VEBE 101 “Unrated”
Welcome to the wonderful world of confusing finance things — where acronyms, math, and silly little charts swirl around in a cesspool of stuff you forgot two days after taking your Finance 101 final.
Today’s topic is near and dear to my heart. By that, I mean Sang, our president, and CEO here at VegaX, is forcing me to write this.
Let’s discuss VEBE.
VEBE stands for VegaX Enhanced Bitcoin Exposure Token (I dare you to try and say THAT three times fast).
It is our premier index and fund. To put that in millennial-speak, VEBE is VegaX’s vibe.
It is based on one of our premier indexes — VBXM, which you can check out here.
So what is VEBE? (Great question)
VEBE, at its core, functions like a stock/cryptocurrency. You, as an investor, can head on over to VegaX.com, click a few more times to find the VEBE page, and then you can purchase VEBE — just like you would go on Robinhood or any other trading app to buy a stock/cryptocurrency.
Here’s the difference between VEBE and a stock or a cryptocurrency: VEBE is a stock that has a strategy. It’s a strategic stock.
VEBE’s strategy is twofold:
- VEBE is a Bitcoin stock built to generate consistent income through a technique dubbed a “covered call.”
- By generating consistent income, VEBE can act as a hedge against falling Bitcoin prices — so even when BTC prices are down, we outperform the HODL technique.
Theoretically speaking, VEBE is perfect for an old-fashioned-traditional-finance-loving customer who wants ~exposure~ to Bitcoin while still earning guaranteed revenue every month.
Talk VEBE to Me:
What is a covered call? Great question.
A covered call (aka a “buy-write strategy” because finance people like giving one concept two names) is one of the oldest tricks in the traditional finance world. It is an options strategy.
Now I know your eyes just glazed over because I wrote options strategy. Hang in there. I’ll make this quick.
Let’s say one Bitcoin costs $10,000, and VEBE holds 100 Bitcoin. This means VEBE is worth $1,000,000.
At the beginning of each month, VegaX sells a call on 10% of the Bitcoin within VEBE at a strike price of $11,000.
Selling a call means that VegaX HAS to sell 10% of its Bitcoin at the end of the month at $11,000 if the price is at or above $11,000.
The person buying VegaX’s call is betting that Bitcoin will be above $11,000.
VegaX, for giving someone the chance to purchase Bitcoin at a discount at the end of the month, is given what we call a premium.
For selling 10% of the Bitcoin within VEBE, a number worth roughly $100,000, VegaX is paid $2,000, or 2%.
This is the consistent income I mentioned earlier. Every single month, VegaX will receive that 2% premium, no matter if Bitcoin goes up, down, or around.
Wait, so what happens if Bitcoin goes up or down?
So, if the price of Bitcoin goes up, let’s say it jumps to $12,000 from $10,000.
- pocket the 2% premium
- be forced to sell 10% of our BTC holdings at $11,000, missing out on the profit from $11K-$12K
- enjoy the portfolio gains as the rest of our BTC (90% of it) gains 20% in the move from $10K-$12K
Now, if the price of Bitcoin goes sideways, let’s say it ends the month at around $10,100
- pocket the 2% premium
- keep all of the Bitcoins #diamondhands
Eek, now Bitcoin goes down, like way down, and ends the month at around $7,000
- pocket the 2% premium
- send all of our investors tissue boxes to help with the tears of losing ~28% in one month
- keep all of the bitcoins and try again next month
- note: in this scenario, VEBE would outperform holding BTC because we received the premium from selling the call, offsetting BTC’s 30% loss
Obviously, the example I went through above is unrealistic because
- Bitcoin is never going to be priced at an easy $10,000, so the math will be more difficult
- We, at VegaX will be looking for a 2%-4% premium — which means income will vary each month
Can you explain it in a chart?
Battle of the Bitcoins: VEBE vs. BTC
Here’s the gist: When Bitcoin is way up, BTC > VEBE. In any other situation, VEBE > BTC.
When Bitcoin’s up, VEBE loses out on 10% of VEBE holdings obtaining massive gains. However, when Bitcoin’s down, VEBE gets the guaranteed premium — thereby HEDGING the losses.
So how has VEBE done in comparison to BTC? Fantastic question. We were hoping you would ask.
As you can see from the chart below, VEBE has consistently brought in returns in excess of Bitcoin.
In other words, VEBE has consistently outperformed HODLing BTC, outpacing BTC by 5.8%-31.3% over six months spanning 2019 and 2020.
Look at all these returns in EXCESS of HODLing BTC:
The VEBE End Game: Actually Investing
If you are looking for…
- the best Bitcoin product on the market
- an easy way to hedge against volatility
- a financial product that marries traditional strategies with crypto assets
then VEBE is a perfect match for your portfolio, and you should buy the VEBE token on VegaX today (using this link).
For more information:
🚀Better Indices, Better Returns — VegaX
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