StayKing results of August 2023
The beginning of August was marked by three events in the crypto world, none of which can be considered extremely positive.
Litecoin halving took place, in which the rewards for Litecoin miners were automatically reduced. The price reacted rather negatively to this event, with a gradual drop of up to -10%.
The new blockchain BASE, backed by the Coinbase exchange, experienced a major rugpull in the first few days, with the BALD meme token crashing by more than 90% in a matter of days. Losses were counted in the dozens of millions. There are rumors that people with connections to the bankrupt FTX exchange may have been the culprits behind the fiasco.
One of the biggest pillars of decentralized finance, the Curve protocol, was targeted by a hack. The attackers exploited a programming language flaw and managed to extract large amounts of cryptocurrency from liquidity pools. This caused even more capital outflows from the Curve protocol, plus the price of the CRV token dropped as well. The markets reacted positively to the news, with altcoins in particular recording gains. The leader of this peloton was of course XRP, which gained up to 60%.
This is where it gets even more interesting. The founder of the Curve protocol, Michael Egorov, used the CRV token as collateral in his DeFi loans, pledging the CRV token and borrowing other cryptocurrencies against it. But as the price of the CRV token fell, there was a risk that the collateral would not be enough to cover the loan and the position would be automatically liquidated.
This means that the Curve founder would lose a large amount of funds, and in addition, the protocols where he borrowed (AAVE, Frax,...) would gain a large amount of CRV token that was falling in price, and in addition, the market for this token was not liquid enough. Basically, a so-called Loss-Loss situation would have occurred, which would have been disadvantageous for everyone.
Eventually, Egorov was able to raise additional capital by selling OTC (over the counter), selling his CRV token off-exchange and keeping the loans afloat. But even this shows how fragile the DeFi world is for now.
At the beginning of the second half of the month, the price of bitcoin dropped significantly, taking other cryptocurrencies down with it. Bitcoin dropped as low as $25,000. This drop followed a series of bad macroeconomic news, including the bankruptcy of Chinese giant Evergrande or news of BTC sales by SpaceX, which triggered an avalanche of liquidations in the derivatives market and caused a significant price drop.
The price of bitcoin has stabilized around $26,000 and attention has shifted to the blockchain BASE, where the social app friend.tech has caused a literal frenzy. Its members can purchase "shares" of individual influencers and trade them. The platform has generated more than 2 billion USD in fees. However, it is worth keeping an eye out to see if this is yet another "Ponzi scheme", or a similar craze as previously caused by NFT.
Then on Aug. 29, Grayscale won a lawsuit against the SEC (U.S. Securities and Exchange Commission). The SEC had previously denied Grayscale's request to convert their hedge fund into an ETF (exchange-traded fund).
The court has now ruled that this decision was incorrect. The judge particularly disliked the SEC's reasoning. According to the court, it applied a double standard when it allowed ETFs that had bitcoin futures as the underlying asset but rejected Grayscale's bitcoin spot ETF.
As a result, the court has now ordered the SEC to reconsider its decision.
This court decision resulted in an immediate spike in the price of bitcoin, but the spike was short-lived. The price dropped again after a few days to around $26,000 per BTC.
And how has all of this affected our capital management results?
Despite the fact that the price of cryptocurrencies slowly declined in the first half of the month, we were calm. We had set up stop loss protection orders on our spot positions already in the black. This means that if the price fell, these positions would automatically close (cryptocurrencies would be sold), but would still close in positive numbers.
And that's exactly what happened. When the aforementioned drop to $25,000 per BTC occurred, stop loss orders were triggered. For us, however, this meant that these positions closed with a final profit of 10.66%.
The semi-automated trading of futures derivatives has been a stable and powerful pillar of our portfolio over the long term. As these are inherently riskier operations, we trade with less capital. We have managed to achieve a profit of over 8%. However, the capital allocation is not that large, so in absolute terms the numbers are not that high compared to the entire portfolio.
In the coming months, we want to focus more on these semi-automatic strategies, which are delivering solid results. In addition, we have proven that the autumn months are the ones where futures trading works for us.
As our spot positions have closed, we now hold a larger amount of stablecoins. We currently have around 94% in stablecoins and the remaining funds are in positions. Stablecoins are of course also ready for possible accumulation should there be further declines.
We only hold around 12% of the funds on exchanges, the remaining funds are on cold wallets for security reasons.
So how did it work out overall?
This month, we are distributing PBX totaling $85,384.64 among our clients. The average return is 0.152%.
We are distributing PBX at a similar dollar value as last month, but because the price of PBX has increased significantly, we are distributing fewer PBX, which is reflected in a lower percentage appreciation. But this should not bother PBX holders, because the rise in price increases the dollar value of their portfolio :-)