What Are STFs, and Should you consider Investing?
Smart Token Funds or STFs were created by WazirX as an alternative to mutual funds, the key difference being that you are investing in cryptocurrencies. This was devised as a way to let early investors in who were not well aware of the industry. The landscape of cryptocurrencies since 2 years ago when it was launched has drastically evolved and so have STFs.
What are STFs?
WazirX, India’s largest Crypto Exchange created STFs(Smart Token Funds) to let investors fund traders with experience in the Crypto space and profit off their skills. This is done by purchasing a smart token created by experienced managers who will control the portfolios of investors.
Smart tokens let your portfolio occupy a place in an avid trader’s larger collection of portfolios in exchange for cryptocurrencies. Although WazirX permits investors to buy and hold many smart tokens at a time, the limit on the volume of Smart Tokens is at the minimum 5 USDT(Tether) and at maximum, 100,000 USDT.
If the cryptocurrencies constituting the STF perform well, then so does the smart token which can be sold off with the help of sell orders. On selling, the currencies that comprise the smart token go straight to your WazirX wallet. The platform, however, restricts sell orders to be executed only once a day, a possible reason for this could be to deter people from “pump and dump” schemes,” which have become quite rampant these days.
Investors receive a payout only when profits are generated by the STF, which will be liquidated and provided to you, retaining only your original investment.
More on STF Traders!
STF traders have to undergo strict KYC regulations to be able to manage the portfolios of investors however, WazirX chooses not to publicly disclose any information regarding these traders, which does make it quite challenging to choose the right one for you. The only data available to you is a brief history of their investments along with their strategy.
In addition to this, you can monitor the performance of their token and how much time has passed since its creation. It is also important to note that the initial price of the smart token is set by STF managers, which doesn’t influence the performance of the fund in any shape or form.
The platform also separates the trader's and investors' funds to avoid confusion, in addition to not allowing traders to use investor accounts for deposits, withdrawals, and placing P2P Buy/Sell orders.
Also, traders are allowed to purchase their own STF and join WRX Mining and Referral Commission programs.
WazirX is working on compensating traders appropriately and charging investors correctly. Though the project has still not developed completely, it is being polished to make it more transparent.
Do current market trends favor STFs?
Currently, WazirX lists over 15 STFs and intends to keep adding more as people continue to scour for their desired trader with an ideal portfolio.
XOOM, one of the oldest STFs on the WazirX market, has a very straightforward strategy to earn profits. The manager also is trading for about 4 years which adds to his expertise. This also highlights the fact that the platform is looking for people who have the right skills and experience to show rather than a more descriptive profile.
It is also quite coincidental that the trader has almost all of his portfolio in WRX, WazirX’s native token, and is the highest valued STF on the platform. Like most derivatives of cryptocurrencies, STFs also suffer from frequent volatility. This doesn’t really make them a necessarily safer alternative to investing directly in cryptos. Another important thing that should be noted is the use of Tether(USDT), which has recently become quite controversial. This is more so because of past allegations against people in power misusing it. Tether is also a stablecoin which makes it more important to financial institutions.
However, the fact that it does trade at such a high price makes it more engaging to investors looking to take big risks for big rewards. Not to forget that as an investor, you have a very minor role to play. All in all the concept is great for people in India who are looking for assistance in the Crypto industry that has just recently been accepted.
