- The fund offers full Bitcoin gains while using gold to limit losses over five years.
- It links downside protection to gold prices using efficient financial tools and hedges.
- The goal of this fund is to lower the volatility risk of Bitcoin for cautious investors.
Wall Street firm Cantor Fitzgerald is launching a new five-year Gold Protected Bitcoin Fund. This fund offers investors full exposure to Bitcoin’s price gains while mitigating downside risk through a correlation with the price of gold. The hybrid approach aims to balance Bitcoin’s volatility with gold’s stability, providing a unique investment option.
Innovative Fund Combines Bitcoin Growth with Gold’s Stability
The fund offers uncapped Bitcoin upside while protecting investors from losses through a gold-linked mechanism. This means if Bitcoin’s price falls, gains linked to gold’s performance offset losses. Cantor Fitzgerald achieves this not by holding physical gold but through the means of financial instruments that are highly compatible with gold’s spot price. This unique design targets very wealthy investors who seek Bitcoin exposure but also see the need to limit risks associated with its price swings.
Brandon G. Lutnick, Cantor Fitzgerald’s chairman, described the fund as “a groundbreaking investment vehicle” aimed at merging traditional and digital assets. “This Fund reflects our entrepreneurial spirit and commitment to delivering bold, forward-thinking solutions that redefine what’s possible in digital asset investing,” he stated.
Strategic Use of Protective Collar Options
Market analysts suggest the fund uses a complex protective collar options approach. This involves buying out-of-the-money put options to limit downside risk and selling call options to cover hedging costs. The fund differs by linking the protective floor to gold’s price instead of a fixed dollar amount.
The five-year term appeals to investors seeking long-term growth in Bitcoin, offering a potentially low risk profile. The fund is set to join the ranks of the recent $3 billion Bitcoin investment fund set up in partnership with Tether, Bitfinex, and SoftBank. This fund will bridge the gap between conventional safe-haven assets and high-growth digital currencies.
Related: Cantor Fitzgerald to Launch New Venture Mirroring Strategy
Addressing Investor Concerns Over Volatility
The volatile price of Bitcoin leads to cautious and conservative investors willing to hedge their exposure. Cantor Fitzgerald’s Gold-Protected Bitcoin Fund offers this possibility by balancing growth potential with downside protection. Investors profit on a rise in Bitcoin prices, while partial protection weighs against losses during declines. This protection may have its tradeoffs, including hedging costs and fund structure complexity.
Additionally, the approach of this fund reflects the interaction of conventional financial safeguards with new-age digital assets. The intent behind Cantor Fitzgerald’s gold-linked hedge is to redefine investment avenues for Bitcoin and attract the more risk-averse participants.
