Swissquote Bank, an online banking service, has launched a bitcoin exchange-traded certificate that it claims will curb the cryptocurrency’s volatility.
The Bitcoin Active Certificate works by moving investor’s holdings between bitcoin and U.S. dollars with the help of a machine learning algorithm that forecasts short-term market movements using technical indicators, buy/sell pressure and analysis of social media sentiment.
Swissquote said in a statement: “Our strategy is focused on reducing volatility by increasing the amount of cash held during periods of uncertainty and downturns. This lower-volatility strategy is intended to decrease volatility to help create more consistent potential returns in the long run.”
The bank explained it will hold from 60–100 percent of the portfolio in bitcoin, depending on the level of confidence its bitcoin price prediction, while the remainder is held in U.S. dollars. Trading will be carried on the SIX Swiss Exchange, it added.
According to a Bloomberg report, Peter Rosenstreich, head of market strategy at the bank, said:
“Investors are excited about the cryptocurrency but are unnerved by its volatility. So we tried to build a trading algorithm that’s a protection against downside risks.”
Notably, the new certificate isn’t the bank’s first foray into the cryptocurrency space.
Back in July, Swissquote announced a new bitcoin trading feature in partnership with digital currency exchange Bitstamp. The service allows customers to exchange bitcoin with euros and U.S. dollars through their accounts.