Fidelity Digital has confirmed that they are in the process of launching Bitcoin-based yield fund.
Mutual fund yield is used to represent the net income return of a mutual fund, and is calculated by dividing the annual income distribution payment by the value of a mutual fund's shares. It includes the income received through dividend and interest that was earned by the fund's portfolio during the given year.
While cryptocurrencies might not be as stable as traditional asset classes including fixed income and equity, their price movements tend to be non-correlated with other asset classes, increasing the diversification benefit of adding crypto to already diversified portfolios. Despite the benefits, volatility in digital assets such as Bitcoin is very high, sometimes moving more in one day than some asset classes do in years.
As digital assets mature and gain recognition, such as being included in mutual funds and ETFs, this volatility should slowly subside, making it a more appropriate investment in multi-asset portfolios.
Samuel Lee, financial advisor at Chicago-based SVRN Asset Management, says:
“They are a very new asset class whose market is not very efficient. Skilled investors are going to take a lot more advantage of those who are less skilled in such markets when compared to more mature equity and fixed income markets.”
A few weeks ago, Elementus, a startup that focuses on spotting illicit transactions in digital currencies, announced they were raising $3.5 million from a fund that is linked to Fidelity Investments.
Recently, Los Angeles-based asset management firm Wave Financial has announced the creation of the world's first Bitcoin-based yield fund, which aims to generate an investment yield by selling call options on bitcoin held inside its fund. This fund is going to be charging 100 basis points of fixed management annually.
Furthermore, it will take 30% of returns above 18 percent yield. Although the fund is already open to investors, no interested party confirmed to subscribe.