Get Liquid with Astronaut Capital

We really hope you have been enjoying our weekly issue of Dark Pools by the desk at Astronaut Capital and Picolo Research.

We do our best to give you a taste of some of the random analysis and thoughts that we have going through our head every week. One thing is for sure; there is never a dull day in this market.

Also, a quick ‘thank you’ to the thousands of new subscribers that have joined us in the last few weeks. Keep sharing and spreading the word!

On that note, we mentioned that we have some big news to be released.

Since early 2017, Astronaut Capital, together with its independent research-house Picolo Research, has guided investors through the crypto market by leading in due-diligence, analysis, and above all, transparency.

Today, we roll out another chapter.

The Astronaut Capital Liquid Crypto Fund

The team at Astronaut are pleased to announce the launch and opening of the Astronaut Capital Liquid Crypto Fund.

Over the past 12 months, the management of Astronaut has gained feedback from a targeted segment of institutional, corporate and accredited investors to form a vehicle that is safe, flexible, liquid and above all, transparent for investment into digital assets.

Not just another Index Fund

The rise of index funds and single-asset exposure vehicles have flooded the market of late. While much of this can be attributed to the recent outperformance of Bitcoin, there is little doubt that the Alpha in years to come will be from exposure in growth and emerging digital assets.

The Liquid Fund differentiates itself from ‘long-only’ index structures by taking exposure in fundamentally sound emerging projects whilst still adhering to the liquidity parameters of high-turnover secondary markets.

With the ability to hedge and create ‘net-short’ exposure through seasonal and cyclical declines, the strategy puts risk mitigation and capital preservation as one of its highest priorities.

Birds-eye view

The investment fund is a traditional structure and operates as a long/short vehicle for the trading of cryptocurrencies.

  • The mandate is focused on liquid-only crypto exposure with the ability to take positions both long/short based on fundamental, qualitative and technical analysis

  • The investment strategy is conducive to deployment of large amounts of capital, with the flexibility of quarterly redemptions for large subscribers

  • Investments decisions are driven by our team at Picolo Research and the Astronaut Capital Investment Committee

  • The fund is traditional structure (non-tokenized), audited, fully custodized and registered under CIMA

  • Subscription is open-ended for institutional investors, family offices, venture capital firms and select strategic accredited investors

Request data room access

Download the 2-page fact sheet

For those who believe they meet the requirements for subscription, we have put together a short fact-sheet detailing the overview of the fund and the asset allocation strategy.

Download

We are extremely pleased with the level of interest and subscription to the fund so far. Should you wish to learn more, please request access to the corporate data room by clicking here.

. . .

Looking for smaller exposure?

Chat to us about the ASTRO Tokenized Fund.

For those who are seeking smaller exposure, Astronaut Capital has also been running the ASTRO Tokenized Dividend Fund since 2017.

The fund has been extremely active in the marketplace with exposure to Pre-ICO’s, ICO’s, IEO’s and secondary market trading.

In the coming weeks, we will also be taking new subscriptions from interested parties for this fund. If you would like to find out more regarding a placement for this quarter, please contact us by clicking here.

. . .

Finally, a big thank you to those who have helped Astronaut Capital along the way. We are currently at a huge inflection point in the digital assets market, and we are privileged to have you join us for the journey.

PS. next issue of Dark Pools dropping soon.

Matthew Dibb | CIO


About Astronaut Capital

Since 2017, Astronaut Capital has been one of the leading asset-managers for cryptocurrencies and digital assets. Utilizing its internal research team at Picolo Research and STO Rating, Astronaut operates long/short strategies to navigate the market on behalf of investors.

For subscription information about our investment funds, visit www.astronaut.capital or follow us on twitter.

Bitcoin's perception has now become reality

“Perception is more important than reality. If someone perceives something to be true, it is more important than if it is in fact true.”

- Ivanka Trump


What an insane week around the globe. Equities investors are having a heart attack, fake meat is still outrageously priced, and China's currency is falling off a cliff.

But perhaps more important is the perfect storm that is currently brewing for cryptocurrency markets.

BTC is undoubtedly gaining public perception as a ‘safe-haven’.

Over the last week, financial markets have been hit with a myriad of bad news including a slashing of the official cash-rate by the Fed, and more recently, an escalation of the US-China ‘trade wars’ that have now put an enormous amount of pressure on currencies and commodities globally.

