While many cryptocurrency investors are holding their investment with the hope that it increases, LedgerX’s new savings product allows HODLers to earn interest on their cryptocurrency holdings over a three-month, six-month, and nine-month period.
According to Forbes, the Bitcoin Savings product uses a call overwrite investing technique. The call overwrite trading strategy involves a person who has deposited Bitcoin to the LedgerX platform to sell “a call option at a slightly longer date with a higher strike call option.” The idea is to enable investors to know when they can make premiums on the sale of their coins or tokens.
The call overwrite trading strategy is currently a very popular service for LedgerX. The Bitcoin savings product, however, makes this process even simpler, “to its most basic point-and-click functionality,” so less sophisticated investors can also receive US premiums when they sell the option.
The New York-based startup obtained both the CFTC swap execution facility (SEF) license and the derivatives clearing organization (DCO) license. Juthica Chou, the president of LedgerX mentioned that “everything we do requires both the licenses. And a lot of that is intentional because by making it a package deal we can offer a number of services to our customers in a really clear, vertically integrated way.”
LedgerX’s new Savings Product
LedgerX described their Bitcoin savings accounts as:
“an innovative product that uses an underlying call overwrite strategy. The offering targets a 16 percent annum yield with a potential 2x exit at maturity in the event BTC doubles from current spot prices.”
LedgerX expects a large volume of people to use the product since it was initially designed for their existing customers who already use a similar technique in a more complex manner.
As mentioned on Forbes, the new interface is simple and easy to use for retail investors. It allows users to select the rate they’re looking to earn with the number of Bitcoin they hope to make interest on. Investors can then submit the answer to LedgerX’s matching process powering the current Bitcoin options product.
Bitcoin Savings product may not be attractive for everyone
While people often see Bitcoin’s volatility as a problem, Chou believes that it makes it an attractive opportunity to undergo a call overwrite trading strategy. She, however, admits that the volatile nature of the cryptocurrency industry may not be an attractive investment for everyone.
Members of the online Reddit community have however expressed confusion over the product. Reddit user pepe_le_shoe also points out that “offering such an account while the tax treatment is so confusing and uncertain in most jurisdictions seems risky to the bank too.”
Matthew De Silva from ETHNews has even called the product “just another derivative Gamble,” mentioning that “LedgerX inappropriately conveys a limited risk suggesting that people can earn interest through LedgerSavings without having to know anything about derivatives.” He goes onto state that LedgerX should ensure that customers know the risks with their new Bitcoin Savings account and risk of “tying up crypto-capital for long periods of time.”