.
- The lack of any central authority to issue or control bitcoin.
- Its susceptibility to manipulation by malicious actors or botnets.
- Its susceptibility to forking.
- Its substantial price volatility.
- Its possible correlation to the price volatility of other distributed ledger assets.
- The susceptibility of bitcoin spot exchanges to the risk of fraud, manipulation, and other malfeasance.
- The undeveloped and evolving nature of bitcoin regulation.
- The enhanced basis risk in bitcoin futures compared to other types of investment vehicles.
- The possibility of exchanges or FCMs’ imposing other requirements or limitations on bitcoin futures trading.
- Increased regulatory scrutiny of participants in the crypto space. Any of these factors could materially and adversely affect the value of the Fund’s investments.
Renaissance is one of the world’s most extensive hedge funds. The firms had stated that the Chicago Mercantile Exchange is restricting crypto-currency trading activities to Bitcoin Futures contracts.