Medallion Gets SEC Node to Trade Bitcoin Futures on CME
Investment fund powerhouse, Renaissance Technologies, recently stated that it will start trading Bitcoin Futures on Chicago Mercantile Exchange (CME).
While several institutional funds have been struggling, the flagship Medallion fund of Renaissance Technologies has returned 24% year-to-date.
The founder of Renaissance Technologies, Jim Simons, is regarded as one of the shrewdest traders of all time. His company is managing the Medallion Fund, which is seen as one of the biggest hedge funds in the world. From 1999 to 2018, the hedge fund has managed to provide an average return of 66.1% yearly for its investors and stakeholders.
In comparison, the S&P 500, which pulls a lot of weight in the American economy, manages to provide an average gross return of 11.66% yearly. The management of the Medallion Fund is believed to have $10 billion of managed funds, which could be invested in CME.
Bitcoin on the list of possible trading vehicle
The Medallion Fund had already listed one of its probable trading vehicles as Bitcoin. The list was drawn on a brochure the Securities and Exchange Commission (SEC) filed on March 30. According to reports, The Medallion intends trading Bitcoin futures on the institutional platform of CME.
According to the Brochure, “The Medallion Funds are permitted to enter into bitcoin futures transactions.”
Medallion starting on a low key
Medallion highlighted the risky investment profile of bitcoin. According to the hedge fund, this type of investment is significantly and substantially expected to lead to a great loss of capital compared to other types of investments.
Apart from the basic volatility risk, the firm has also pointed out 11 other risks associated with an investment in Bitcoin, including fraud and regulatory uncertainty. Since CME was established in 2017, it has provided an excellent illiquid platform for investors and hedge funds to trade Bitcoin.
The main reason is the fact that most Bitcoin volumes seem to accrue on platforms such as Binance and BitMEX, which have better margin requirements. If Medallion picks CME for Bitcoin trading, it could halt the hedge fund’s ability to trade Bitcoin more efficiently.
At the time of writing, if Medallion takes a 1% position size, it will make up to 50% of the available Bitcoin futures open interest on CME. That’s why many experts in the crypto community feel Medallion should be trading far more Bitcoins on a larger exchange. But it seems the hedge fund wants to start cautiously, knowing the level of risk inherent in trading Bitcoin.
Despite the slow start, the venture into the Bitcoin market is a welcome development in the cryptocurrency development. It indicates the increased level of interest the mainstream financial sector is attaching to the cryptocurrency industry.
Medallion’s foray into the Bitcoin market coincides with the return to form of Bitcoin, following few weeks of reduced participation.