NAV Trading, in the context of crypto investment vehicles such as certain funds or tokenized portfolios, refers to the practice of buying or selling shares or units at a price directly reflective of the Net Asset Value (NAV) of the underlying crypto holdings. This contrasts with market price trading, which can deviate from the intrinsic value.
Mechanism
The Net Asset Value is calculated periodically by summing the total market value of all crypto assets held by the fund, subtracting any liabilities, and dividing the result by the number of outstanding shares or tokens. Trading then occurs at this precisely calculated NAV, or a slight premium/discount, typically through direct subscription or redemption mechanisms with the fund issuer.
Methodology
The methodology for NAV trading demands precise, auditable asset valuation processes, transparent accounting of liabilities, and a secure system for handling subscription and redemption orders. This approach provides investors with direct exposure to the underlying crypto assets at their calculated intrinsic value. It minimizes the impact of short-term market noise and ensures equitable capital deployment and withdrawal from managed digital asset portfolios.
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