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Introduction:
bitcoin Volatility Premium AMC, an innovative investment product, has quickly become the largest actively managed bitcoin-only financial product in Europe and the second largest globally. Despite this achievement, this bitcoin-exclusive AMC has flown under the radar and received no media coverage to date. What makes this investment product offering particularly interesting is that its dramatic rise was due to the initial $50 million investment launched by an enigmatic bitcoin miner in 2010. The product is designed to curb price volatility. of bitcoin, encouraging its adoption as a reliable medium of exchange.
What is an AMC?
AMC stands for Actively Managed Certificate. It is a type of structured security that is popular in Europe. Jurisdictions such as Luxembourg and Jersey allow asset managers to create these certificates to raise capital from investors. Certificates provide a “wrapper” for a specific investment strategy or underlying assets. The certificate is sold to investors and the capital is used to implement the strategy.
Who is the mystery whale?
In response to queries about the identity of the bitcoin whale behind the new bitcoin-volatility-premium-amc”>bitcoin AMC Volatility Premium, Zeltner & Co. confirmed that the initial investor is indeed one of the first bitcoin miners who has been involved in bitcoin since 2010. However, respecting the investor's request to preserve privacy and avoid public scrutiny, Zeltner & Co. .declined to reveal further details about his identity. The motives behind such a significant move by an individual with significant bitcoin holdings are particularly intriguing. The creation of this AMC, aimed at stabilizing the price of bitcoin, shows a strategic approach to digital asset management. By personally allocating its holdings to develop this investment product, bitcoin Whale not only addresses the issue of bitcoin's volatility but also improves its viability as a stable medium of exchange. This AMC stands out as a unique market-making instrument that not only seeks to manage risk but also differentiates itself by its operational approach, aiming for a more stable and predictable market for bitcoin.
Why is this AMC relevant?
bitcoin Volatility Premium AMC has already become the largest actively managed bitcoin-only financial product in Europe and the second largest globally after Purpose Investments' bitcoin Yield ETF (BTCY), with over C$109 million ( US$80,750). There are several major bitcoin ETFs that actively manage futures positions, such as the ProShares bitcoin Strategy ETF (BITO), with over $2.82 billion in assets under management; However, these are not actively managed funds in the traditional sense. Rather than attempting to outperform or optimize the risk/return of a direct bitcoin investment, futures ETFs aim to track the price of bitcoin 1:1.
The difference between an ETF and an AMC is that ETFs are passively managed. That means they track the underlying asset. While AMCs are actively managed, meaning they try to outperform the underlying assets in terms of absolute return or risk-adjusted return.
Figure 1: bitcoin-only active funds and larger structured products
Why is your investment strategy unique?
The certificate algorithmically invests in bitcoins and US dollars, with the aim of charging a volatility premium while optimizing the risk-return profile directly when investing in bitcoins. The strategy provides liquidity to the btc/USD spot market with market making on leading exchanges such as Kraken. This leads to small profits, which can accumulate between 2% and 6% annually, depending on volatility. The volatility premium is generated when the market goes from executing buy orders generated by the algorithm to executing sell orders, and vice versa. The algorithm buys low and sells high on each dip or peak, respectively.
Figure 2: bitcoin Risk Profile vs. Zeltner & Co. bitcoin Volatility Premium.
Similar to ETFs, as more investors invest in bitcoin Volatility Premium AMC certificates, the certificate must purchase more bitcoins, increasing demand for bitcoins, which already exceeds the newly created daily supply due to several factors. Market making targets an allocation of 70% bitcoin and 30% US dollars, meaning the strategy currently owns over 540 bitcoin.
Market Impact and Future Prospects:
The goal of bitcoin Volatility Premium AMC is to mitigate bitcoin's price fluctuations, making it more stable and functional as a medium of exchange.
Dr. Demelza Hays, Portfolio Manager at Zeltner & Co., shared her thoughts with bitcoin Magazine Pro:
“bitcoin's potential to become a global medium of exchange and money depends significantly on achieving stable purchasing power. Currently, the volatility inherent in bitcoin's price poses a barrier to its widespread adoption for everyday transactions. However, if bitcoin were to stabilize in value, it could emerge as a viable alternative to traditional fiat currencies, offering benefits such as decentralization, security and lower transaction costs in bitcoin scaling solutions such as Liquid, AQUA and Lightning Network.”
Becoming the exclusive actively managed bitcoin financial product in Europe and a major player globally, AMC leverages an algorithmic strategy to invest in bitcoin and US dollars. This strategy aims to capitalize on market volatility, which in turn influences the demand and price dynamics of bitcoin.
Swiss Family Office participation:
The strategy is managed by the prestigious family office Zeltner & Co., based in Zurich, Switzerland. Founded by Thomas Zeltner, Zeltner & Co. continues the legacy of Thomas' father, the late former UBS president of wealth management, Jürg Zeltner. Zeltner & Co., recognized for its discretion and experience in wealth management, has brought credibility to this company, solidifying confidence in the legitimacy and potential for success of the strategy.
Regulatory and geographic advantage:
By choosing Zurich, Switzerland, as its headquarters, AMC benefits from the region's favorable regulatory environment and its reputation as a global center of finance and innovation. This strategic location enhances the security and attractiveness of bitcoin Volatility Premium AMC for investors looking to diversify into digital assets.
Conclusion:
The launch of bitcoin Volatility Premium AMC comes at a time of increased interest, as bitcoin recently surpassed all-time highs and captured the attention of institutional investors and media outlets alike. As the market continues to mature and attract greater institutional participation, the emergence of innovative investment vehicles like this certificate highlights the evolutionary nature of digital asset management.
