SIP20 is an autonomous crypto-only index fund that tracks the top 20 cryptocurrencies. SIP is the Arbitrx fund’s token, and represents an investor’s share in the fund (NAV). Token-holders are able to liquidate the SIP token for their share of the underlying assets.
Why did we create SIP20?
Cryptocurrencies have ushered in a new paradigm of financial freedom and self-reliance. A diversified, low-cost cryptocurrency investment option should be available to all.
What makes SIP20 different from a regular index fund
Cryptocurrencies afford us an opportunity to create the world anew. So why are we installing intermediaries and building bloated platforms? By going directly to the end-user as a cryptocurrency itself, SIP20 gives investors the ability to sell or exchange their tokens at will with no exit fees, no platform fees, and no broker fees.
We go directly to the end-user by operating as a token
If fund management platforms need to take a cut, their token-holders need to take a cut and the fund managers using the platform need to take a cut — how much will be left for the investor? SIP20 disrupts this nascent industry by giving token-holders their fair market return.
The cryptocurrency market is rapidly maturing, and there are hundreds of cryptocurrencies for investors to choose from — with more added daily. Choice paralyzes: choice adds cost, complexity and the need for advice. SIP20 eliminates this complexity for the new crypto investor and offers value to the crypto veteran.
Cryptocurrency diversification in a proven structure
One is now able to invest in the top 20 cryptocurrencies by holding a single token. The top 20 changes over time, and so will SIP20’s holdings — this weekly rebalancing process mitigates risk and volatility. The underlying assets are passively managed, with an index strategy, and there are no expensive legacy banking costs.
As a trustless binance smart chain token, no human interaction, judgment or emotion is involved in the investments — just autonomous adherence to a method judiciously determined via data science. Our white paper presents this method in detail. Cryptocurrencies are volatile, and a fund should leave no room for guesswork.
Unique smart function sets a price floor
SIP20 will utilize 90% of the SWAP proceeds to buy the underlying crypto-assets. The tokens can be liquidated with the base value of the token at the time of liquidation allowing SIP token-holders to cash out for this underlying asset value at any time.
Liquidation is fundamental to what makes SIP20 groundbreaking: it protects the token price and ensures it is never able to fall below the token’s share of the publically audited underlying assets. These tokens will be resold on exchanges so that the overall fund value does not decrease over time.
The rise of the index fund
The average citizen prepares for retirement and often solicits advice from a broker or other investment professional. Usually, an actively managed fund is promoted and recommended to such people even though ETFs take up to 2.5% in fees, and mutual funds up to 20%, regardless of whether they generated a return, beat inflation or even their own benchmark index.
For the five-year period ending in 2015, 84% of large-cap funds generated a return less than the S&P 500. In the 10-year period ending in 2015, 82% of large-cap funds failed to beat the index. The odds of picking a winning fund manager are also low: studies show that irrespective of past performance, future performance is virtually random.
Who is protecting consumers from high fees that progressively erode the hope to retire? High fees mean high commissions and thus these are the products that are sold to people seeking advice from finance professionals.
Index funds have outperformed the average actively managed fund since their inception, but since they are low-fee funds (0.5% or less of value per annum), they are not as actively promoted.
Index funds have beaten the average actively managed fund since inception
Index investing has seen exponential growth among investors since John Bogle’s Vanguard Group launched the first index mutual fund in 1976. Passive investment through an index has proven to be a tremendously successful form of investment — the low costs involved in operating an index fund has allowed them to outperform the majority of active managers across market and asset types.
Simply, an index fund allows investors to track the market index — the underlying trend behind the selection of assets without being reliant on a particular one. There is no active trading apart from the occasional rebalancing of assets based on predetermined rules. Rebalancing allows the fund to consistently track the mean market performance even if some of the original holdings fall out of favor.
The SIP20 index-fund would be the first of its kind — the SIP token is bought with crypto and holds only cryptocurrencies. It will bring stability into the crypto ecosystem, boosting liquidity and providing a suitable option for those who previously felt it was too risky to invest in a single technology.
“I believe the long-term results from this policy will be superior to those attained by most investors, whether pension funds, institutions or individuals, who employ high-fee managers.”
