Here is the brand new launch by IDX Insights- the ‘smart beta BTC Index.’ It is basically a crypto index that makes use of smart beta construction method. The objective is to offer a controlled risk allocation and therefore, control volatility of the crypto assets. The IDX crypto Index is aiming to achieve this by offering allocation between BTC and fixed income ETFs. These allocations will make use of short term momentum signals in order to control the risk involved. On this, the CIO and the founding partner of IDX Insights- Ben McMillan said-
As crypto assets have emerged as an alternative asset class, we continued to question how to prudently deploy risk capital in the space. While several long-only cryptocurrency indexes exist, there were none that took a tactical approach to deploying risk-capital when the risk/return profiles look most favorable.
He further added that there is high potential in the ‘nascent asset classes.’ It represents an opportunity for promising returns. With such potential, comes great volatility and strong ‘drawdowns’ as well. He explained that BTC and cryptos have not been different. Also, he further added that the company had seen greater interest from the investors in the nascent asset class. Yet, he thinks that most of the investors find it difficult to stick to the long-sighted approach.
During the time when the rates of Bitcoin are increasing and show positive growth, the index takes a long exposure of the crypto. This is expressed with the help of ‘Grayscale BTC Trust.’ During the fluctuation of any of these parameters, the exposure is then focused entirely on low risk fixed income ETFs, by the index. This allows greater participation in Bitcoin during the ‘high bar’ and in the case of ‘low bar,’ the risk is eliminated to the maximum capacity with the help of this system. The ‘Grayscale BTC Trust’ was launched six years ago in 2013. As per sources by far the index has 36 percent long of the time, has captured 49 percent of all the up tides, and has captured 39 percent of the low times. Further, it has captured 36 percent of drawdowns in comparison to 84 percent of the Grayscale Bitcoin Trust, as per sources.