Astronaut Capital — Quarterly Report Q1 2018
From The Ceo
Just shy of five months ago, Astronaut Capital, in conjunction with the team at Picolo Research, launched a diversified fund backed by leading analysts from traditional finance to navigate the crypto markets on behalf of thousands of investors globally.
After what was a very rewarding first quarter for ASTRO (Q4 17), where dividend distribution was a high yield to initial ICO, the Astronaut team has more recently encountered the inevitable test of all fund managers.
While ending performance for Q1 2018 is by no means celebratory, we are pleased to receive further validation of our strategy by outperforming all major benchmarks in the ecosystem over the same period.
Despite a lackluster quarter, we firmly believe that out recent early-stage investments in several new token sales will be the catalyst for significant growth and profitability for the fund over the next 3–6 months.
Contained within this report you will find the current holding statement for the fund, audited returns as well as some analyst commentary including a ‘post-mortem’ of the last quarter, as well as our outlook for Q2 2018.
Over these last few months we also have several other small victories as an asset manager including the launch of our portfolio tracker app on iOS and Android as well as a new announcement regarding a partnership deal (see latter pages).
Once again, on behalf of the team at Astronaut Capital, I would like to thank our community for their ongoing support. It is, and always will be, our commitment to be transparent and open to our token holders as we navigate this crazy, turbulent and exciting market we call cryptocurrency.
CEO of Astronaut Capital
A volatile quarter as cryptocurrency market-cap declines more than $400 billion from its January peak.
Astronaut is an asset manager that engaged in operations of funds management as of 01 November 2017. The company utilizes the expertise of Picolo Research for trading and investment decisions.
Following an initial coin offering (ICO), approximately $2.2m of capital was deployed in the market. Astronaut pays quarterly distributions based on net ‘realized profit’ taking into account appreciation of core currencies, altcoins and exit proceeds from ICO’s. Exactly 50% of this profit is paid to ASTRO token holders. On the 26th of December 2017, Astronaut paid its first distribution of over $1.6m to token holders.
The cryptocurrency market experienced a short-lived bull run in January 2018 with market cap of all tokens exceeding $830b on January 7th.
Since its all-time high (ATH), several news events impacted the continued appreciation of currencies including:
- USD Tether Audit (or lack of)
- Selling of substantial holdings by Mt Gox beneficiary
- Selldown of ETH by EOS
- Crackdown by SEC on USA domiciled ICOs
- Exchange hacks and government intervention
The volatility in the market has also led to a sharp decline in trading volume. Daily traded volume has decreased approximately 63% since its highs.
BTC lost some dominance in the market during the early stages or January (~32%) largely due to the increase in other non-related currencies and tokens such as Ripple (XRP) and Ethereum (ETH).
While market conditions have been described as ‘shaky’, actual technical advancement in the market is starting to come to fruition. A handful of companies including new protocols, DEX’s and marketplaces have launched into main net with sufficient traction to validate their business case. Interest in these ‘market-ready’ projects is showing strong support despite the slump in prices.
Market Overview (ICOs)
Contrary to general belief, the ICO market has continued to grow substantially in 2018. In January alone, over $1.3 billion was raised with February only 10% behind. March, however, has seen a significant slump with less than $600m raised this far.
Data collected through icodata indicates that an average of ~$7million was raised over 428 token sales this year alone. While this figure appears to be high, we doubt the accuracy due to the collection of funding from private sales (SAFTS) and also the Telegram (TON) token sale contributing to over $1 billion of this figure.
Changes in the ICO Market
One of the largest changes witnessed is the evolution of funding structures over the past four months. Private sale deals now account for a significant portion of ICO funding, and in some instances, all of it.
Our analysis determines that this is due to the following reasons:
- Raising funding via SAFT agreements bypasses many securities laws by ensuring that the investor deems himself to be accredited or sophisticated
- Private sales using SAFT agreements can generally accept Fiat currency as a method of contribution. New market entrants that are unable to obtain a sizeable amount of ETH or BTC can then only contribute during this private sale period
- Institutional demand appears to be increasing despite the market slump. Higher allocation limits can only be met at a private sale stage.
These changes have resulted in other structural movements in the market such as the implementation of longer vesting periods, tight limits/caps on private sales as well as a need to be a ‘strategic’ partner to qualify for investment.
While these changes have occurred extremely fast, it shows that the market is maturing and becoming more sophisticated as it grows. Many of the previous enhancements are feature traits of private equity and venture capital deal structuring.
Astronaut Capital has continued to hold a diversified portfolio of altcoins and major cryptocurrencies to spread risk and maximise swings in market volatility. The vast majority of listed coin exposure has been accumulated in Q4 2017 while prices were depressed.
