Blockforce Update
We hope you and your family had a wonderful holiday season and a great start to the new year. Over the course of December, the Blockforce team made a number of great strides on improving our systematic trading strategies (as well as backtesting some new ones) which we hope to begin implementing into the portfolio in the coming months. We also published two pieces of content in December that we would like to highlight. Just after Christmas we released our look back on the four biggest stories of the year in our bi-weekly newsletter. A few days later, on New Year’s Day, we posted an article highlighting a variety of on-chain metrics to get a sense of where we are in the cycle and what we might expect in 2023. Later this month we will be releasing an article (and hopefully an accompanying video) describing the trends we are watching this year.
Multi-Strategy Fund Performance
The Fund remained rather conservative in December as we waited for the fallout of FTX to subside. That prudence paid off as the Fund outperformed bitcoin and the wider crypto markets for the month. Throughout the year, the Fund’s strategy has proved its medal, limiting the drawdown and volatility compared to bitcoin and the rest of the crypto markets. The results from the strategy and portfolio allocation are even better when one takes into account the Fund outperformed its benchmarks even with a 10% writedown due to FTX in November. Although it’s been a tough year for the crypto industry as a whole, the Blockforce Multi-Strategy Fund continues to be long term oriented and well positioned to withstand the current bear market in order to take advantage of the next bull run.
| Multi-Strategy Fund | Bitcoin | |
| December Gross Performance | -0.9% | -3.6% |
| December Daily Volatility | 0.5% | 1.4% |
| Multi-Strategy Fund | Bitcoin | |
| 2022 Gross Performance | -49.7% | -64.3% |
| 2022 Annualized Volatility | 34.5% | 63.8% |
Market Commentary
After a tumultuous November in which we witnessed the dramatic collapse of FTX, the crypto markets settled down quite considerably in December. Most of the market was relatively flat indicating that the worst of the FTX fallout is likely behind us.
Since May, the industry has withstood numerous bankruptcies, wide-scale deleveraging, and outright fraud in the case of FTX and Three Arrows Capital. And yet, nothing about the usefulness of the technology has changed. Bitcoin’s adoption as a better form of savings technology and money has grown exponentially throughout the world in places such as Lebanon, Venezuela, Nigeria and many more countries. Ethereum’s merge to proof of stake was a huge success and sets the stage for increased scaling capabilities and lower fees. Lightning, Arbitrum, Optimism and other Layer 2 networks saw record growth this year. The resilience of decentralized systems such as Uniswap, Aave, and Compound, built through many years of trials, held up remarkably well throughout the turmoil of 2022. Stablecoins continue to demonstrate meaningful product market fit and decentralized infrastructure continues to expand. Thus, the key takeaway is that the price collapse this year was due to deleveraging and fear in the market caused by centralized actors, not because the technology failed or adoptions slowed. That bodes well for the long term prospects of this industry.
Nowhere is this more evident than bitcoin. This year has seen BTC fall 75% from it’s all time high in November 2021. With such a chaotic year, the resolve of bitcoin holders has been firmly tested to a historic degree throughout 2022 and yet, the percentage of bitcoin that has not moved in over a year is at all-time highs. Liquid supply available for trading is at all time lows (ie: there is a building supply squeeze) as there are no more large forced sellers left due to the massive unwind and deleveraging that we saw starting with the collapse of LUNA back in May and ending with FTX in November. In many ways, many on-chain metrics, market structure, and investor behavior patterns are a textbook bear market floor compared to historical data.
The biggest unknown at this point is the duration of this current down market, of which history would suggest there may be several months still ahead before we see signs of a strong recovery. Our best guess is that we likely won’t see a v-shaped recovery, but rather, we could experience sideways price action for some time before moving back up. However, when this does turn (and it is when, not if), cryptoasset prices are likely to rise faster and higher than most people expect.
The Blockforce Team
Disclaimer: This is not investment advice. The content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice. Nothing contained constitutes a solicitation, recommendation, endorsement, or offer to buy or sell any securities or other financial instruments in this or in any other jurisdiction in which such solicitation or offer would be unlawful under the securities laws of such jurisdiction. All Content is information of a general nature and does not address the circumstances of any particular individual or entity.
Disclaimer: This is not investment advice. The content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice. Nothing contained constitutes a solicitation, recommendation, endorsement, or offer to buy or sell any securities or other financial instruments in this or in any other jurisdiction in which such solicitation or offer would be unlawful under the securities laws of such jurisdiction. All Content is information of a general nature and does not address the circumstances of any particular individual or entity. Opinions expressed are solely my own and do not express the views or opinions of Blockforce Capital or Onramp Invest.
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