It has become quite common for exclusive real estate, cars and even extraordinary artworks which are available to buy for bitcoins to appear on market. But the purchase of a rare Antonio Stradivarius violin for digital currency – this is something absolutely new.
Last week LeoGroup
announced the unexpected purchase of a "golden period" Stradivarius violin using modern digital currency – Bitcoin.
Matt Allain, Senior Managing Director of LeoGroup and Sean Carpenter, Carpenter Fine Violins Co-Founder and CEO, gave an interview to Pimm Fox on Bloomberg Television’s ‘Taking Stock’ on 4 April.
“Late last year we came to meet Sean and the other Carpenters. We were looking for an instrument that is not correlated to stock market, and that’s an investment that is a unique part of the story,” said Matt Allain.
The multi-million dollar bitcoin contract was conceived and engineered by LeoGroup on 27 February and on 24 March the transaction officially closed.
Sean Carpenter, who is also the owner of another Stradivarius violin, says about the instruments, “These are priceless in many ways objects that are very rare. There are only a few hundred that are traded in many decades. They are very highly coveted instruments, also in terms of sound and aesthetic beauty”.
Why Buy a Violin Using Bitcoin?
“When we first met we had an investment in a few gold mines in California. So we wanted to use gold to purchase violin, because it also has the same quality as gold – we believe it’s a musical gold, we calling it now – but it became logistically difficult to deliver gold bullions and gold coins,” explained Allain.
“At the same time, last year LeoGroup became the first financial service in US to accept Bitcoin. We had a prospective client who only wanted to pay with Bitcoin, which we accepted”.
LeoGroup had significant holdings in Bitcoin and while it was logistically difficult to pay with gold they continued to offer payment with Bitcoin.
Getting Around The Risk
In order to protect this transaction and hedge the risk, LeoGroup proposed a bitcoin derivative to Carpenter Fine Violins.
“We had to create something to protect them and to perform this transaction we created the derivative Bitcoin Swan, which is a very complicated instrument”, said Allain.
According to an interview and official press release from LeoGroup, the swap was created by a LeoGroup portfolio company, TeraExchange, and closely coordinated with the CFTC. The price of bitcoin was calculated by MathMoney f(x), Inc., the pricing agent for the transaction.
Although the CFTC has not officially approved bitcoin swaps, this transaction followed regulatory protocols and helps pave the way for regulation of bitcoin derivatives.
“The Carpenter would be completely hedged to risk. As we close at March 24, no matter what happens to Bitcoin, they would be able to collect it in US dollars”, explained Allain.
Now LeoGroup has the unique Stradivarius violin, which was even used in performance on 3 April.