How Will the Crypto Markets Affect My INDX Investment?
INDX was designed to be resilient to the volatility that deters many would-be crypto investors. Instead, it offers an alternative way to make the highest returns within this exciting new asset class.
Whilst our core platform procures Masternodes and continuously collects the rewards for our investors, our hedging strategy helps protect the fund from downturns in the market. Maintaining this delicate equilibrium is our responsibility to our investors and we carefully monitor movements in the crypto market with a combination of algorithmic and human verifications as part of our endeavour to perform in both bull and bear markets. You may ask, as an investor, ‘what sort of yield can I expect from INDX?’. In this article we will explain what affects the annual yield and what type of returns we hope to achieve.
INDX is designed to excel during a bull market for a number of reasons. Firstly, the value of the INDX tokens sold to raise capital for staking in the Masternodes should increase in value with an upward trending crypto market. Using Dash as an example, the 1,000 DASH tokens required as collateral for a Masternode would have cost you $100,000 in May 2017, before the bull run started. At its peak, eight months later, those same 1,000 DASH would have been worth a staggering $1.6 million.
The second factor to consider is that Masternodes reward in native tokens, meaning that your Dash Masternode would have been churning out between a quarter and a half of DASH every day during that eight-month period. This would have resulted in additional earnings of 60–80 coins. This equates to approximately $50,000-$75,000 on top of the value of the token.
If you consider INDX’s model for staking in multiple Masternodes, you can imagine that with every round of reinvestment, the net asset value (NAV) of the INDX token increases, while simultaneously reaping greater rewards from the Masternode portfolio. Suddenly it makes more sense why owning INDX tokens could be far more beneficial, and far less complicated than owning cryptocurrencies in a highly volatile money market.
To minimize losses due to price volatility, the INDX fund is designed to weather the storms of bear markets. The crypto “winter” of 2018/19 was a particularly taxing time for both Bitcoin and alt coins, most of which saw a 90% reduction in their value. This proved costly for common ‘buy and HODL’ investors. In contrast, INDX token owners can feel more secure about their investment with our hedging strategy which helps protect against losses incurred through our Masternode investments. By taking a short position on Bitcoin in times of market negativity, combined with our approach of divesting ourselves of Masternodes that are no longer profitable, we aim to outperform the market throughout downturns.
In late 2018 (and early 2019), we tested our hedging strategy over a six-month period on a trial portfolio. Over the 6 months, the hedging strategy managed to generate returns that covered 50% of the portfolio’s losses, meaning that together with the rewards collected over that period, INDX outperformed Bitcoin and most cryptocurrencies in the market during a period where Bitcoin fell 40%. The yield of the portfolio equated to 53% annualized, which compares nicely to the 44% indicative yield that was obtained on a much larger portfolio via a Masternode snapshot for our INDX whitepaper.
Many of our investors have asked us to detail what kinds of returns they might earn from their investment in the INDX Masternode portfolio, particularly given the ups and downs in the crypto market. We hope to have shed light on how INDX was designed to outperform the market both in a bull market and bear market.
We may not get you that Lambo, but we’d like to keep you in leather seats and fluffy dice for many years to come.