Bad news is a cyclical and recurring theme of financial markets, however, this time we are noticing something different. For the first time, several financial analysts and market commentators are referring to Bitcoin as a safe-haven next to the likes of Gold, Fixed Income and the Yen. (video here)

This might seem trivial to some, but the fact that traditional market participants are aware of the that BTC appreciation is correlated with Gold as a ‘safe-haven’ is a huge deal.

Binance Research beat us to the punch and put out the below chart highlighting the appreciation of BTC in line with JPY, CHF and USD. More speculative asset classes and instruments that are heavily affected by economic uncertainty such as DJI, CNY and OIL are struggling to find their feet.

Crypto ‘haters’ will take the other side of this argument, claiming that the data (or absence of data) for new institutional and retail inflows does not yet support the story for BTC’s recent appreciation.

They may actually be right, but in our view, it doesn’t matter.

To take a quote from Ivanka Trump (which we feel is quite fitting given the current circumstances):

“Perception is more important than reality. If someone perceives something to be true, it is more important than if it is in fact true.”

The ‘digital gold’ narrative is in play

Bitcoin has long been called the ‘new-age’ gold. Traditional gold bugs hate this reference, but the data doesn’t lie.

In fact, the data might just bring a tear to their eye.

BTC is outpacing physical gold by as much as +23.9% in the last 7 days alone and up +42.8% over the course of a year. The spread between XAU and BTC is increasing rapidly by the day.

Which safe-haven would you pick?

(Chart courtesy of our friends at Coin Gecko)

The new hedge to equity market volatility?

Another interesting correlation we are observing is the relationship between Bitcoin and the VIX. The VIX is the volatility index which derives its price from the ‘implied volatility’ of the S&P500.

Put simply, when there is major volatility and drawdowns in the US equities market, the VIX can skyrocket as option premiums become more expensive.

(BTCUSD/VIX - tradingview)

Based on this relationship, the data suggests that when the equities markets are in a state of flux, the VIX would rally at the same time as BTC (or vice versa).

We will be keeping an eye on this correlation, but it is fair to say that we are currently seeing more and more evidence daily that Bitcoin is becoming a newfound hedge to global market volatility and the ultimate safe-haven against an impending economic downturn.

Before we wrap it up, a soft nudge to let you know that we have some big news being released tomorrow. Keep an eye out.

Stay safe out there,

Matthew Dibb | CIO

P.s Follow us on twitter and if you like this article, please share it.


About Astronaut Capital

Since 2017, Astronaut Capital has been one of the leading asset-managers for cryptocurrencies and digital assets. Utilizing its internal research team at Picolo Research and STO Rating, Astronaut operates long/short strategies to navigate the market on behalf of investors.

For subscription information about our investment funds, visit www.astronaut.capital or follow us on twitter.


Not signed up to Dark Pools?

We do our best to deliver you one mind-bending article a week from the desk at Astronaut Capital.

It’s free.

Click below to get added to the list.

Crypto Exchanges: When utility is actually a security

No matter how great the talent or efforts, some things take time. You can’t produce a baby in one month by getting nine women pregnant.

- Warren Buffet


Unless you have been living under a rock for the past 12 months, it should be no surprise that some of the best-performing projects/tokens through both bear and bull market have been exchange-based ‘utility’ tokens.

Here at the desk, we have had an extremely bullish view on crypto-exchanges for quite some time, but that doesn't mean we can't see past the incredibly grey-area that most of these projects are operating in.

In this issue of Dark Pools, we once again put politics and niceties aside to explore the largely synthetic and 'controlled' world of exchange tokens, and why despite their many issues, they are still the prize-winning horse that will continue to attract the smart money.

Play by the rules, get left behind.

Since the dawn of day, crypto-exchanges have tried to justify their blockchain-issued utility tokens in three simple ways:

  1. use them for exchange fees

  2. use them for withdraw fees

  3. use them for listing fees

Now on face value, we admit that the preceding is in fact a better ‘utility’ than most other projects in the market, however, sticking purely to such a simple tokenomics model has proven to be commercial suicide for these projects and subsequently, a tragedy for token investors.

Case in point; $QASH by Liquid (formerly known as Quoine)

By abiding to the former utility cases described above, Qash managed to shrink their market-capitalization from +$800m down to $40m in less than twelve months.

