ELEMENT DIGITAL MASTER FUND
April 25, 2018
Like most people in the Western hemisphere, this morning we were hit with a brief feeling of dismay upon checking the status of the markets. At press time the market has traded down 7% in the past 24 hours, with small caps leading the way at -11%. Volumes continue to remain above average with just about $17B of excess in the past day. Most of that has been centralized with bitcoin, ether and not surprisingly EOS. The market appears to have found a bit of a local bottom as we speak, with most of the space slowly reverting higher by 2-3% in the past hour. Here are some of our thoughts for this week:
High intensity interval training is always followed by a brief but necessary cooldown. That is all we will say on today’s market move 🙂
If you want to separate yourself from the pack, have a thesis and stick with it. The age of social media has given everyone a platform to express their views and share their opinions in real time. This is especially prominent in the cryptocurrency world. YouTube has made a number of people that are great at selling (read: pumping) extraordinarily rich. It seems like in the past year that everyone has morphed into a Jim Cramer. FYI – That isn’t a knock on the man. Confessions of a Street Addict is an all time classic and having grown up on a trading floor, we recognize all too well the “Jim Cramer effect” on the short term price of an asset. However our point is that having so many market pundits berading us with their views on what the price of bitcoin will do at any given moment (with no accountability for their words) tends to make the space very noisy. This kind of banter tends to be annoying and useless over time. Unfortunately it’s not going away anytime soon. But we are witnessing that the great sell off of 2018 has left a fair amount of people understandably skeptical about the intent behind their favorite crypto pundits. And that is a good thing. We believe the idea of doing your own research, producing a thesis and then sticking with that thesis is a much better way to play these markets and that this type of strategy will pay off in the long term.
The regulatory risks are still very much a real thing. The negative consequences of punitive regulation to this asset class are risks that tend to get understated when Mr. Market is in a state of euphoria. In the past week, we read a headline that the former head of the CFTC believes ETH and XRP can be classified as non-compliant securities. Though he isn’t part of any regulatory body today, this type of headline is a very big deal. There is an incredible amount of dependencies and relationships that exist between various cryptocurrencies so any type of negative effect for a single name will most likely ripple (no pun intended) to the rest of the market. On the flip side, any type of positive regulatory release will be the single most powerful catalyst to price action we will have seen for 2018. That is why the state of the regulatory environment is something we at Element pay exceptionally close attention to.
*On a side note, we this week caught our first glimpse at the level of promotional marketing that will ensue in the next month. We read that Snoop Dogg will be performing at a party hosted by Ripple during Blockchain Week. Whether or not this stunt pays off in value appreciation for XRP is anyone’s guess. What we do know is that this couldn’t have been cheap. Google search puts Snoop Dogg’s appearance fee at anywhere between $150k-$1m (guess it pays to have a warchest like Ripple’s). Regardless, our hats off to Ripple attracting one of the most well known hip hop artists of a generation. Without a doubt, all the millennials at the event will be checking their portfolios with their minds on their money and their money on their minds.
Thanks for reading everyone. Questions or comments, just let us know.
Portfolio Management Team
ELEMENT DIGITAL MASTER FUND
Thejas Nalval | Konstantin Antropov | Kevin Lu
This Commentary is for informational purposes and does not constitute investment advice, any type of recommendation or an offer to sell or a solicitation to purchase any securities from the Element Digital Funds or an entity organized, controlled, managed by or affiliated with Element Capital Group, LLC (“Element Group”). Any offer or solicitation may only be made pursuant to a confidential private offering memorandum which will only be provided to qualified offerees for careful review prior to making an investment decision. We aim to educate, report and/or opine on certain developments relating to the digital asset market. These are our subjective views, based on information and sources we believe to be reliable as of the date we publish, but we make no representations or warranties with respect to the accuracy, correctness or completeness of our opinions or any information herein and have no undertaking to update it. Please do not rely on it.
Element Group and/or its affiliates and personnel have made investments in some of the assets or instruments discussed here, and may in the future make additional investments (long or short) in such assets or instruments without further notice. Element Group does not, here or anywhere, provide accounting, legal or tax advice, or make investment recommendations. Please do not rely on us for the foregoing. We strongly suggest that prospective investors seek independent advice with respect to any investment, financial, legal, tax, accounting or regulatory issues discussed herein.
Certain information contained in this Commentary constitutes “forward-looking statements,” such as statements that include the words“may,” “will,” “should,” “expect,” “anticipate,” “target,” “project,” “estimate,” “intend,” “believe”. There are so many risks and uncertainties that actual events or results or the actual policies, procedures, and processes of Element Group and the Element Digital Funds and the performance of the Element Digital Funds may differ materially from those reflected or contemplated in such forward-looking statements. Please do not rely on forward-looking statements. Past performance is not necessarily indicative of or a guarantee of future results.
This Commentary is confidential, is intended only for the person to whom it has been provided, and under no circumstances may be shown, copied, transmitted or otherwise given to any person other than the authorized recipient.