Earn 16 percent interest or double your money, but pay no attention to the finer details.
Would you sell your bitcoin holdings for twice their current price? Really think about it for a second, deeply. If the bitcoin price reached $17,000, would you calmly cash out, or hope to ride the bull market to even greater heights?
Wherever you land on the spectrum of bitcoin belief[1], the cryptocurrency market is obviously volatile. Prices bounce and dip in every direction. These gyrations make the strange digital asset endlessly fascinating – and maddeningly risky. Introducing financial derivatives into the bitcoin ecosystem adds another layer of complexity, but stakeholders have portrayed the products as stabilizing forces. Earlier this month, even the San Francisco Federal Reserve[2] suggested that cryptocurrency derivatives tamed the market:
"The rapid run-up and subsequent fall in the [bitcoin] price after the introduction of futures does not appear to be a coincidence. Rather, it is consistent with trading behavior that typically accompanies the introduction of futures markets for an asset."
As cryptocurrency investors chase their next high, new-fangled products have quickly been developed to meet the demands of the ravenous crowd. This week, LedgerX introduced "LedgerSavings," which the company described as "an innovative product that uses an underlying call overwrite strategy. The offering targets a 16% per annum yield with a potential 2x exit at maturity in the event BTC doubles from current spot prices."
Via savings.ledgerX.comSource[3]
Descriptions like that are apt to make a customer's eyes glaze over … but the highlighted "16% return / 2x Exit" might tempt some into the purported investment opportunity.
The premise is this: If a customer owns bitcoin and wants to "earn a return," then they can bet that the price of bitcoin will not
