Wave Financial – the Los Angeles-based company and Fidelity Digital Assets are in a new partnership to launch Bitcoin derivatives yield fund.
In the new arrangement, Fidelity will be the custodian of the BTC reserves for the established yield fund. The move by Wave Financial to launch bitcoin derivatives yield fund is an extension of a growing trend aimed at launching BTC derivatives products. The CME Group has already supported the plan, saying that the derivatives marketplace will be a suitable option for its Bitcoin futures trading in the first quarter of 2020.
The Launch of Bitcoin Derivatives Yield Fund
With the push for option strategies in crypto space, Wave Financial recently announced its plans to launch a new Bitcoin derivatives-based yield fund. A derivative is a contract that derives its value from the prices of items, such as currencies, commodities, bonds, and stocks. From 2017, Bitcoin market prices have been used market response data and indexes.
These instruments help market analysts and financial institutions to develop swap agreements and forward contracts, options contracts, and futures. Options are usually launched when the markets are more mature to allow traders to make a profit from the outgoing and flow attached to the market sentiment.
Wave Bitcoin Income & Growth Digital Fund
This incorporated fund originates from the British Virgin Islands. The fund aims to allow investors to create yield by selling call options on the BTC reserves that the fund holds.
The firm says that Fidelity Digital Assets will provide custody for the BTC reserves held in the fund. Wave President, Benjamin Tsai said:
“For high net worth investors, appetite for innovative yield product with upside potential is strong…This product monetizes higher volatility of BTC to deliver yield, independent of the interest rate environment while keeping some upside exposure.”
According to Wave, the yield fund aims to allocate a dividend of 1.5% of its net asset value (NAV) every month. Besides, the fund aims at an annual target yield of 18%.
“The fund would generate this premium by selling call options with strikes higher than the current price, which also leaves room for investors to capture potential BTC upside.”
If there is a surplus, it will use it to buy more BTC after deducting a performance fee. This, it says, will help NAV grow further.