Topic: [Direct] BTC Growth - Forex Volatility Focus - page 3. (Read 11206 times)

Many thanks, and a belated Happy Thanksgiving to you as well. 

Several folks have now registered their interest in participating in the fund, despite the naturally quiet day yesterday. (Unfortunately, the announcement itself has now slipped off the front page of the Securities section, but hopefully those interested will still get to hear about it via this thread instead.)

Awesome!  Good luck Greg and happy thanksgiving!

I've now posted a separate announcement that registrations of interest via the BTC Growth site will be open for the next week:

https://bitcointalksearch.org/topic/btc-growth-forex-volatility-focus-initial-private-offering-details-350281

If we allow "identity" to encompass non-real world identity -- say, a pseudonymous user name on a discussion forum -- then sure, you might at a stretch say there's some sort of quasi-accountability there, in the sense that behaviours become associated with the pseudonymous "identity" rather than just being chalked up to an entirely anonymous entity.

But to the extent that the sort of accountability that I think people will be concerned with -- especially the large set of people who have lost money to unaccountable, pseudonymous operators wearing badges of "trust" bestowed by the Bitcoin forum software -- is real world accountability, it seems to me pretty darned difficult to achieve that without real world identity.

There's a world of difference between knowing, for example, that a person with the pseudonymous "identity" of "ExampleScammerDude" is responsible for stealing a bunch of cash, and the real person behind "ExampleScammerDude" being in any way accountable for having stolen a bunch of cash.

Identity does not have to be legal name or real world.

I really appreciate the situation and the impact that these types of restrictions have on most of us.

In the current climate, however, at least as far as I can tell, a direct fund provider can either be identifiable and accountable, or a direct fund provider can be be open to all -- but not both at the same time. Find a direct fund provider who has come clean about their own identity, is accountable for their actions, and who doesn't place restrictions on participation, and you've found a ticking time bomb. Find one that is able to remain open to all by insisting on their own anonymity, and you'll find one that is ultimately unaccountable -- since ultimately, without identity, there is no accountability.

That very problem is something to ponder when reading the spate of new "fund" announcements from would-be currency arbitrageurs. (The other thing to ponder about those is the apparent universal failure of their promoters to grasp that arbitrage is, by definition, risk-free profit. To the extent that a supposed "arbitrage fund" is not risk-free, it is not an arbitrage fund at all.)

I already read that and it states:

I don't think I am any of those.

1. Nope I am a person
2. Nope
3. Nope
4. Nope, I guess I could make my own security trading company?
5. Nope, I guess I could start my own business?
6. 1$ Million dollars, I wish
7. agaian I wish
8. again I wish

Based on that criteria I do not qualify to invest in your fund. I really would like to but I do not see any way I qualify under any of those 8 options.

An informational notice from the US Securities and Exchange Commission is available here, summarising the definition of the term 'accredited investor' from Rule 501 of Regulation D. Prospective participants in the prospective fund who are US persons are asked to self-certify their status as accredited investors prior to participating.

So as a US citizen I would need 1 million in net assets to invest in this fund? Am I reading that correctly? I would really like to invest but there is no way I have that money sitting around..

Not to worry -- the subscription fee occurs only once, in connection with the manual account setup, and without any additional fees for rollovers.

You realise the PIF is much safer, of course? 

We'll see...

The question has even been raised as to whether someone could participate in the fund and operate a pass-through to an exchange, and of course they could do so. However, I think the recent shenanigans with Havelock and their "investment fund" have left many people even more skeptical about becoming involved with exchanges.

Hopefully this will garner enough interest to make the fund a reality.  Also, I totally agree about people being fed up with the bitcoin asset market.  After the chaos of the last couple of months, this new venture of yours is the only asset I've even thought about investing in.

Many thanks for your kind words and encouragement.

Judging by the BTC prospective participants have been talking about placing in the prospective new fund -- just going by emails and the occasional PM -- it's not clear yet whether there will be sufficient interest to go ahead with it, but we'll see.

(I know many people are still struggling to get their capital back from Ukyo, Graet, TF's fund and others, not to mention the aftermath of TF's claimed "hack"; meanwhile, many people are still smarting from losses when the broader market tanked. I think folks in general are pretty fed up with the Bitcoin asset markets as a whole -- and I can understand that.)

Awesome!  Good luck with this new venture Greg!  I have nothing but good things to say about how honestly and competently you handled BTC-Growth on BTCT.CO and wanna be first in line when this thing gets ready to launch.

Cheers!

Several folks have been in touch to ask variations on the same underlying question -- namely, whether I'll be offering another fund similar to the original BTC Growth, one providing exposure to listed equities, derivatives, listed debt, and so forth.