Approximately 70% of the portfolio is liquid with the remainder awaiting listing on a viable exchange.
Several assets that have been entered into at ‘ICO-stage’ are still to be considered illiquid or not viable to factor into performance measures due to the following:
- liquidation period is too early due to the nature of the investment
- the token has just listed on an exchange
- the token has an associated bonus attached in the short term
- the token has not yet listed on a viable exchange
While Astronaut has not achieved FUM growth for the period ending Q1 2018, it has outperformed overall market capitalization and other related indices (refer post mortem).
Since the date of last distribution, FUM has decreased 28.1% for the quarter, however it is still up over 29% since inception.
There will be no dividend distributions for Q1 2018 due to the following reasons:
- total Net Asset Value is down approximately 28% since the last distribution on 27 December 2017
- assets that are either illiquid or not available to trade on an exchange total ~$850,000
No Fees Taken
Astronaut Capital will not take any performance fees for Q1 2018. As the manager implements a ‘high watermark’, the fund value must exceed $3,955,180 (highest previous value) for incentive/performance fees to be taken.
The first quarter of 2018 has been one of the most volatile in market history when taking into surging account participation rates and market volume.
Astronauts performance has been no different with exceptional gains achieved in the early weeks of January, followed by several sharp drops for the remainder of the quarter.
We discuss some of the metrics and strategies relating to our performance below.
While a loss has been made for the first quarter of 2018, Astronaut Capital outperformed all other popular benchmarks significantly including major cryptocurrencies, market cap and other index funds over the same period.
Strategic Deployment into ICOs
A large focus for Astronaut in Q1 was to gain significant exposure to new initial coin offerings. With close to $1m deployed into ICOs via private sale (SAFT agreements) and the majority pegged to USD, this places Astronaut in an advantageous position for significant capital gain in Q2.
As the market dynamics have changed for ICOs, liquidity periods are getting longer, as are some exchange listings. This has worked to the benefit of Astronaut as the token issuers seek to list once markets become more stable.
USDT and Stablecoins
A driving force behind the market correction and instability of cryptocurrency prices has come from the distrust of Tether (USDT), arising from their inability to satisfy the public of a legitimate audit of ‘held collateral’. As one of the most actively traded tokens which processes billions of dollars per day, avoiding this stablecoin to mitigate third-party risk has proven to be a double-edged sword.
Astronaut Capital ceased trading USDT for the above reasons, however like many others, this also meant that the fund was more susceptible to swings in the market.
Since the events of January, our focus has been heavily on supporting tokens and ICOs that are creating a similar and more transparent mechanism of stability such as TrustToken (TUSD), Havven (HAV) and Maker Dai (DAI). Unfortunately, volume and liquidity in these alternatives have not been sufficient for day to day hedging (although certainly improving).
Moving forward, Astronaut has developed several over the counter (OTC) partnerships that will provide a more appropriate and secure way to hedge against market volatility.
Fund Performance Since Inception
The audit indicates that Astronaut funds under management (FUM) are still ~28% higher than when the fund launched in October, even after paying out a dividend of ~$1.7m in Q4 2017.
Outlook for Q2 2018
While there has been a noticeable change in sentiment over the past quarter throughout the entire market, the Astronaut Investment Committee (IC) is of the view that Q2 and Q3 will see the cryptocurrency leaders retest previous resistance levels as regulatory uncertainty eases.
The fund’s portfolio has been diversified to capitalize from a lift in the market while our selective ICO exposure provides a speculative element that will continue to contribute to the outperformance of the fund.
Astronauts analysts continue to focus on new opportunities in the market that we believe possess the characteristics of high ROI opportunities.
Several of Astronauts recent ICO investments that are tightly held with small market capitalizations are poised to outperform significantly with a rise in confidence. Based on the track record of Picolo Research in 2017, it takes an average of 4–6 months for our early stage investments to show a boost in liquidity and price action.
In conclusion, we are extremely optimistic regarding the potential for growth in Q2 2018 and anticipate that the early-stage backing of select token sales will result in an exponential rise in Astronaut Capitals net asset value (NAV) over the next 3–6 months.
This report has been compiled by Picolo Research for the exclusive use by Astronaut Capital. Picolo Research is an independent provider of research on cryptocurrency ICO’s. We have not been paid, nor mandated for this research report. The views expressed within this report are Picolo’s in its entirety.
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Astronaut and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction. We disclaim all liability and responsibility arising from any non-compliance placed on such materials by you or any other visitor to Astronaut or by anyone who may be informed of any of its contents. This is not investment advice.