Astronaut Capital Quarterly Report Q4 2022
From the CEO
News seems to be going from bad to worse for crypto since our last quarterly report. The contagion effects starting from Luna earlier in the year have well and truly made its way through the rest of the market with its latest victim being FTX. As exchanges, lenders and now projects fall one by one, the wealth destruction continues to take hold encapsulating every corner of the ecosystem.
We are coming up to six years as full-time investors in crypto and can confidently say that sentiment is getting to extremely negative levels. Barring a blow-up by Binance or Coinbase, which would be the final nail in the coffin (so to speak), we believe that the huge volatility shocks should soon come to an end. Further downside would generally be met with just a slow grind down exacerbated by market-wide illiquidity. We are starting to see signs of this already.
Without touching too much on macro, we can look towards the equities markets and find strong parallels between crypto and the tech sector. Huge valuation re-ratings have taken place with most assets looking like pump and dump charts.
Needless to say, opportunities have been minimal for long-only active crypto investors.
The fund has been fortunate to dodge a few bullets lately especially around the most recent collapse at FTX. While previously having exposure there, funds were withdrawn prior, hence there was almost zero loss. Recent paranoia has led us to safeguard the majority of assets offline to further reduce any possible counterparty risk.
As you could probably guess, there will be no distributions this quarter. Performance has been lacklustre with mere asset rotation to coins that we believe ‘have a lesser chance of rugging.’ Exposure to large caps has been increasing due to this very process.
We will continue to run the portfolio in a conservative manner until sentiment and liquidity picks up. Our hope is that we may see more positive speculative price action coming into Q2 2023.
Finally, wishing all our subscribers a happy and safe festive season to close off the year.
Cheers
Matthew Dibb
CEO of Astronaut Capital
Macro Outlook
Headwinds that just keep piling
Just when we thought the worst was over in Q3, the crypto sector was hit by pitfalls once again. In this quarter, the FTX bankruptcy proceeding has resulted in a liquidity crisis, with unknown contagion effects to come. Crypto sentiments are at rock bottom with trading volumes hitting a 2-year low — the winter seems to be getting colder.
On a brighter note, the depth of the decline did not seem too daunting. Markets have generally been trading sideways since the middle of this year. Bitcoin has been trading within the $18k — $23k range earlier this quarter but broke support to trade on the $16.5k pivot. Ethereum, on the other hand, had a more volatile session where it rally just shy of $1,700 before dropping below the $1,200 level.
That being said, the number of headwinds from Q4 seems to be heading into 2023. With macro weaknesses, global recession, job cuts and higher interest rates on everyone’s mind, it does seem oblivious that we can expect a very challenging Q1 ahead.
News and Developments
Negativity from traditional markets and crypto has created constant headwinds for price action. Macro weaknesses, high inflation and weak investors’ confidence have overshadowed any positive news that arises. The FTX collapse has been the biggest stress this quarter, as most investors remain on the sidelines given the unknown effects of the contagion.
Positive News
- Consumers see US inflation easing in 2023
- Tether slashes commercial paper holdings backing USDT to less than $50m
- Alibaba Cloud to integrate Avalanche network to power cloud infrastructure
- ChatGPT launch could prompt loopholes in smart contracts
- Brazil passed a law legalizing cryptocurrencies as means of payment
Negative News
- FTX collapsed as it loses $8b in customer deposits
- Digital Currency Group (DCG) reveals it has $2b in debt after FTX
- Recession risks to create headwinds for crypto
- More than 26,000 people were laid off in crypto this year
- Binance seen massive outflows of $6b, raising risks of another bank run
- Greyscale Bitcoin Trust discount reaches 50%
Astronaut Holdings
Changes to Portfolio Holdings in this Quarter
Total Portfolio (Liquid Assets)
Illiquid Assets
Assets that have been entered into at early-stages are still to be considered illiquid or not viable to factor into performance measures.
Dividends
Distributions to token holders
There will be no dividend distributions for Q4 2022.
*For more clarity and dividend criteria, please refer to our Dividend Distribution Policy
Net Fund Figures
Dividend Distribution Figures
High Water Mark
Performance Fees (10%)
Astronaut Capital will not take any performance fees this quarter, as the FUM value did not exceed the prior high-water mark.
Astronaut Performance
Post Mortem
Q4 2022 In Review
The liquidity crisis this quarter with the FTX saga has dampened any recovery most investors were searching for. Fortunately, Astro was not impacted by the FTX collapse given the robust practices that we have put in place for the cold storage of assets.
Having said that, we could expect some ripple impact from our existing portfolio projects. More time will be needed as the teams are still assessing the actual damage done.
Overall, our portfolio remains close to 100% deployed with ~65% in large-cap and highly liquid tokens. Astro outperformed total crypto market cap, but was on par with BTC performance.
One of our high conviction trades this quarter was rotating our BNB and ETH holdings into MATIC. The rationale behind this was the progress their team has made in terms of wallet adoption and institutional partnerships, which forms the basis of our investment thesis.
Comparative Benchmarking
Fund Performance Since Inception
The fund has paid a cumulative dividend amount of $6.44m since inception. The audit indicates that Astronaut Capital’s overall fund performance with paid dividends is $7.46m, which is 239% higher as compared to the value when the fund was launched in October 2017.
Liquidation of Holdings
In Q4 2022, Astro sold several of our holdings including GOG and FTT, as well as rotating BNB and ETH into MATIC for a medium-term horizon
Outlook for Q1 2023
The management team expects another challenging quarter going into 2023. Headwinds from the mainstream economy are likely to deter investors from deploying into risk assets unless markets see a reversal in the Fed’s hawkish tone.
The correlation will cause a slowdown in the crypto markets, reducing volatility and causing markets to trade sideways. Without any surprise catalysts (such as China reopening, etc), we believe the brakes are on for any potential rallies.
Our focus will be on rotating from some large caps into projects with mismatched fundamentals, picking up value trades in the secondary markets. Core sectors include infrastructure layers, DeFi, and web 2 to web 3 bridging solutions — with a satellite portion in GameFi to generate additional alpha should this area picks up.
Ultimately, patience remains key to Astro’s portfolio. It will be difficult to achieve beta returns in non-trending markets, hence we prefer to ride out this winter and position our portfolio wisely before the next bull run.
Astronaut Capital: https://www.astronaut.capital/
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Disclaimer
The contents of this report and its attached documents have been prepared without taking account of your objectives, financial situation or needs. Because of that you should, before taking any action to acquire or deal in, or follow a recommendation (if any) in respect of any of the financial products or information mentioned in or downloaded from or through this website, consult your own investment advisor to consider whether it is appropriate having regard to your own objectives, financial situation and needs.
Taxation and Investment Disclaimer
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.