Now this is an interesting case, given that Liquid.com just raised a Series C at valuation of over $1 billion. Why then would a project that is raising money (on an equity basis) hand-over-fist, and reaching unicorn status, have a token that is amongst the worst performers in the entire crypto ecosystem? More on this later..

Introducing ‘The Burn’ - another way of saying ‘Security Token’.

Binance ($BNB) has been a market ‘darling’ since ICO in 2017. You will note from the original Binance whitepaper that the utility of $BNB is consistent with the above, however, it has one small addition - ‘the burn’.

‘The Burn’ - AKA, Share Buyback.

In the world of stocks and equities, there is a term used for ‘the burn’ which in theory, is almost identical to the concept employed by many exchanges - it’s called a Share Buyback and Retirement.

Essentially, based on the profitability of the company over a certain period, the management will buy shares back on the open market and ‘retire’ them, therefore increasing the price of actively circulating stock.

Sound familiar?

So does ‘the burn’ actually make it a security?

Despite how completely obvious it may be to us, regulators haven’t quite caught up with this. Expecting a return or ‘profit’ based on company revenues and operating performance is clearly a trait of a traditional security. There is no disputing this.

The genius of these exchanges is when they disguise ‘the burn’ amongst other factors of ‘utility’ including trading fees, listing fees, lottery tickets etc etc. This muddies the waters to the point where tokens such as BNB are some hybrid, ‘frankensteinesque’ mashup of utility and security that isn’t actually backed by a dollar of fiat.

So is it a security? Despite what your views may be, the quarterly buyback and burn has been a hit amongst exchanges since it first came out, and the returns are proving to be juicy.

Those exchanges implementing a quarterly buyback through the burning mechanism are all outperforming the general market by a huge multiple.

The returns speak for themselves.

Need more evidence?

OkEx launched a token in April this year. The very first utility that the website advertises for OKB is… you guessed it - Buy and Burn.

OKB since launch

So what does this all mean?

As investors, we are constantly seeking Alpha, which means that we are looking for the best returns comparative to the rest of the ecosystem. Despite our comments, the returns on both an equity and token performance basis are, without a shadow of a doubt, in the exchange market.

We don’t deny that there may be a ‘shake-out’ of some of these exchanges in the future.

Cracks are already beginning to appear:

  1. Binance recently announced the burning of pre-mine tokens that were allocated to the team. *Our theory* on this relates to pressure from the USA and the possible classification of BNB as a security token. Cancelling premined tokens may help the team significantly in discussions with regulators.

  2. Qash token holders are really pissed off. The headco, Quoine, used funds to go down the regulated and legal path with a focus on Japan. The fact that Quoine did not implement tokenomics resembling security tokens (quarterly burning) means that price performance has suffered greatly. To rub salt in the wound of Qash investors, revenues that would otherwise be burned by other exchanges are actually held by Quoine (liquid.com) instead, therefore contributing to their recent unicorn valuation.

  3. LEO token backed by Bitfinex has had a raft of issues. Tied up in legal battles between US contributions for its LEO sale and the scrutiny of USDT (Tether), they are not excluded from the firing line.

But.. we are talking about stacking sats here right?

It’s not really fair for us to single out exchanges that are actually growing the ecosystem, even if they are walking the tightrope..

In a largely unregulated industry filled with exit scams and pump and dump schemes, we take our hat off to the exchanges that are constantly innovating. We actually love exchange-tokens, because with such similar characteristics to securities and equities, they are the one thing that we can actually formulate data-driven financial valuations for.

Don’t let our unfiltered comments turn you into a bear. We are bullish exchanges and have been for some time, but we won’t lie to ourselves. To face reality means that we have to be aware that as investors, we are taking very speculative exposure in these exchange-tokens, which are subject to a huge degree of uncertainty and regulatory risk.

Read our research on LEO and BNB for comprehensive valuation modeling and a better understanding of how share-buybacks *cough*…. I mean, token burning for exchanges works.

Until next time.

Matthew Dibb | CIO

P.s Follow us on twitter and if you like this article, please share it.


About Astronaut Capital

Since 2017, Astronaut Capital has been one of the leading asset-managers for cryptocurrencies and digital assets. Utilizing its internal research team at Picolo Research and STO Rating, Astronaut operates long/short strategies to navigate the market on behalf of investors.

