Astronaut Capital Quarterly Report Q4 2023
From the CEO
2023 has been a turnaround year for crypto and Q4 has only further cemented the great recovery.
Performance across the board has been surprisingly good with initial signs of retail re-entry occurring.
Narratives have been unexpected to many, with the Solana / SPL ecosystem outperforming significantly in comparison to most other L1’s and L2’s. Memecoins have also taken up a lot of mindshare for the past few months as they are deployed on more nascent chains.
Our portfolio has had a good run this year as we have consolidated our focus and exposure across sectors.
We have issued various research notes relating to some of our high-conviction positions including SNX and LINK. At present, we have rebalanced the portfolio to comprise exposure to these assets as well as a heavy allocation to Ethereum.
As discussed in previous reports, we have begun writing down some of the illiquid assets that have long been held in the portfolio and are yet to provide any update on a valuation. Some of these are underperforming, while others are completely dormant. We have written down and discounted assets by around ~80%, and will further change the valuation subject to future updates. Note that these assets do not affect dividend distribution.
Moving forward, we expect that fewer private (primary) investments will be made. Even at current levels in the market, liquid tokens provide a better ROI as opposed to higher-risk VC deals with longer locks and vesting.
Aside from our current exposure, the team is still particularly interested in DeFi and infra projects and will allocate accordingly.
A distribution will be sent to token holders for Q4 2023 performance with the details in the latter of this report.
We look forward to a massive 2024.
Happy Holidays!
Matthew Dibb
CEO of Astronaut Capital
Macro Outlook
Bitcoin resurgence providing the catalyst for growth
Q4 kicked off with a bang as markets steam rolled ahead amid expectations that the Fed beginning to loosen monetary policy with potential rate cuts coming in 2024.
Further catalysts such as the impending Bitcoin ETF approval in early 2024 and Bitcoin’s pre-halving rally continue to fuel gains as euphoria hits the market — leading to a noticeable 5%+ increase in Bitcoin’s dominance this quarter as it further cements its position as the leading cryptocurrency.
Total Crypto market is up 50+% with BTC and ETH registering highs of $45,000 and $2,450, respectively. The steps taken over the past few quarters clearly paid off as adoption continues to grow with more projects launching their dApps or making headways on new upgrades.
Unlike Q3 that is plagued with low liquidity and start-stop price momentum, Q4 experienced a fresh injection of sidelined capital, driving notable breakout in upward momentum. We believe Q4 price action are seeding positive signals to the markets, as Crypto is on the cusp of a stronger bull run heading into 2024.
News and Developments
In Q4, the focus of cryptocurrency news has predominantly been on Bitcoin and the anticipated approval of its ETF early 2024. Coupled with its halving narrative, it is no surprise that we saw a significant uptick in attention and adoption from traditional institutions and investors. We believe this could pave way for Crypto to finally establish itself as an alternative asset class.
Despite this positive trend, the sector continues to grapple with challenges such as regulatory uncertainties, security breaches, hacks, and government-imposed penalties as jurisdictions seek to find a balance between compliance and fostering innovation.
Positive News
- More traditional finance firms flipping the switch to adopt blockchain technology
- Bitcoin Spot ETF approval likely in early 2024
- Circle issues Euro (EURC) on Solana
- Private banks bring Crypto trading to wealthy clients
- Tether steps up Bitcoin mining investment
- US Firms to add Bitcoin to balance sheets after FASB rule change
Negative News
- Binance CZ fined billions by CFTC in court ruling, steps down from Binance
- Major ledger breach hits DeFi
- FTX Plan to end Bankruptcy, creditors could lose millions
- SEC Subpoenas PayPal Over PYUSD Stablecoin
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.
*Kindly take note there is an update to adjust the valuation of our illiquid tokens to better reflect Astro’s portfolio value. It is important to note that this revaluation will NOT affect dividends this quarter. Our performance calculations have consistently focused on returns from liquid assets. (refer to the next segment for more details)
Illiquid Assets — Notes*
In this quarter, based on community feedback, the team has initiated a clean up of Astro’s portfolio, specifically for illiquid tokens. This adjustment is designed to enhance the accuracy and representation of our asset values, aligning with the anticipated bull run in 2024.
Management has opted to take a haircut / write off in the valuation of our long-term, illiquid holdings. These assets, initially acquired several years ago, have not yielded the expected returns that were set forth. The team will continue to monitor these assets and should they become liquid, it will be reflected appropriately in the liquid portion of the portfolio.
It is important to note that this revaluation will NOT affect the portfolio’s return metrics for this quarter. Our performance calculations have consistently focus on returns from liquid assets, in accordance with the Astro Distribution Policy .
Having said that, we present the rationale for the adjusted valuation of these specific illiquid projects below.
Confidential (TBA) — 80% haircut. We have had a long standing investment in a private sale project from back in 2018 which has been stagnant in its development. TGE has yet to occur and have been awaiting updates from the project.
