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Hedge Clippings | Friday, 21 May 2021
Crypto currencies crashed, but not crushed.
As we start this edition of Hedge Clippings, Bitcoin is trading at US$40,737, up 6.72% in the last 24 hours, but down 17% over the past week. Ethereum, at US$2,776, the second largest coin by market value, is up 12.36% over 24 hours, but down 25% over the week. At their lowest point both were close to 50% off their previous all time highs, with Bitcoin trading close to US$30,000, down from a mid April high of US$63,000.
This is what many crypto disbelievers were either expecting, waiting - or possibly hoping - to happen. Warren Buffett, Chairman and CEO of Berkshire Hathaway, and his vice-chairman, Charlie Munger have both been outspoken critics of the crypto sector, and Bitcoin in particular. Buffet called it "rat poison squared" while Munger said digital currencies are "disgusting and contrary to the interests of civilisation".
They may well be right, and time will tell, although at 91 and 97 years old respectively, that time may not come soon enough to prove either right or wrong.
Hedge Clippings has to admit to not having all the facts at our disposal: The world of crypto currencies is complex, complete with market terminology which sounds familiar (exchanges, futures, derivatives and the like), and jargon which would not seem out of place in a cross between a sci-fi TV show and a group of millennials on whoopee weed (if they still use that stuff).
It's not only a whole new world, one has to learn a whole new language to understand it. What we do understand however is that so far, in spite of the volatility of the past week, and the volume and value of trades involved, the core infrastructure supporting the over 9,800 different coins or currencies, and across hundreds of exchanges operating across the globe, 24 hours a day, 7 days a week, the trading infrastructure has remained operating and intact.
Compare that with traditional equity exchanges, subject to failures and flash crashes, or suspending trading when volumes or volatility exceeds comfort levels. Crypto we believe is here to stay, albeit that governments around the globe are wanting to curtail, control or ban it - in fact action from China this week started the roller coaster described above.
Is crypto speculative? No question! Is it, to traditional "investors" such as Warren Buffet, who starting in 1951 has built his working life over the past 70 years creating "value" out of real businesses and assets, "disgusting"? Undoubtedly!
But it is - or at least trading in it - real, and the opportunities are likely to remain, although picking the next Bitcoin - which sold for 5 cents in 2010 and reached $65,500 in April and is still worth $39,903 as we reach the 8th paragraph of this newsletter - might not be as easy.
Interest in Bitcoin and other crypto currencies has accelerated recently in large part due to media coverage, and human nature which dictates that a relatively small outlay which leads to a massive payoff is seen as a reasonable "bet" - somewhat like buying a lottery ticket, but probably with better odds. That doesn't help the majority of people who're attracted by the risk/reward payoff, but either don't know where to start, or even if they did, don't believe they have the skills, expertise or time to enter the market.
Until recently, at www.fundmonitors.com we've steered clear of the crypto world, either through our own lack of knowledge (ongoing, but getting there) or useful and reliable sources of information. However, with over 800 managed crypto funds reportedly available around the globe, that's changing, so unless they (and we) are all dreaming, we need to be in the know.
Are they a store of value as some supporters believe; an asset which lies outside the normal government and exchange rules; or are they just too risky to contemplate?
Or are they simply a trading opportunity that's both intriguing and too good to miss - even though you might have already missed the upside, and if it comes to that, the downside over the past week.
As a result we have organised a webinar to be held on Thursday June 3rd at 4:30 to try to clarify what to many is the unknown world of crypto currencies and for those - believers and disbelievers alike - who'd like to know more but perhaps don't know where to start, or want to understand how to avoid the risks.
We have been fortunate to secure as our guest Clint Maddock, Founder of Sydney based Digital Asset Funds Management (DAFM), and CIO of their newly launched Digital Asset Fund. Clint heads DAFM's team of over 20 financial markets and software professionals and has over 17 years experience trading complex derivative products with an impressive CV that includes studying Aerospace Engineering before co-founding Tibra, a high frequency trading operation, in 2006.
If you would like to join us while we ask Clint to explain, educate and answers your crypto questions, please register your interest here.
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