-Warren Buffett on putting 90% of the amount he is leaving his spouse into index funds
Index funds mean lower fees and higher returns
We believe the recent appearance of active crypto funds with high management fees (3%+ p/a), exit fees and the inability to trade fund tokens between investors are contrary to the core spirit of crypto — control over your assets and the freedom to move them at will. These funds attempt to exploit the nascent market because of a lack of competition. SIP20 can charge fees of only 0.5% P/A due to its innovative set-up, with no legacy banking costs and full automation.
The Financial Research Corporation evaluated the predictive value of different fund metrics such as a fund’s past performance, Morningstar rating, alpha, and beta. In the study, a fund’s expense ratio was the most reliable predictor of its future performance, with low-cost funds delivering above-average performance relative to the funds in their peer group in all of the periods examined. Morningstar performed a similar analysis across its universe of funds and found that, regardless of fund type, low expense ratios were the best predictors of future relative outperformance.
Motivation for issuing no further SIP tokens post-SWAP
When a fund has stellar performance, it attracts substantial amounts of new money. A manager will most likely have to use that new money to “chase” a relatively small group of coins. This buying pressure can drive up coin prices, forcing the fund manager to pay higher prices than would otherwise be the case. This affects all token holders by reducing the fund’s future gains and is our motivation for a closed-cap fund.
SWAPs taking advantage of speculators
There is a worrying trend of initial coin offerings (SWAPs) with minimal technical merit attempting to dazzle the potential investor with obtuse platform offerings and a white paper consisting of convoluted mathematical formulae that describe only very basic interactions and perform no function other than to appear complex. White papers are often rushed to market with not much more than a pie chart describing the way the funds will be spent.
As a finished product, SIP20 offers value now — not based on selling a potential future income stream that may never materialize.
We aim to reverse the trend by using 90% of SWAP funding to buy the underlying crypto assets. Further details are available in our white paper and on our website at https://arbitrx.fund
The state of legacy financial investments — anti-consumer
Global financial regulations have been built up under the guise of protecting the consumer. Banks and other major financial institutions have been issued with profit-protection “licenses” at the expense of the public — it is practically impossible to innovate in finance without being backed by one of these institutions.
Disruption in most other industries does not necessitate the navigation of the same sort of legal minefield that exists in finance. Regulation often makes it prohibitively expensive to even attempt disruption, with licensing and compliance taking years and costing tens of millions of dollars.
We have to accept a legacy financial system riddled with exorbitant fees and multiday settlement delays — or — we can choose decentralized cryptocurrency technology.
SIP20 will appeal to traditional investors
SIP20 is listed on Binance DEX exchanges for trading. Tokens will not be sold beyond the SWAP as it is a closed-cap fund. The total market cap of the S&P 500 is 23 trillion USD — the entire combined crypto market cap is only 0.5% of the S&P 500 cap. The S&P 500 is itself only a representation of a small part of the global investment market.
The crypto market can thus still expect very significant growth and exposure to crypto returns with broad, diversified risk and a straightforward and transparent approach will drive fiat investors into this new type of fund.
We will heavily promote the fund to fiat investors via marketing and investor outreach, and the only opportunity to purchase these fund tokens will be on exchange from SWAP participants — highlighting the real demand for reduced risk crypto investments, while simultaneously creating value for investors. Fund promotion will only take place in non-regulated markets and markets where participation is not forbidden or likely to be forbidden in the near future. SIP20 intends to fully comply with any local legislation prohibiting participation.
SIP20 aims to bring cryptocurrency investment into the mainstream
SIP20 is poised to set a new standard for cryptocurrency investments. As a transparent, secure and directly asset-linked ‘token-as-a-fund,’ SIP20 aims to bring low-fee, broad market exposure crypto investment to the mainstream with its innovative single token offering. Owning a diverse cryptocurrency portfolio is now as easy as holding a single token.
Cryptocurrencies represent a new kind of freedom; we should not take it for granted and make the same mistakes as our predecessors did when creating the legacy banking system. Support building the ecosystem the right way — without middlemen.