For the purpose of sufficiently marking our book to market, we are writing down the investment by 80% along with all other pre-TGE tokens with the hope that we can mark it more accurately once further developments occur. We will provide a more comprehensive update on this in our next report.
Current (CRNC) — 80% haircut. Despite years of development and rebranding, Current has evolved into a Mobile First Rewards Network, supporting their Mode Mobile ecosystem through EARN’M Loyalty.
The token has changed multiple times from CRNC >> EARNFT >> EARNM tokens. TGE is slated for Q1 2024, but dependent on dApp progression, which is now in Alpha testing. There have been many misses with Current the past few years and would prefer to revisit once it goes live.
Exotic (EXO) — 80% haircut. We have been in constant contact with the team and product is developing well. Last month, they obtained 1st in Injective hackathon, and the team remains committed in developing the DeFi options infra.
However, they have been slightly affected by FTX saga last year, had salary cuts and are currently raising another round, which has some commitments. Due to the risks, we believe an appropriate discount of -80% should apply to this project until it launches.
Zodium (ZODI) — Write off (<$50 in value). 80%+ of the tokens were unlocked and sold last quarter, no unlocks since then. Project in GameFi did not get the intended outreach and the team had difficult sustaining through the bear market. The price where the token is trading is considered ‘dead’, hence a write off is appropriate.
Dividends
Distributions to token holders
Astronaut Capital declares a dividend payment of $0.0351 per ASTRO token, which represents 50% profits distributed to ASTRO holders, translating into a dividend yield of ~16.8% versus the current ASTRO price.
The dividend is payable proportionally to all eligible token holders based on the number of tokens (ASTRO) held as of the snapshot date, 5 Jan 2024, 15:00 hrs (GMT +8). A breakdown of dividend calculation can be found below.
*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 2023 In Review
As 2023 draws to a close, it’s clear that the majority of our strong performance was concentrated in the fourth quarter. Bitcoin emerged as the best performing asset amongst most asset classes, soaring over 160% this year.
Consistent with our predictions from the last quarter, the on-chain derivatives and infrastructure sectors have proven to be particularly fruitful. Astro’s investments in these areas have outperformed ETH, with notable gains in LINK (over 50%), SNX (over 40%), and dYdX (over 40%). We anticipate further growth in these tokens, hence positioning Synthetix and Chainlink to be our 3rd and 4th largest holdings in our portfolio, respectively.
One significant update was management’s decision to adjust the valuation of our illiquid tokens to better reflect Astro’s portfolio value (refer to the earlier segment for more details). These tokens will be more accurately reflected in the liquid portion of our portfolio once listed.
Having said that, LSDfi and RWAs have been lacklustre, but we believe once retail resurgence occurs, these sectors would regain market flavor in 2024.
Overall, Astro delivered a performance of 42.2% over the quarter. We discuss some of the metrics relating to the fund’s performance below.
Comparative Benchmarking
Fund Performance Since Inception
The fund has paid a cumulative dividend amount of $6.8m since inception. The audit indicates that Astronaut Capital’s overall fund performance with paid dividends is $7.73m, which is 251% higher as compared to the value when the fund was launched in October 2017.
Liquidation of Holdings
In Q4 2023, ASTRO begin strategically scaling out a part of our BTC holdings, diversifying into ETH and SNX in anticipation of outperformance on the Ethereum layer in 2024.
In addition, we have also capitalise on the recent surge in markets by selling our legacy holdings in BNB (Bought at ~$20 in 2019) and POLS (IDO at $0.025).
Outlook for Q1 2024
2022 — The year of the correction
2023 — The year of a recovery
2024 — The year of the bull market rally
Market indicators suggest a more positive outlook than previously anticipated. We were proponents of a global recession mid this year, given the yield curve inversions, but it appears investor optimism was underestimated. S&P returning to its all-time highs and cryptocurrencies breaking out from its consolidation phase signals that markets are getting re-ignited.
There are just too many catalysts and tailwinds to be ignored, which could easily propel upward price movements. We expect BTC to dominate the flavor in the first quarter of 2024, followed by a transition in focus towards Alts, particularly ETH as the ETF could be next on the horizon. This provides a strategic opportunity for us to continue scaling down our BTC holdings and focus our capital on ETH or alternative L1s.
Our attention will be in DeFi, specifically on LSDfi, RSDfi and the RWA sector. This comes with expectations of new entrants from Tradfi to gravitate towards safer options such as staking and yield generating opportunities. Additionally, we will keep an eye on the BRC 20 sector, given its strong sentiments here.
Despite the current market euphoria, we remain cautiously optimistic. We recognize that current market dynamics appear to be more influenced by cyclical shifts within crypto investments rather than a resurgence of retail or traditional capital. Therefore, we will only scale into a particular token should there be a mid to long-term strength in fundamentals.
With that, the Astro team would like to extend our heartfelt wishes to everyone for a prosperous and fulfilling 2024 ahead!
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