GSR is a cryptocurrency trading firm that is making big waves with a new announcement. The firm announced on May 13, 2019 that it will begin offering a new Bitcoin halo option derivative for investors. This derivative allows investors to take a position on an active trading account. Those who invest in the option can make money if the trading account increases in value.
What is the Bitcoin Halo Option Derivative from GSR?
The new Bitcoin investment option from GSR works like this. A trader pays a premium upfront to buy an option on a trading account. The account begins with a value of zero and has a fixed rate of maturity. As the option matures the trader is allowed to make up to ten trades each day. The trading is restricted to the BTC/USD market.
At the end of the trading period when the Bitcoin halo option matures the investor claims any value that the trading account has built from trades. If the investor’s trading results in a loss, there is no additional fee to pay beyond the initial premium.
Many consider this type of option derivative to function similarly to an insurance policy on the trading account. The investor is either going to realize a profit from the account or gain nothing. Of course, the initial premium must be factored into the original investment.
Bitcoin Futures are Gaining Popularity
GSR is not the first cryptocurrency exchange to begin developing futures for Bitcoin. BitMEX announced in April that it was working on its own options platform. CME Group has already had success with its own Bitcoin futures. The firm has done over $1 billion in Bitcoin futures volume since launching its platform.
Bitcoin futures move cryptocurrency one step closer to mainstream financial investments. Giving investors more choices when it comes to cryptocurrency could be a big boost for the crypto markets. Some even speculate that the recent uptick in prices for Bitcoin, Ethereum, and other token platforms is due to an increase in speculation thanks to Bitcoin options and other investment vehicles.
GSR believes that its Bitcoin halo option is an innovative product that stresses consideration of risk management. The firm believes that most investors fail when they have not properly considered how to take a risk when Bitcoin investing. GSR also factors in the volatility of the crypto market when discussing how a Bitcoin halo option can be beneficial.
Investor positions in crypto can be labor intensive. The market is open for 24 hours each day, seven days per week. This means that investors must be constantly aware of the positions they hold. Being able to set stops against losses requires time that some investors don’t have. They want an investment option that requires far less attention to the market. The GSR Bitcoin halo option might be the right choice for these investors.
Speculation is certainly what drives interest in Bitcoin futures. Mainstream investors in stocks and other asset classes are quick to point out that speculation has been the downfall of many investors. Some believe that Bitcoin futures are a risky proposition because they assume an increase in market value under very volatile conditions. Other believe that options are a sound way to mitigate risk and limit market exposure.
Pros and Cons of the GSR Bitcoin Halo Option
GSR would probably be the first to admit that their Bitcoin halo option is not the right choice for everyone. For starters, the price of the premium can be high. This will lock out some smaller investors who do not have the capital to make such a large investment up front.
The price for the upfront premium is $16,530 or $1,653 per BTC. This means that the investor must realize a profit of almost $17,000 from the options trading account before they can expect to see a return. With the volatility of the crypto market this is certainly within the realm of possibility, but there is also the possibility of significant loss.
GSR’s model of algorithmic Bitcoin trading is a plus for some, and so is the reputation of the firm. GSR has been in business since 2013 and uses a proprietary software platform to provide the execution of both simple and complex market orders. The team at GSR has extensive experience with securities that include work at Goldman Sachs and Two Sigma.
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