The importance of an open mind in the crypto market
In my September monthly commentary, I stated,
I believe the recent market selloff has marked the end of this correction… This might be a good time to (re)enter the market or increase positions.
This obviously hasn’t been the case since the market dove deeper in the second half of November.
The call provided a good entry point, as the market generated a positive return in October, but then prices turned south again. Everybody is wrong occasionally, but it is important to accept the new reality and admit your mistakes quickly. This enables you to adjust your position accordingly and protect your portfolio.
Focus on the downside, and the upside will take care of itself
This title is actually a well-known saying in the financial industry. Risk is inseparable from return, and to be a successful investor, it is important to actively manage it. This is especially true for extremely volatile assets like cryptocurrencies.
At Solidum Capital, one of our top priorities is downside protection. We apply several advanced hedging mechanisms that enable us to protect our clients’ assets. While the crypto market lost 16.1% in November, our Solidum Cautus Crypto Hedge Strategy generated a gain of 1.8%.
Despite the recent weakness in the crypto market, fundamentals are getting stronger. The Bitcoin network hash rate is continuously increasing, and the same is true for individual investors’ interests. One example: Square processed $148 million in Bitcoin sales in Q3 2019, which is 8% of Bitcoin’s mining supply (!). The number of first-time buyers has approximately doubled.
While we are waiting for a catalyst to spark the continuation of the crypto bull market, more gateways are being built for both individual and institutional investors to enter the new asset class. In fact, Germany passed new legislation, which will allow banks to offer the sale and storage of cryptocurrencies in 2020. We can expect some serious fireworks in the coming months.