Stone Ridge Shutting down Bitcoin Futures Fund, Returning Money to Investors
Stone Ridge’s Bitcoin Futures Fund suffers losses triggered by market downturn and competition.
Stone Ridge Asset Management, a global asset management firm based in New York, announced Monday plans to liquidate and dissolve its Stone Ridge Bitcoin Strategy Fund with the Securities and Exchange Commission (SEC).
According to an SEC filing, Stone Ridge said it expects to liquidate the Bitcoin Futures Fund next month, October 21, and from November 3, shares of the funds will not be available to purchase.
"The adviser will reduce the Fund to cash in preparation for the Liquidation Date. Proceeds of the liquidation of the Fund are expected to be distributed to shareholders in cash. The liquidation proceeds are expected to be distributed promptly following the Liquidation Date in full redemption of each shareholder's shares of the Fund," the filing said.
The shutdown comes as the Fund launched in late 2019 with a strategy to invest in Bitcoin (BTC) via futures contracts, failing to find interest from investors. Currently, the Fund holds only about $2.3 million in assets under management.
The Fund likely faced obstacles not just from the Bitcoin bear market but also SEC approval of several competing Bitcoin Futures ETFs, at least some of which charged fees less than the Stone Ridge product.
Stone Ridge was founded in 2012 by current CEO Ross Stevens. In 2017, the founder launched the Bitcoin-driven New York Digital Investment Group (NYDIG), where he serves as executive chairman.
Stone Ridge Asset Management and NYDIG are both Stone Ridge Holdings Group subsidiaries. NYDIG is a full-service, vertically integrated Bitcoin-only financial services company.
Market Struggles to Recover
This year, Bitcoin ETFs have not been as good investments as expected. And the same scenario is being seen in stocks in the S&P 500 (such as Netflix (NFLX), Under Armour (UAA), Ceridian HCM (CDAY), Caesars Entertainment (CZR), Epam Systems (EPAM), among others) whose performance also turned worse this year.
This year, inflation crises have tremendously impacted the economy and the stock market globally. The $822.9-million-in-assets ProShares Bitcoin Strategy ETF is one of the major ways most investors use ETFs to gain exposure to cryptocurrency.
As of June, the largest Bitcoin ETF, ProShares Bitcoin Strategy, was down 53.6% this year. Such discouraging performance shows the underappreciated risk of the new asset class because most investors were not prepared to face hard questions like What would happen during a market crash? Or What would happen if a crypto exchange company went bankrupt?'
And that makes total sense, as it tracks the price of Bitcoin. Bitcoin price itself is down more than 50% this year.
ProShares Bitcoin Strategy is not just the largest Bitcoin ETF that is suffering. The entire crypto ETF universe is not doing well this year.
And the ETFs that own big positions in Bitcoin-based companies are underperforming. The First Trust SkyBridge Crypto Industry and Digital Economy ETF, which puts a bigger piece of its portfolio in Coinbase than any other ETF, is down 69% this year.
Despite the low performance of ETFs, the industry is still pushing for the launch of more Bitcoin ETFs. Several firms have filed with the SEC to get approval to launch their spot Bitcoin ETFs.
Grayscale has been pushing for the SEC to approve their request to convert their Bitcoin trust into a spot ETF.
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