In brief
- Stone Ridge has added Bitcoin to its diversified alternatives fund.
- The fund will focus on put options and indirect exposure to Bitcoin.
New York-based asset manager Stone Ridge has added Bitcoin as the seventh investment strategy in its diversified alternatives fund. This addition will become effective on April 26, according to an SEC filing yesterday.
As its name suggests, the fund is focused on investment strategies with potentially high returns, while diversifying away from stocks and bonds. It focuses on key investments, including single family real estate, healthcare royalties and alternative lending.
The fund will now have exposure to Bitcoin through put options on Bitcoin futures contracts. This is where a trader initially agrees to sell a certain amount of Bitcoin futures at a certain price in the future—but is not obligated to do so. The trader pays a premium in order to do so.
Stone Ridge noted that the fund may get further exposure to Bitcoin’s price by investing in pooled investment vehicles that have invested in Bitcoin.
As is customary in SEC filings related to Bitcoin, Stone Ridge noted that the cryptocurrency is volatile and could decline rapidly, potentially going to zero. It also noted that political or economic crises could cause large sales of Bitcoin, damaging its price.
Stone Ridge’s bullish view on Bitcoin
Stone Ridge’s founders have been bullish on Bitcoin for several years. As Forbes previously reported, the firm’s staff were investing so much personally into Bitcoin that it needed to find a way to store the funds safely. So it created a subsidiary, the New York Digital Investment Group (NYDIG), which has raised $100 million in investment over the past two years.
NYDIG Custodies Over $1 Billion in Bitcoin and Cryptocurrency
New York Digital Investment Group (NYDIG), a crypto-focused subsidiary of Stone Ridge, revealed today that it currently custodies around $114 million in Bitcoin (BTC) for its parent company, according to an announcement. $10 billion asset management firm is holding $115 million worth of Bitcoin. Having 0% exposure to Bitcoin at this point is the wrong answer.https://t.co/HEIiwvj9vm — Pomp 🌪 (@APompliano) October 13, 2020 Stone Ridge decided to purchase the 10,000 Bitcoin as part of its treasu...
NYDIG now has 280 institutional customers and looks after $6 billion of their Bitcoin. It holds 10,000 of Stone Ridge’s Bitcoin, worth $500 million at current prices. It also has several crypto clients who store other cryptocurrencies, including Ripple chairman Chris Larsen, who keeps some of his XRP with NYDIG.
Earlier this month, NYDIG CEO Ross Stevens said that the firm had so much institutional demand, it expects to be holding $25 billion of Bitcoin by the end of the year.
