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Blockforce Manager Commentary: September 2022

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Fund Update

Over the past several months, the team at Blockforce has been working diligently to launch our second fund. September was the culmination of all that hard work as we had our first full month of live trading for our new Market Neutral strategy and were very pleased with the results. Though we were confident in the strategy, it’s always a relief to see the algorithms perform as intended in a live environment. The entire Blockforce team would like to thank all of the initial investors in the fund for their belief and faith in us. We understand the responsibility that comes with being entrusted as stewards of your capital and we work diligently every day to live up to the standards we have set for ourselves in both funds.  

Multi-Strategy Fund Performance

Despite difficult macro market conditions and the sell-off of Ethereum derivatives post merge that caused ETH to tumble, the Multi-Strategy Fund once again limited the drawdowns and volatility compared to a passive crypto strategy. The various strategies (Long Beta, Systematic, and Market Neutral) continue to perform as intended, allowing the Fund as a whole to outperform BTC, ETH and just about every other asset class in September. While bear markets are always a challenge to navigate, the team has experienced multiple downturns in the past and that experience has paid dividends this market cycle.  Though we are likely to trade sideways for some period of time, we are now beginning to see early signs in the market that give us optimism about the long term position of the Fund moving forward.

Multi-Strategy FundBitcoin
September Gross Performance-2.5%-3.1%
August Daily Volatility1.4%3.5%

Market Neutral Fund Performance

In its first full month of live trading, the market neutral fund generated a 7.1% return in September. Though it’s difficult to extrapolate based on only one month of data, if the fund were to maintain this level of performance over a 12 month period, the annual return would be 128%. The fund also exceeded expectations in terms of win loss ratio as 92% of the trades this month were profitable. While we continue to monitor each trade closely, the team is very pleased with the early results.  

The fund is still accepting subscriptions on the first $5m tranche of capital. This initial pool of capital comes with preferred terms for early investors. However, the remaining allocation is filling up fast so please contact us ASAP if you are interested in participating.

Market Neutral Fund
September Gross Performance7.1%
Year to Date Gross Performance*7.1%

*Note: Market Neutral Fund launched September 1st, 2022

Market Commentary

Despite many traditional assets selling off in September, bitcoin held steady around the $19,000 level for most of the month as Long Term Holders continue to provide strong support. Currently, 71% of all bitcoin in existence are held by addresses that have a statistical likelihood of not selling their coins anytime soon. Further evidence of this strong holding behavior is the fact that 66% of all bitcoin in existence has not moved in over a year. 

We can also observe the average length of time between transactions for coins that have moved recently in order to get an indication of who is selling. As the average time between transactions rises, it means older coins are being taken out of cold storage and traded. However, what we have seen as of late is that the average age of coins that are being traded is falling dramatically meaning that the activity in the market is predominantly centered around younger coins. Thus we know most of the selling that is happening in the market right now is by short term market participants while long term holders remain on the sidelines. This level of unwillingness to sell by long term holders is similar to what we have observed during the bottom of past bear markets.

We can see further evidence that we may be at or near a bottom by looking at realized losses. The initial drawdown to $20k in June of this year resulted in a large spike in realized losses. When adjusted for market cap, this amount of realized loss is very similar to the realized losses of other bottoms of past bear markets. The reality is that most people looking to sell in the $20k range, either due to fear or from forced liquidation, probably already have done so. While it’s likely that we may continue to move sideways in this price range for a period of time, the data suggest that the worst of the capitulation may be behind us. 

Due to the reported instability of various global financial institutions and growing evidence of stress developing in sovereign debt and currency markets, more and more people are turning to BTC as insurance against the current economic uncertainty. At the same time, those that have already bought BTC are continuing to hold. It’s likely due to this shift in behavior that bitcoin has held steady while most asset classes have fallen dramatically in recent months.

Sincerely,

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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