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Crypto markets: Crash, Crisis or Cropportunity?

BOS update July-Aug 2022

Crypto: Crisis, Crash or Cropportunity?

As staunch capitalists, we have unironically quoted Lenin before, and will again, because the quote is so apt for crypto markets: “There are decades where nothing happens; and there are weeks where decades happen”.

In June we witnessed another crypto price crash. This should not surprise long-term HODL-ers, as Bitcoin has had many crashes of 50-80% in its 13-year history (these sharp drops are often historically followed by 600-1000% gains).

What is surprising, is how many crypto analysts, investors and institutions got it wrong. Most of these casualties borrowed too much money, forgot about diversification, and were unprepared for the inevitable crypto drop.

In June alone:

· Singaporean crypto fund manager Three Arrows Capital (3AC) imploded, due to a mix of bad investments (Terra/LUNA) and massive debt

· DeFi darling Celsius paused withdrawals pending its filing for Chapter 11 bankruptcy (another victim of bad investing and high debts)

· BlockFi lost hundreds of millions of dollars in bad debts

· announced it may lose $270 million lent to 3AC

· Fund manager Voyager Capital lost half a billion (bad debts at 3AC)

· Babel Finance lost a billion (bad debts, much to 3AC)

· CoinBase sacked almost 20% of its workforce, COIN stock dropped by 80%

But it seems that some people had been sitting on “dry powder”, waiting for the drop, so that they could invest more funds at lower prices.

· MicroStrategy (Michael Saylor) bought another $10 million in Bitcoin; making them the largest holder of BTC on the planet, and having twice as much BTC as Tesla

· FTX offered to buy the struggling Voyager Capital

· Binance advertised for 2000 new job openings, and raised $500M in new VC funding for Binance Labs

· Paypal allows for the purchase and transfer of several cryptocurrencies to external wallets for the first time

· Solana Labs announced the development of a SOL crypto smart phone

· Someone transferred US$42 333 777 in #Bitcoin and paid a fee of $4.61. That’s a transaction fee of 0.00001088%! No government bank or third party had to verify the transaction, nor could they have stopped it.

· After the flash crash, many larger cap coins have staged small recoveries, including BTC jumping from under US$19 000 to over US$21 000, and Ethereum bouncing up from under US$900 to over US$1400

What is also interesting, is that prior to, and immediately during the big drop, crypto was behaving like the stock market. Cryptocurrency movements were highly correlated with movements of tech stocks (remember that 50- 80% June 2022 drops were not just in crypto; we also saw 50-80% drops in stocks such as Zoom, Netflix, Amazon, Apple, Facebook, Google, Tesla and PayPal).

As we enter a small recovery, it seems that crypto markets have decoupled from tech stocks, and are recovering independently and faster than their Wall Street peers. Interesting times indeed.

Whether you dollar-cost-averaged (DCA) by buying every day, week or month, whether you bought at the absolute bottom or bought at the top, it is claimed that nobody has ever lost money if they held Bitcoin for four years. The same cannot be said for the stock market.

By the way, if you want to have an idea of where crypto is heading next year, check the historical patterns. The chart below shows a big dip in 2014, 2018 and 2022, followed by a massive rise. Past performance is no guarantee of the future, however, it does bring a sense of optimism that the next few years may be good for crypto.

Weathering the storms

As Bitcoin and crypto consolidate after a large drop, a few companies are trying to pick up the pieces. The entire crypto market capitalisation was down 33% for June, and Bitcoin funds such as Digital X and Grayscale Bitcoin Trust are down around 34-35%.

Bostoncoin has weathered the storms as well as we could, with large drops in some token prices presenting opportunities. We continue to HODL or buy as we see an opening.

Key Takeaways

It seems that Three Arrows Capital (3AC) were not only irresponsibly bullish (“price always goes up, right?”) but they also forgot about diversification. Considering there are around 15 000-20 000 crypto projects, it seems crazy that someone would put 40-50% of their available capital into a brand-new and untested coin (Terra/LUNA). The US$1 billion that 3AC put into LUNA is now worth under $700.00, representing a massive 99.99% loss.

Even though crypto is the “new kid on the block” and can sometimes seem like a shiny new toy that makes all other investments obsolete, it is wise to look back at history and the lessons investors have learned over millennia.

Whether investing into old technology such as timber forestry, or new-tech such as Tesla, one must always remember to diversify (“eggs in different baskets”) and keep your debts manageable. The truth may soon come out in the bankruptcy courts, but rumours currently abound that some of the crypto platforms mentioned above may have carried debt that was up to twenty times their assets.