I'm observing carefully, but at the moment, the space of opportunities in equities or debt offering what I would consider an attractive balance between risk and reward is fairly sparsely populated. In addition, the lack of equity options on exchanges like Havelock makes it all but impossible to hedge individual position risk effectively. Thus, if I were to offer a similar fund, in practice it would currently be heavily skewed toward forex derivatives anyway, given the relative paucity of attractive alternatives elsewhere.

The recent movements in the value of BTC against other currencies have opened up trading opportunities which, in my view, far exceed what is available from individual equities and debt -- at least for the time being.

Notably, exposure to forex derivatives was a central part of the original BTC Growth fund almost from day one, and that exposure provided an effective counterbalance to offset the fund's exposure to listed equities and listed debt.

28 November 2013

The document Risk Factors - General was updated to include a section on rule changes on exchange platforms.

26 November 2013

The documents Risk Factors - General and Risk Factors - Funds Involving Derivatives, Including Forex Futures have been updated with a section on risk tolerance and diversification (for the former) and sections on distinguishing forex futures activities from forex arbitrage and on diversification and the risk of derivatives (for the latter).

25 November 2013

The original full document has now moved to the BTC Growth site itself, along with the full terms and conditions and risk factors.

I'd like to share for discussion an initial draft for a new forex-focused fund which my company is considering operating under the BTC Growth umbrella.

I've now removed the original full document, retaining here only a quick history of the original BTC Growth Fund (now closed), the Executive Summary for the proposed new fund, information about the fund provider, and the brief FAQ. The full draft document is now available here on the BTC Growth site itself:

BTC Growth - Forex Volatility Focus

Updates to this post will be noted in the post immediately following this one.

For those familiar with the original BTC Growth fund, the principal differences distinguishing the original fund from the new are:

• The fund will focus on forex volatility, with no direct exposure to Bitcoin-denominated equities, equity options, or listed debt, and with correspondingly limited diversification.
• The fund will operate for 3 months at a time, with an option for rollovers into future periods.
• The fund will operate on a private, direct basis on behalf of a small set of participants strictly limited in terms of their total number, their minimum level of participation (5 BTC) and, for US or UK participants, their self-certified status.
• The fund will require a one-time 0.1 BTC subscription fee.

This forum post is not an offer to sell, nor a solicitation to buy, any security; nor is it an invitation to participate in this strictly limited, small private fund.

Questions, comments, and feedback are very welcome, though!

Background: Summary of the Original BTC Growth Fund

The original BTC Growth fund was a hedge fund-style service provided to BTC-TC from mid-August thru mid-October 2013. (See the BTC-TC listing here or the original forum announcement and discussion here.) The fund offered exposure to Bitcoin-denominated debt and equity, and it employed derivatives to hedge risks associated with this exposure as well as to generate returns independently. The fund also provided capital to exchanges, and it constructed positions designed to exploit volatility in the value of Bitcoin versus other currencies.

Within around 30 hours of launch on BTC-TC, the original fund was capitalized with 2000 BTC.

As we all know, the broader market for Bitcoin-denominated assets cratered not long after the fund's launch, with many individual equities falling by 75% or more during the following months.

For participants in the original BTC Growth fund, however, the benefits of operating as a hedge fund-style offering rather than a "buy into a rising market and hope everybody wins" offering became apparent very quickly. While BTC-TC's closure announcement marked a temporary low point for the fund's value, it then climbed sharply, regaining much of its lost value within just days of the announcement. While other funds which remained in operation continued to squander shareholder value, BTC Growth completed an orderly liquidation and returned capital to participants in mid-October, its net asset value per virtual 'share' having decreased by a total of 11.6%.

From initial offering to final return of capital, this loss -- small in relative terms -- means that during the period, the fund appears to have outperformed all other comparable funds and nearly all individual Bitcoin-denominated equities by a wide margin.

Executive Summary of BTC Growth - Forex Volatility Focus

Operating as a private hedge fund-style service, the BTC Growth - Forex Volatility Focus fund aims to achieve modest capital growth denominated in Bitcoin.

The fund's primary focus will be the construction of moderately leveraged positions designed to profit from volatility in the value of Bitcoin versus fiat currencies or other cryptocurrencies. The fund may also provide capital to exchanges, and it may engage in limited lending directly to businesses or individuals active in the Bitcoin economy.

The fund is not securitized, it is not exchange traded, and individual stakes in the fund are not transferable. Participation in the fund is not available to the general public and will be administered on a strictly limited private basis directly with individuals who have registered an interest with the provider.

