November reinforced the fact that large drawdowns can occur at a moment’s notice within the cryptocurrency market. Whilst cryptocurrencies have historically offered staggering returns, these returns often come hand-in-hand with significant short-term drawdowns. Bitcoin (BTC) is no exception, with a history of unpredictable short-term price movements. Investors accustomed to the relative stability of traditional investments can be deterred by this short-term volatility.
Invictus Capital’s Bitcoin Alpha fund (IBA) was constructed to reduce the effects of BTC’s short-term drawdowns and create a more stable investment product for long-term BTC investors. IBA is designed to outperform BTC by employing option and lending strategies, generating enhanced returns for long-term IBA investors. The IBA fund’s strategy aims to limit monthly drawdowns to a maximum of 10% through the purchase of out-of-the-money put options — this acts as insurance by giving the fund the right to sell BTC holdings above the market value in the case of a price collapse. The cost of the put option is covered by the sale of a far out-of-the-money call option and returns generated from proprietary yield generating strategies. The IBA fund does not charge a management fee, only a 20% performance fee on the outperformance of BTC.
BTC’s low correlation with other financial assets and its crypto market dominance makes the asset an attractive option for seasoned and new investors alike. With inflation rates rising globally and BTC’s reputation as a long-term inflation hedge, often referred to as digital gold, fundamentals point to growing demand for the flagship digital asset.
November’s market correction provides investors with an opportunity to enter the BTC market at an attractive level. Given the current market state, with BTC poised to gradually climb or see sharp corrections, IBA is the ideal fund for BTC holders looking for downside protection and upside exposure.
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