This was revealed by Renaissance in a new filing with the United States Security and Exchange Commission.
The hedge fund giant revealed it has been given permission to go ahead with its $10-billion flagship Medallion Funds, meant to enter into Bitcoin futures market.
The statement reads:
Bitcoin Futures–The Medallion Funds are permitted to enter into bitcoin futures transactions, which Renaissance will limit to cash-settled futures contracts traded on the CME.
The underlying commodity for these futures transactions, bitcoin, is a relatively new and highly speculative asset.
Bitcoin and futures based on bitcoin are extremely volatile, and investment results may vary substantially over time.
These instruments involve substantially more risk and potential for loss relative to more 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.
In the filing, the firm also itemized the risks in Bitcoin Futures investment. The risks are listed below as itemized by Renaissance in the filing.
- Its limited history.
- The absence of any recognition of bitcoin as legal tender by any government.
- The lack of any central authority to issue or control bitcoin.
- Its susceptibility to manipulation by malicious actors or botnets.
- Its susceptibility to forking.
- Its substantial price volatility.
- Its possible correlation to the price volatility of other distributed ledger assets.
- The susceptibility of bitcoin spot exchanges to the risk of fraud, manipulation, and other malfeasance.
- The undeveloped and evolving nature of bitcoin regulation.
- The enhanced basis risk in bitcoin futures compared to other types of investment vehicles.
- The possibility of exchanges or FCMs’ imposing other requirements or limitations on bitcoin futures trading.
- Increased regulatory scrutiny of participants in the crypto space. Any of these factors could materially and adversely affect the value of the Fund’s investments.
Renaissance is one of the largest hedge funds in the world. The firms had stated that it is limiting cryptocurrency trading activities to Bitcoin Futures contracts on the Chicago Mercantile Exchange.