The fund is intended to operate for an initial period of 3 months, subsequent to which each participant's capital will be returned to them unless 1) the fund provider elects to repeat the offering via a follow-up fund into which participants' capital may be rolled over, and 2) that participant has specifically indicated at least two weeks prior to the fund's liquidation that they would prefer their capital to be rolled over.

Being a manually administered private fund which is not traded on an exchange, the fund will be limited to 20 or 25 total participants; participation in the fund will be available from a minimum level of 5 BTC per participant.

The fund employs a once-only subscription fee of 0.1 BTC and the 'two and twenty' fee structure common to the hedge fund industry, subject to a high-water mark. From the subscription fee, 10% will be refunded as part of the fund's security protocol.

This document should be read in conjunction with the fund's Risk Factors and Terms and Conditions, provided separately.

This fund is unsuitable for potential participants for whom the full documentation is in any way 'TL;DR'.

This documentation is not an offer to sell, nor a solicitation to buy, any security; nor is it an invitation to participate in this strictly limited, small private fund.

About the Fund Provider and Fund Manager

The fund will be provided by Mulhauser Consulting Ltd., a company incorporated in the United Kingdom eleven years ago and which has been in continuous operation ever since.

The fund will be managed by Dr Greg Mulhauser, the company's founder and Managing Director. In other areas of its business, the company works with a team including both volunteers and paid employees and consultants, but for the purposes of this service, fund management will be handled entirely by the Managing Director.

With educational background in mathematics, philosophy, and later in mental health, Dr Mulhauser has worked at the Pentagon, UK universities, and telecommunications giant BT. Originally employed at BT as a research scientist in cognition, complex systems and biologically inspired computation, he was also responsible for curiosities such as the Lattice of Extended Turing-Style Automata, which he designed as a novel computational architecture for implementation with FPGAs in a fashion similar to cellular automata. He later left the Complex Systems Laboratory for business strategy roles and advised on corporate venturing and on derivatives strategies associated with M&A projects. He contributed to the company's Asian portfolio management, assessed flotation and alternative demerger options for its wireless operation, and developed strategy for its £500 million indirect channels business. In 2002, he left a strategic partnering role in security and mobile technology to found his own firm, securing consulting contracts ranging from ground-based air defence systems at Northrop Grumman and the UK Ministry of Defence to internal communication at the UK's national Police IT Organisation (PITO). A British Marshall Scholar and Fellow of the Royal Society of Arts, Mulhauser lives in Devon, England with his wife and daughter.

Additional information about the fund manager specifically regarding his investment background is available from one of the newest sites in the company's portfolio, Psychological Investor.

Potential participants can get something of a flavor of the fund manager's general approach to investing from the same site, along with a small selection of his recent articles specifically about the Bitcoin economy.

For further background, the archive section of the Mulhauser Consulting site also includes work on business strategy development and even older research work on topics like algorithmic information theory, computability and recursion theory dating back to the 1990s. (Greg Chaitin, who as a teenager independently invented algorithmic information theory alongside Kolmogorov and Solomonoff, described the fund manager's first book as "One of the first serious applications of algorithmic information theory; fun to read!")

Posts by the fund manager on the Bitcointalk.org forum can be found here.

As with ordinary hedge funds, in which the General Partner typically invests alongside Limited Partners, the fund manager intends to participate in the fund, helping to ensure alignment between his interests and those of the fund. Note, however, that this strictly limited, small private fund is not structured on the General Partner/Limited Partnership model.

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Mini FAQ

Having dispensed with the lengthy Not-So-FAQ of the original BTC Growth fund, here are brief answers to a few questions I expect would otherwise have come up:

Q: Why isn't this going to be listed on an exchange?

A: I'm always open to suggestion, so if and when someone comes up with a credible and reliable exchange platform which is fully accountable both to its users and to relevant laws and regulations, I'll be very keen to learn about it. (Since I take it that without identity, there is ultimately no accountability, one prerequisite for an exchange platform which is fully accountable would be coming clean about the identities of all those involved.)

Q: Even if it's not going to live on an exchange, why isn't this securitized/tradable/transferable/more convenient?

A: From a regulatory standpoint, offering publicly tradable assets is a whole different kettle of fish than offering a private Bitcoin management service. This fact might figure into the decision by many issuers of more conveniently tradable securities to remain unaccountable by insisting on anonymity. For my part, I think anonymity for individual consumers is great, but for profit-making businesses setting out to offer Bitcoin-based services, I think it's more important to be accountable.

Q: Why are there limits in place on the number of participants and on the minimum participation level for each?

Q: Being a manually administered, direct service, I cannot feasibly manage a large number of participants each with relatively lower levels of involvement in a fund. The UK regulatory framework also treats funds differently according to their number of participants, and it treats funds differently when they are restricted to certain types of participants.