Blockchain Asset Wallet Custodian Risk
Blockchain assets will be stored on hot and cold wallets on and off blockchain asset Exchanges. While unlikely due to the high level of security of selected wallets, blockchain assets could be hacked from those wallets. A 2 factor-authentication mechanism is used to mitigate any hacking risk.
Blockchain Asset Wallet Transfer Risk
During the transfer of blockchain assets between wallets, the withdrawal address might be wrongly input. As blockchain asset transactions are irreversible, blockchain assets could be send to a wrong address and be non-recoverable. The controlled withdrawal process will be used to mitigate this risk, ensuring the matching of deposit and withdrawal blockchain asset Exchanges addresses.
Blockchain Asset Exchange Counterparty Risk
The value of Shares may be affected by the default of one or many blockchain asset Exchanges. Deposits of cash and blockchain assets on those blockchain asset Exchanges might be lost in case of default. A thorough due diligence of blockchain asset Exchanges and an active management of the cash and blockchain asset deposits held at each blockchain asset Exchange is performed continuously to mitigate this risk.
Political and/or Regulatory Risks
The value of a Share may be affected by uncertainties such as international political developments, changes in government policies, changes in taxation, restrictions on foreign investment and currency repatriation, currency fluctuations and other developments in the laws and regulations of countries in which investment may be made. Furthermore, the legal infrastructure and accounting, auditing and reporting standards in certain countries in which investment may be made may not provide the same degree of investor protection or information to Investors as would generally apply in major financial markets.
Blockchain Asset Lending Risk
As with any extensions of credit, there are risks of delay and recovery. Should the borrower of blockchain assets fail financially or default in any of its obligations under any blockchain asset lending transaction, the collateral will be called upon. The value of the collateral will be maintained to exceed the value of the blockchain assets transferred. In the event of a sudden market movement there is a risk that the value of the collateral may fall below the value of the blockchain assets transferred.
Foreign Exchange/Currency Risk
Although Shares may be denominated in a particular Base Currency, BitSpread Ltd may invest its assets in cash deposits denominated in a wide range of currencies. BitSpread Ltd might have to post collateral to borrow blockchain assets in a currency different to that the Base Currency. The Net Asset Value of the Shares as expressed in the Base Currency will fluctuate in accordance with the changes in the foreign exchange rate between the Base Currency and the currencies in which the Share investments are denominated. A Share may, therefore, be exposed to a foreign exchange/currency risk. Where hedging of these currency risks is not undertaken, the performance of Shares may be strongly influenced by movements in foreign exchange rates because currency positions held by BitSpread Ltd may not correspond with the assets positions held.
BitSpread Ltd may enter from time to time into currency exchange transactions either on a spot (i.e. cash) basis or by buying currency exchange forward contracts. BitSpread Ltd will not enter into forward contracts for speculative purposes. Neither spot transactions nor forward currency exchange contracts eliminate fluctuations in the prices of blockchain assets or in foreign exchange rates, or prevent loss if the prices of these blockchain assets should decline.
Some of the blockchain asset Exchanges in which BitSpread Ltd may invest may prove to be illiquid, insufficiently liquid or highly volatile from time to time. This may affect the price at which BitSpread Ltd may liquidate positions to meet redemption requests or other funding requirements.
BitSpread Ltd may also encounter difficulties in disposing of blockchain assets at their fair price due to adverse market conditions leading to limited liquidity or change of withdrawals policy from blockchain asset Exchanges.