A cryptocurrency fund in 2017: 700% in 7 months of existence
It is time to step back and share our views on this crazy ride, hopefully the start of a long journey…
About the present report
We previously published weekly reports, allowing to build a transparent track record and share some of our thoughts about the market and our investment decisions. You can find all the previous reports here. We decided that the weekly frequency was not necessary for two reasons:
- We developed a simple tool, based on Google spreadsheets and scripts, displaying in real time (updated every 10 minutes) the NAV of the fund, the performance 24h/7d/30d and the weight of all the fund positions. People interested in following the evolution of the fund can therefore easily access this data anytime, simply by bookmarking the page which is optimized to open on a smartphone screen. Here is the link: Singularity Fund dashboard.
- The fund strategy is long-term oriented. Of course we use the liquidity of the crypto market to optimize the performance, actively managing the fund with frequent rebalancing, but it is always with the objective to increase our long-term exposure to the assets we selected (more on the fund strategy later). The weekly reports tend to give too much importance to the short term performance of the fund, and we want to ensure that people following the developments of the fund understand that the short term is not our priority.
For these reasons, we will from now on publish quarterly reports, trying to develop more on our views of the market and how we integrate these views into the strategy of the fund. Of course, we may publish posts at any moment if we feel there is a good reason to.
About the strategy of the fund
Long term focus…
We strongly believe the crypto and blockchain are going to disrupt large parts of the economy as we know it today. The whole purpose of calling the fund “Singularity” is to reflect this conviction. The “singularity” word is usually associated with the idea that Artificial Intelligence is going someday to surpass human intelligence. We rather use the term singularity to describe a phenomenon so different from what existed before that it triggers an unstoppable disruption of the system in which it happens. With this definition, the birth of Bitcoin and cryptocurrency is a singularity of the financial system, triggering a chain of highly disruptive events. Finance is the first sector impacted, but we believe the blockchain technology with its new models of distributed ecosystems will disrupt a lot of other sectors of the economy.
The purpose of the Singularity Fund is therefore to invest in the projects building the foundations of this new financial system and distributed economy. Most probably, these projects will need years to reach their objectives and this is why we are not chasing short term profits, but rather investing in the pillars of a distributed economy.
…with short term optimization
That being said, crypto markets allow something that the traditional Venture Capital investments always lacked: liquidity. This is a true revolution, as we are able to simultaneously invest in projects with 3–10 years term, and trade tokens 24/7 to adjust and optimize our positions.
We actively manage the Singularity Fund asset allocation, defining target weights with variation margins, and doing frequent rebalancing to take opportunity of the frequent market inconsistencies and volatility. For those of the readers who are not familiar with these terms, we basically sell a small part of our assets which are over-performing, to buy more of the ones which are under-performing at a given time. This is a way to increase our long-term positions, while decreasing the risk and volatility of the whole fund.
Performance Analysis
The numbers
We began to compute the NAV of the fund in May 31 of 2017.
Net Asset Value on May 31 2017: $6.14
Net Asset Value on Dec 31 2017: $50.55
Total performance between May 31 and Dec 31: 722.65%
At the time of this writing (Jan 6 2018), the NAV is $68.66, which represents a performance of more than 1000% since inception, a little bit more than 7 months ago (reminder: you can check the NAV in real time here).
Comparison with benchmarks
Here are the benchmark we are using for this analysis:
- CRIX (CRyptocurrency IndeX): an index representing the crypto market as a whole . You can find more information on the website, or on the paper: “CRIX an Index for blockchain based currencies”
- BTC (Bitcoin): the reference of the market
- ETH (Ether): the third biggest valuation of the crypto-currency market.
On the chart above, all the assets (Singularity Fund, CRIX, BTC and ETH) are indexed in order to be able to compare their evolution (they all start at 100).
It means that if you invested $100 on May 31 in each one of the four assets, you would obtain 7 months later, on December 31:
- Singularity Fund: $822.65
- CRIX (index crypto market): $661.34
- BTC (bitcoin): $608.91
- ETH (ether): $325.25
These results are very good, however they could have been even better! We did the mistake of having a very low weight in bitcoin in September-October, this is why Bitcoin largely over-performed the fund between October and the beginning of December. The fund caught up in December, but this is “lessons learned”: despite the current market sentiment (see our view below), Bitcoin is still the king and in no way is going to be beheaded soon.
Our view on the market
The Ripple case — THIS is a bubble
When we see people on social media arguing that Ripple is “cheap” because it is a only a few dollars and could reach the same price as Bitcoin, without even knowing that something such as “market capitalisation” exists… no comments.
A lot of newcomers on the market, a lot of fulgurant rises 100% based on hype and a lot of absurd capitalisations for projects with few lines of code. The market really heated too much these last few weeks and the correction will hurts. Hopefully, the core of crypto investors will continue supporting the good projects and a natural selection will occur.
Bitcoin or not Bitcoin?
Bitcoin.
Have Bitcoin in your portfolio. Especially now that we are close to a new altcoin-recession cycle. Bitcoin will be the least affected by the next crash and will the first to recover, as it always did. Also, on the positive side: RSK is coming. This may be the good news triggering the next rise.
Resources
Information about crypto
A lot of people are asking about good sources of information. The crypto market is saturated by information, and it is really difficult to filter the noise. Here are a few very selective sources:
Token Economy: an excellent blog with a weekly newsletter selecting the best articles about cryptocurrency and decentralization.
Epicenter podcast: a podcast about the technologies, projects and people driving decentralization and the global blockchain revolution. This is the perfect choice for a one-hour run.
Blockchain at Berkeley blog: “As a non-profit working at UC Berkeley, we specialize in education for the masses, Fortune 500s and work on blockchain projects for enterprise”. They produce regularly very interesting analysis.
Singularity Fund links
Website: http://singularityfund.io/
Blog: https://medium.com/singularity-fund
Telegram: https://t.me/SingularityFund
Dashboard (NAV, performance and weights updated every 10 minutes): https://docs.google.com/spreadsheets/d/1iHqMjI1UfbzYePLZARHCfWcKoXRpZgW938OIHmcG-Kg
