Applying Stock Market Features To Cryptocurrency

[MNbag]

This is how a fund may operate

1. The Bitcoin Fund raises its funds from investors in return for a share of the scheme's profits.
2. The Fund would then buy up assets that would go up in value (like NFTs and cryptocurrency projects)
3. As time passes, the value of those assets should rise, increasing the value of the Fund's shares.
4. The Fund would then sell off the assets, giving the investors a return in the form of dividends while allowing the Fund to repeat the cycle.

This model is inspired by REITs (Real Estate investment trusts) which make their investors a return via dividends and capital growth.

It may be flawed due to the volatility of cryptocurrency projects and the relative difficulty of verifying whether a project is legit.

Maybe the Bitcoin Fund could be backed by something more trusted like a Bitcoin reserve or even gold in the event of major losses
like a project turning out to be a scam or the crypto market going into a fall in demand.

 

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[mk4]

That's called a decentralized autonomous organisation or "DAO" in the Ethereum DeFi side of things. There have been a good amount of those kinds of cryptocurrency groups for a while now that has appreciating and yield-producing NFTs in their governance treasuries. e.g. Yield Guild and BlackPool

[Ucy]

This is how a fund may operate

1. The Bitcoin Fund raises its funds from investors in return for a share of the scheme's profits.
2. The Fund would then buy up assets that would go up in value (like NFTs and cryptocurrency projects)
3. As time passes, the value of those assets should rise, increasing the value of the Fund's shares.
4. The Fund would then sell off the assets, giving the investors a return in the form of dividends while allowing the Fund to repeat the cycle.

This model is inspired by REITs (Real Estate investment trusts) which make their investors a return via dividends and capital growth.

It may be flawed due to the volatility of cryptocurrency projects and the relative difficulty of verifying whether a project is legit.

Maybe the Bitcoin Fund could be backed by something more trusted like a Bitcoin reserve or even gold in the event of major losses
like a project turning out to be a scam or the crypto market going into a fall in demand.

That could work well with businesses that's sustainable, useful and consistently generate enough profits. You'll be taking big risks with funds invested in NFT or crypto that's not sustainable and consistently profitable

[The Sceptical Chymist]

4. The Fund would then sell off the assets, giving the investors a return in the form of dividends while allowing the Fund to repeat the cycle.

If you have to sell off assets in order to pay out dividends, that isn't going to be sustainable unless there's always new money coming in.  Unless the fund invests in something that pays income, I don't see how this would work.  REITs pay out hefty dividends because there's always income coming in in the form of mortgages and rent (if I'm not mistaken; if I am, someone please correct me).  That income is then paid out to investors as a dividend.

What you're talking about is selling assets and using the capital gains to pay the dividend, and that's assuming there are any capital gains to begin with. 

[Kyraishi]

This is how a fund may operate

1. The Bitcoin Fund raises its funds from investors in return for a share of the scheme's profits.
2. The Fund would then buy up assets that would go up in value (like NFTs and cryptocurrency projects)
3. As time passes, the value of those assets should rise, increasing the value of the Fund's shares.
4. The Fund would then sell off the assets, giving the investors a return in the form of dividends while allowing the Fund to repeat the cycle.

This model is inspired by REITs (Real Estate investment trusts) which make their investors a return via dividends and capital growth.

It may be flawed due to the volatility of cryptocurrency projects and the relative difficulty of verifying whether a project is legit.

Maybe the Bitcoin Fund could be backed by something more trusted like a Bitcoin reserve or even gold in the event of major losses
like a project turning out to be a scam or the crypto market going into a fall in demand.

Don't we already have this?

There are plenty of listed companies and/or funds that have bought into bitcoin and other projects. Best example of this is Microstrategy and also GBTC.

Not a fan of integrating random elements of the old economy into these bitcoin investment vehicles. Just makes zero sense to me how you would willingly sacrifice liquidity and discretion for apparently nothing in return at all.

[TheUltraElite]

Taken in account the sheer hype that surrounds NFTs and similar extremely speculative stuff, the risk management of such a fund is not going to be a piece of cake. If it was only for bitcoin, then the risk may be less.

Maybe the Bitcoin Fund could be backed by something more trusted like a Bitcoin reserve or even gold in the event of major losses
like a project turning out to be a scam or the crypto market going into a fall in demand.

Why would someone trust such a fund? If someone wants to buy NFTs they should do it on their own. Then they would have the freedom of selling it whenever they wish, thereby reducing the risk that such assets face. Face it, NFTs are short term high gain stuff, they are not for long term.

This would also need backing from governments, a problem of taxation also would exist - if they are selling assets. Quite a lot of problems to deal with. I dont see any "startup" taking such a bold step.

On the other hand, ETFs seem to be getting a renewed attention again.

[teosanru]

This is how a fund may operate

1. The Bitcoin Fund raises its funds from investors in return for a share of the scheme's profits.
2. The Fund would then buy up assets that would go up in value (like NFTs and cryptocurrency projects)
3. As time passes, the value of those assets should rise, increasing the value of the Fund's shares.
4. The Fund would then sell off the assets, giving the investors a return in the form of dividends while allowing the Fund to repeat the cycle.

This model is inspired by REITs (Real Estate investment trusts) which make their investors a return via dividends and capital growth.

It may be flawed due to the volatility of cryptocurrency projects and the relative difficulty of verifying whether a project is legit.

Maybe the Bitcoin Fund could be backed by something more trusted like a Bitcoin reserve or even gold in the event of major losses
like a project turning out to be a scam or the crypto market going into a fall in demand.

 

I don't know if you are unaware of it or what but we have a lot of Defi projects which work pretty much this way, but the only major difference is that there isn't any single fund manager which decides where to invest the whole fund instead it's based on a decentralized consensus. In fact, we have even better models now which focus on yield farming which means investing directly where there is most yield, therefore, ensuring maximum profits, however, the caveat in cryptocurrencies is the impermanent loss, you might gain double times the BTC, for eg. you might get 2 BTC after investing 1 but the problem is if the price of BTC falls thrice then the returns are pretty much useless.