It’s always nice to report green figures when Managing Assets and the last quarter has made that much more pleasurable.
However, for context, a basket of the top 7 coins by market cap is still -48% below the prices of October 9th last year, despite recent recoveries. So where do we go from here? Let’s talk about Bitcoin for a moment because to a greater or lesser degree where BTC goes the others follow.
- Traditionally, October and November have been the two best-performing months for BTC. In fact, over the last 10 years BTC has delivered an average 46% gain in Q4
- October has been the star, with an almost 18% average gain.
- The average acquisition cost of BTC is currently circa $77,000 and in previous bull markets BTC has only peaked after a minimum of an 85% gain. This means we could be looking at a figure of $140K fairly quickly if we are truly in the next bull cycle. Remembering that last month we called the bottom at 63K.
- The key figure is $77k, stay above that and we are in strong waters. Dip below, and the bulls are running out of steam.
- On balance, we have struggled to break the $85K wall; sell orders were filled every time the price touched it, but many of those sellers have now been cleared and the next attack might break through ($83K at the time of writing)
- If this is the next bull cycle, it probably has about 2 years to run, based on previous cycles and may well reach over $200K. Remembering, of course that things rarely go in a straight line, but the direction of travel is clear for all to see.
So that sets up the bull case for BTC and by default the market generally. More immediately what might happen in October?
- Oct 14 we get the CPI Print, a soft reading would see a real push from the crypto market, a stronger reading would reinforce the need for another rate hike. As two more are in the price currently, no real downside there but big upside if it is weaker than expected.
- Oct 28 – FOMC meeting, the market has only priced, at 40%, the chance of another rate hike. One of the most vocal on the panel New York Fed President, John Williams, said last month he sees no urgency for another rate rise, so a soft Oct 9 figure would add to his argument.
- Against that, the 10 year yield keeps rising (5.2% at post time) and that is holding BTC currently, more than any other macro factor.
- President Trump has moved another carrier to the middle east – threat or action? and if its the latter will Oil spike again?
- There is a welter of money sitting on the sidelines waiting for more positive figures. If they come BTC will move very quickly and drag the rest of the quality assets with it.
- Based on the premise there is probably a lot more upside than downside with Crypto currently you may well see traders getting into bullish positions over the coming days.
- However we may need a catalyst to break out of the range.
What does all this mean for Algoz, given that we are totally systematic? Basically good news because our algorithms thrive on high trading volumes. As shown in the last quarter, this sustained activity is ideal. The star performer for the quarter was again Momentum up 40% and AiQP up almost 20%. Our Market Neutral, again performed inline with its statistics, where it looks to achieve 10% net annually with minimal drawdowns.
I remember people asking me in early October 25 if they had missed the boat when BTC reached $120K. All I could say was that only 5% of the world had some sort of BTC ownership at that time – what price will BTC be when 25% of the world has a piece? It’s rare that you get a chance to get back in at prices 40% below those tops, but here we are.
We weathered the storm of crypto being down 65% very well, showing that even in the most demanding circumstances we can still manage; that’s important. Now we are here to show that all the R&D work done over the last 10 months has made us stronger and even more responsible in our trading.
However you look at it the digital space continues to be exciting and we feel Q4 might just be another cracker – lets see.