For subscription information about our investment funds, visit www.astronaut.capital or follow us on twitter.


Not signed up to Dark Pools?

We do our best to deliver you one mind-bending article a week from the desk at Astronaut Capital.

It’s free.

Click below to get added to the list.

Grayscale and the institutional inflow paradox

“Markets are constantly in a state of uncertainty and flux and money is made by discounting the obvious and betting on the unexpected.”

- George Soros


The market talks continuously about the arrival of institutional money and the increase in participation from some of the worlds largest money-managers. With the launch of Bakkt, Prudential and a raft of other institutional infrastructure for the purchase of top cryptocurrencies, one would make the assumption that capital inflows amongst top-tier traditional managers is on the rise.

Right?

In this issue of Dark Pools, we get down and dirty by analyzing the capital inflows of one of the largest BTC investment vehicles globally - Grayscale.

. . .

Grayscale says institutional investment in its GBTC Bitcoin Trust has increased - but the data suggests something different...

Our initial assumption based on 'headlines' of various publications was that growth in capital deployment from institutions to cryptocurrencies was surging.

This is correct, to an extent.. but there is more to it than meets the eye.

First some background.

In late 2013, Grayscale created a vehicle for investors to take exposure in Bitcoin securely through a trust. The trust would purchase Bitcoin as a close-ended fund to match the contributions made.

As of June 2019, assets under management (AUM) for GBTC reached US$2.70b, fueled by the increase in price of BTC and ‘new contributions’, as Grayscale would claim.

Grayscale’s 100% growth in new contributions for Q2 2019 dominated by ‘institutions’.

In the last quarter, Grayscale doubled contributions to their trust, pulling in an extra $84.8 million in investment in comparison to $42 million in Q1 2019. The vast majority of this capital was directed to investment in BTC-exposed vehicles.

A massive $71 million of the total $84 million inflows was driven by institutions, a data-point that gets your average crypto speculator jumping with joy.

So based on this data, you are likely thinking that the worlds best and brightest are spending their fiat on crypto and the long-awaited institutions have finally seen ‘the light’ correct?

Not exactly.

71% of new contributions were ‘in-kind’ (meaning not made in Fiat).

In the asset-manager world, an ‘in-kind’ contribution is a method of exchange where instead of giving the fund/trust Fiat currency, they give them another asset that can be exchanged for shares or units. In this case, we are more than likely talking about cryptocurrencies.

This means that $60 million of the $84 million that was contributed to Grayscale in the last quarter was actually contributed in assets such as Bitcoin or shares - not Fiat."

So when Grayscale are saying that institutions are coming into their investment products, it isn’t institutions that are converting Fiat to Crypto. It is institutions that are converting another form of value [Crypto] to Shares.

This took us by surprise, and to be honest, I’m not quite sure if it is a bullish or bearish narrative. Yes, it is good that institutions may already own cryptocurrencies, however, most media coverage is leading us to believe that these new inflows of capital are coming from Fiat, not existing crypto holdings.

So this begs the burning question we need answered:

Why would institutions convert their crypto into a crypto trust?

There’s a few obvious answers here and then there are some that just puzzle us.

Obvious:

  • Streamlined tax reporting and integration with internal systems

  • Custody-enabled

  • Insurance

  • Limited liability for handling of the assets

  • Possible tax incentives

And then we have the ‘not so obvious’…

GBTC is illiquid, close-ended, and trades at a 30-40% premium to the underlying Bitcoin price.

Most savvy investors and professional money-managers will generally look to buy into an asset that trades at a discount and has the potential to ‘close-the-gap’ and converge with normal market pricing.

What we are seeing in this instance is investors swapping their physical cryptocurrency for a unit that trades at a steep premium and charges a raft of fees for doing so.

. . .

Perhaps there are other explanations for the contribution of Crypto vs Fiat including reinvestment from a previous fund, pricing arbitrage or inflating a funds mark to market for valuation purposes? Perhaps the ‘in-kind’ contributions are not crypto but actually private shares, listed equities or some other form of non-fiat asset?

We don’t know for sure.. All we can say is that being a fund-manager and research-house ourselves, the data from Grayscale leaves us with more questions than answers.

View the Grayscale Financial Report here.

