There is a lot of hype around Bitcoin and its related startups. And hype, as anyone who lived through the dot-com bubble can attest, can be a dangerous thing. The F.DERP fund, which just launched on MPEx, hopes to help alleviate that.
One method to deflate hype in the traditional financial world is known as short selling or “shorting.” Shorting is looking at a stock or bond and betting that it is over valued. Essentially, you borrow the stock from a broker or other financial entity with the promise of returning it later. The stocks are sold at their current price and the money is credited to your account. Then, after a predetermined amount of time, you have to buy the same stock again and return it to the entity that lent it to you. If the stock went down since you sold it, you made money, if it went up - you lost.
The idea is that by allowing people to bet against a stock, it won't become as overvalued. This, obviously, doesn't always work. And the practice has caused for some controversy, like when banks started short selling their own toxic housing mortgages and got rich off their own bad investments while the people living in the houses found themselves in foreclosure.
But, it is still an important part of the financial system and is an important counterbalance to the hype and commotion that could engulf an entire industry. F.DERP is looking to release some of that pressure by giving Bitcoin investors a place to bet against companies.
BitPay and BitGo, two giants of the industry that have received significant amounts of funding in the past few years are the first two companies in the fund. Mircea Popescu, the founder of F.DERP said via cryptocoinnews that they would never make “enough money to pay back that round of investment[,]” and so from that perspective the inclusion makes sense. But investment into F.DERP only makes sense if you don't believe in the companies' business models and plans.
BitPay is the largest Bitcoin merchant partner and BitGo is a leader in the multisignature space. It will be up to investors to decide if they want to short these companies. Popescu will be personally and manually managing the account, which means dividends won't come automatically, but when Popescu decides to. He will also take 10 % of any profits made as a management fee.
Eventually, more companies will be added, Popescu says he will be going after “[a]ny corps that make bold claims[.]” Presumably, those would be limited to corporations with enough value or investment to have somewhere to drop to.
The short selling F.DERP fund is now available on MPEx.