Astronaut Capital Quarterly Report Q1 2020
By: Lennard Neo
Tags: Digital Asset, Cryptocurrency, Blockchain, Ethereum, Bitcoin

Macro Outlook

Battered markets seeking strength and resilience going into next quarter

Q1 2020 began on the right footing with the cryptocurrency market rallying 65% from Jan to mid-Feb. The recovery, however, quickly became muted towards the end of Feb as we experience a global market shock on the back of the Corona Virus pandemic. US equities fell 35%, the worst decline since 1987, as investors panic sell in preference of fiat and safe-haven assets (e.g. gold).

Contrary to the traditional narrative, correlations between Bitcoin and equities spiked during this period, causing the former asset to fall from its high of $10.5k to a low of $3.8k (-63%), wiping out 1y worth of gains. Altcoin markets also took a -68% nosedive from $116b to $37b. Bitcoin dominance snapped its 70% handle to a low of 62% but has since recovered.

Markets remain volatile as we continue to observe a risk-on / risk-off approach by investors, as they seek stabilisation of this pandemic. On a positive note, the total market cap has since recovered slightly, while trying to find support at $170b level.

News and Developments

A series of positive news hit the market at the start of the year only to be overshadowed by the global market shakeout, which saw a hundred billion dollars wiped out across a few days. Media outlets mainly published negative news, as we observed constant amalgamated reports between cryptocurrencies and traditional markets during this period when extreme fears are prevalent.

However, despite the decline, there was a tinge of positivity, as major announcements were seen on the national level that include India lifting its crypto ban, and China stepping up the launch on its digital currency.

Positive news includes:

India lifts its 2-year ban on cryptocurrency trading

China closing in on its digital currency issuance

Bitcoin futures open interest surge above $5b with CME and Bakkt raking record volumes

Binance officially announced its crypto-backed card, allowing payment of crypto globally

Coinbase to integrate DeFi apps, allowing users to borrow and lend straight from their wallets

Negative news includes:

Bitcoin Fear and Greed Index reach levels of “Extreme Fear” as Bitcoin price plunge this quarter

Bitcoin showing signs of heightened correlations with traditional equities in global market sell-off

BitMEX flash crash triggered $700m of liquidations, highest since 2018

Telegram investors seeking a refund as TON launch date becomes seemingly less viable

Adaptive Capital shuts down after losing more than 50% of its funds

Astronaut Holdings

During this quarter, Astro exited on a portion of SNX holdings into ETH as we look to increase portfolio holdings of major cryptocurrencies. The fund also took a small strategic position in Elrond in view of its strong fundamentals and implementation of staking rewards. A significant amount of Multivac and Perlin tokens have been unlocked as well.

Changes to Portfolio Holdings in this Quarter

Total Portfolio

Illiquid Assets

Assets that have been entered into at early-stages are still to be considered illiquid or not viable to factor into performance measures.

Dividends

There will be no dividend distributions for Q1 2020.

*For more clarity, please refer to our Dividend Distribution Policy

Net Fund Figures

Dividend Distribution Figures

High Water Mark

Performance Fees (10%)

Astronaut Capital will not take any performance fees this quarter, as the FUM value did not exceed the prior high-water mark. Therefore, this portion will be reinvested back into the fund.

Performance

Post Mortem

Q1 2020 In Review

In lieu of the global market shakeout, the crypto market too experienced more than 50% decline across a few days in March, the worst since 2018. The main difference is this major sell-off did not only affect cryptocurrencies but other traditional asset classes as well. Having said that, Astro continuous allocation into major cryptocurrencies, mainly BTC and ETH, has helped to minimise downside risks, as the latter was only down 1.4% QoQ basis.

In addition, the fund also has a significant portion of illiquid tokens unlocked, namely Multivac and Perlin, where a drawdown of value was recognised after they were marked to market.

We discuss some of the metrics relating to the fund’s performance below.

Comparative Benchmarking

Fund Performance Since Inception

The fund has paid a cumulative dividend amount of $2.07m since inception. The audit indicates that Astronaut Capital’s overall fund performance with paid dividends is $3.51m, which is 59% higher as compared to the value when the fund was launched in October 2017.

Liquidation of Holdings

During this quarter, Astro liquidated another portion of SNX into ETH for tactical asset allocation into major tokens, while maintaining about 30% of our original SNX holdings. The fund sold a small portion of ETH for ERD in view of Elrond’s strong fundamentals.

Astro also had to burn 16,540 SNX (~$12k) to unstake our SNX holdings given the debt registered by the overall staking pool.

Outlook for Q2 2020

Our analysts expect a quiet Q2 2020 on the back of a battered market. With the uncertainties surrounding the virus situation, investors’ sentiment on the global outlook remains dim. Despite this downturn, the cryptocurrency market did display significant recovery after both Bitcoin and Ethereum bounced off strongly from its lows of $3850 and $90 respectively. Nevertheless, Astro will take a cautious approach as there could be more pain ahead with the recovery taking longer than expected.

The investment committee (IC) will continue sticking to the mandate of liquidity with a focus on allocating into large-cap tokens, aligning the fund towards the macro view of bitcoin halving event and the emergence of more on-ramps for institutional adoption of Bitcoins.