Renaissance’s $10 Billion Medallion Hedge Fund Permitted to Enter into Bitcoin Futures Market
As per regulatory form filled on March 30, 2020, Renaissance Technologies is permitted to enter the Bitcoin Futures market for cash-settled contracts.
The company’s Medallion hedge fund is currently in the news for having its best years ever. Up 24% year to date it recorded impressive 9.9% gains in March, one of the worst months in modern financial history.
They are well ahead of the broader stock market, which is down over 11% since the rapid spread of the coronavirus pandemic. March’s gains came even after charging hefty investor fees including a cut of 36% of all trading gains and 5% of all money invested.
Cash-settled Bitcoin Futures contracts
Now, Jim Simons founded company has been permitted to enter into bitcoin future transactions, “which Renaissance will limit to cash-settled futures contracts traded on the CME.”
The Form ADV mentions that the underlying commodity, bitcoin is a relatively new and “highly speculative” asset and is extremely volatile, as such “investment results may vary substantially over time.”
It further cautions that these instruments involve much larger risk and potential for loss compared to conventional financial instruments.
“Investments of this type should be considered substantially more speculative and significantly more likely to result in a total loss of capital than many other investments.”
Renaissance further lays down a list of risks associated with bitcoin including its limited history, the absence of any recognition of bitcoin as legal tender by any government.
Bitcoin’s substantial price volatility, its susceptibility to forking, and possible correlation to the price volatility of other distributed ledger assets are other risks.
What the crypto community hails as the biggest strength of Bitcoin, no central authority to issue or control the world’s leading digital asset is also taken by the company as one of the risks.
Bitcoin’s susceptibility to manipulation by malicious actors or botnets, spot exchanges to fraud, manipulation, and other malfeasance, and the enhanced basis risk in futures compared to other types of investment vehicles are also mentioned.
Moreover, it mentions the undeveloped and evolving nature of regulation amidst the increased regulatory scrutiny of participants in the crypto space.
There is also the possibility of exchanges or FCMs’ imposing other requirements or limitations on bitcoin futures trading.
And any of these factors could “materially and adversely” affect the value of the Fund’s investments, reads the form.