Until next time,

Matthew Dibb | CIO


About Astronaut Capital

Since 2017, Astronaut Capital has been one of the leading asset-managers for cryptocurrencies and digital assets. Utilizing its internal research team at Picolo Research and STO Rating, Astronaut operates long/short strategies to navigate the market on behalf of investors.

For subscription information about our investment funds, visit www.astronaut.capital or follow us on twitter.


Not signed up to Dark Pools?

We do our best to deliver you one mind-bending article a week from the desk at Astronaut Capital.

It’s free.

Click below to get added to the list.

Libra, ETH manipulation and our latest research report

“There is only one side of the market and it is not the bull side or the bear side, but the right side.” - Jesse Livermore


The smell of late 2017 is in the air with some insane volatility beginning to enter the market once again. Last week we saw Bitcoin prices swing up to 30% from high to low, a trading opportunity for some, a nightmare for many others.

More interestingly to observe however, is the illiquidity, or as some would say 'manipulation' in Ethereum prices this week.

Traders are making a killing on thin exchanges

Around a month ago, a savvy trader figured out a way to move the entire ETH market through one target - Bitstamp.

Bitstamp is a decent exchange, but that’s not to say it competes with the majors. Average trading volume of Ethereum on Bitstamp is a mere $22m daily, modest in comparison to Binance which puts through around $150m every day.

So why does this matter?

It matters because the most highly speculative derivatives platform, Bitmex, marks its instruments according to the Bitstamp prevailing price. So theoretically, a batch sale of $10-$15 million in ETH can have a drastic impact on the market, which subsequently flows to Bitmex, causing a ripple effect of liquidations.

Well, earlier this week, we saw traders annihilate the order book once again through the same tactic.

In a timeframe of only 15-minutes, Ethereum crashed 30% from $262 to $192 with only $4 million traded.

This sell-order cascaded through Bitmex, and further reached to other exchanges within minutes (to varying degrees).

Theoretically (but unproven) a savvy trader could simultaneously sell this $4 million on Bitstamp while also shorting (leveraged) a perpetual ETH contract on Bitmex to scoop up huge returns in literally minutes before closing out the positions.

This scenario is becoming more commonplace and begs the question as to why Bitmex prices such instruments based on one relatively illiquid exchange.

Some would call it manipulation, but is it simply just some smart traders uncovering the inefficiencies of pricing in this fragmented market?

I will let you decide.

All eyes on Libra

While the ‘long-time’ crypto community shrugs its shoulders at Facebooks Libra initiative as a centralized and bastardized version of ‘crypto’, this hasn't stopped the rest of the world from following the ongoing debacle and pushback from regulators in the US.

A Senate hearing was conducted last night with some relatively negative comments about the social media giants product.

The best are below:

  • Senator Sherrod Brown: "[the company has showed that] through scandal after scandal that it doesn't deserve our trust" and "we'd be crazy to give them a chance to let them experiment with people's bank accounts"

  • Republican Martha Sally: “i don’t trust you guys” and "instead of cleaning up your house you are launching into a new business model"

Representatives from Facebook that were before the hearing are claiming that the initiative will completely separate social data from financial, however convincing the generally public and regulators of this won’t be easy.

In our view, this is going to be a long journey for Facebook and we don’t see Libra having a particularly negative effect on the cryptocurrency ecosystem. Much to our surprise, most of representatives from various US regulators can actually tell the fundamental difference between Bitcoin and Libra.

This is a huge step forward in the learning curve and we see this ongoing saga only benefitting major currencies in the long-term.

Latest Research: Elrond Network (ERD) Technical Code Review

Our internal research team (Picolo Research) has compiled a full institutional-grade report on the latest Binance IEO, Elrond Network. The research has been prepared by our analysts and covers both the fundamental and technical case for the project. Elrond is trading above 9x from listing.

View Elrond Research

The Roadblocks for Security Tokens

The team also writes weekly commentary to a very underserved market, Security Tokens. For an unbiased and independent view of the STO world, read here.

Until next time,

Matthew Dibb | CIO


About Astronaut Capital

Since 2017, Astronaut Capital has been one of the leading asset-managers for cryptocurrencies and digital assets. Utilizing its internal research team at Picolo Research and STO Rating, Astronaut operates long/short strategies to navigate the market on behalf of investors.

For subscription information about our funds, visit www.astronaut.capital or follow us on twitter.


Not signed up to Dark Pools?

Click below to get added to the list.

Loading more posts…