The bitshares ecosystem is on fire with the announcement that the development of a new DAC (Decentralized Autonomous Corporation) + Bitassets (Assets under the Bitshares SuperDAC/Brand), ie Cryptohedge.io and CFSassets is coming online.
Lets cut to the skinny, what is going on? Basically Cryptohedge.io is releasing market making bots and is going to back it up with the asset of bitshares/bitgold and Gold Futures (the last one having counterparty risk) Now dont get worried just yet about Gold futures having counterparty risk, it is a highly liquid and a multi-multi billion dollar market as you can see here http://www.cmegroup.com/trading/metals/precious/gold.html which shows a market of over 100,000 traded in the day (each contract found here http://futures.tradingcharts.com/specs/ is 100 ounces or roughly $120,000 US Dollars per contract which comes to over $12 billion dollars traded in the day (roughly $20 billion and just in the CME Group but whose counting really).
Now the negatives out of the way, is this actually a good investment? Most likely yes because they are performing arbitrage in a market that has no real competition as of yet. Furthermore, as long as there is a market they will be able to skim off a little bit to constantly increase there NAV (Net Asset Value).
How good can these bot/arbitrage mechanisms be in terms of profitability? Well basically the best market making or arbitrage firm in the world which uses the power of mathematics and physics is https://www.rentec.com/Home.action?index=true . The guy that started it James Simon is worth $14 billion dollars and is known as the “Quant King,” he really is. With returns after commissions over 35% – 40% a year meaning hes making 45% – 55% a year. It is true he is not just an arbitrager and that he uses the power of his mathematics University Ph.D teaching degree as well as trend following, special situations, and most likely high frequency trading (he is most likely doing this in his alphabet soup of technique.)
Anyways sorry for getting off topic but if they dont get hit by a black swan and if the market for bitgold/bitcoingold/goldfuturesgold is big enough and more competitors dont come in (there is probably room for 2 – 4 big firms in the future). We could see some serious gains, upwards of 20% a year. Truth be told they may have a few 100 – 200% years and I may be wrong and every year for 10 years they could make 75%+ bringing there asset into the multi billions, much like Renaissance Technologies LLC $25 billion under management. These guys could do it too, it will come down to there ability. We will have to wait and see.
I will keep you updated with developments and you can follow me below on twitter or like my page on facebook to keep updated
You can read the Prospectus for CFSgold here http://cryptohedge.io/wp-content/uploads/2015/02/Prospectus.pdf
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