Bostoncoin has managed to avoid becoming a casualty of the 3AC crisis by diversifying into 30-40 different projects and having debts from 0-10% maximum. Other crypto funds that held debts that were between 40% and 120% are now casualties.

Around the globe as we enter the last half of 2022, investors see interest rates rising again, stimulus packages drying up, ongoing war and supply chain issues, and possible downturns in housing as well as stock markets. Those who borrowed too much, or diversified too little, may be forced to sell at a loss. Those who stayed sane, may be able to snap up some bargains. We trust you are in the latter camp.

If you feel any sense of overwhelm or upset over your personal financial situation, or the greater economy at this time of rising interest rates and falling investments, please contact us for a confidential chat. All members of our team have a minimum of 10+ years’ experience; we have seen a few market cycles and we know how to assist.

In other news:

Inflation has (allegedly) topped out at 9.1%, and the Fed plans to raise interest rates by another 0.75% just to ensure the dreaded beast is truly defeated. When you are forced to choose between inflation and a recession, be careful.

Bitcoin prices are up around 20% from June lows, whilst Ethereum is up almost 60% on the announcement that it will (allegedly) finally have a completion date for its long-delayed merger. One of our favourite coins, Polygon (MATIC) signed a deal with Disney and was up 100% on the news.

Polygon (MATIC) has also announced they will sell a web3 MATIC phone, similar to how Solana (SOL) is building a web3 Solana phone. Only time will tell if diehard Apple or Android fans will make the switch to a crypto phone.

With everyone talking about crypto, it is easy to forget that there are other applications for distributed ledger technology, aka the blockchain.

US logistics and transport company UPS has invested heavily into blockchain technology for managing supply chain logistics. Basically, they are using a public ledger to ensure that the right things get to the right places. If any variations or substitutions are made along the way, the blockchain will be able to pinpoint exactly what went wrong and where. There will be almost zero chance that your organic avocadoes will be swapped out for cheaper ones half a mile from the farm.

IBM, the old typewriter-slash-computer company continues to evolve, and has adopted blockchain technology into its business communications.

Companies new and old are discovering the advantages of blockchain for security, identity protection, so we expect more advances and more uses for this technology to emerge in the coming months and years. Individual crypto tokens may ebb and flow, but blockchain seems here to stay forever.

Action required

Most news can be ignored, however, this probably requires your action. Most BOS investors use the Eidoo wallet to store their BOS tokens safely. After several years, the Eidoo company has released a version 2 of their popular wallet.

Before upgrading to the new wallet, please be sure to take a screenshot of your existing tokens names and amounts, and backup your 12-word seedphrase.

Instructions to download and install the new Eidoo V2 are found here

Instructions to restore your previous wallet into the new wallet are here

If you have any issues, you can contact the Eidoo helpdesk here. Remember that nobody will ever ask for your password or seedphrase: doing so is a sign of fraud.

Back to the main story

Crypto markets are starting to recover from their dips, the stock market seems to have stopped falling, and life may just continue into the “new normal”. Yes, there is still a war in Europe, COVID is still a risk, the property market may slide back 10% to more realistic levels and we may yet face some supply issues moving forward, but things are getting better. Most upcoming news is factored into pricing, so we see that when the Fed puts up interest rates, the market does not plunge, because investors were expecting the rate rises anyway. Pending any unforeseen news (alien invasions, assassinations, the second coming of Cthulhu), we foresee a slow upward trend for most markets over the next 2-3 years.

How did we go this month?

After a brutal first quarter, crypto markets have started their climb back up from the pit. Not everything has recovered, and it is doubtful that the companies that were irresponsible or overleveraged will ever recover, but good projects always seem to rise to the top.

This month we saw some stars in our flagship BOS portfolio

Kadena KDA up 557% for the year

Gala GALA up 222% for the year

Sandbox up 206%

XYO up 194%

Digibyte up 180%

Secret up 115%

Bitcoin and Ethereum both enjoyed 30-60% recovery during the month but are still behind for the calendar year.

As at July 31 2022

BOS NAV 83.0422581

BOS Price 91.3464839

MOM + 29.85%

YOY (-44.97%)

Two years 240.32%

Three years 303.17%

Four years 172.07%

As at July 31 2002

DART NAV 112.259536

DART Price 123.48549

MOM +36.68%

YOY (Not available as <12mths old)

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