Eth Trending Alpha [Monthly Report]

PREPARED BY ADAM HAEEMS

PRODUCT DEFI STRATEGIES

MONTHLY REPORT ETH TRENDING ALPHA MARCH 2020

DISCLAIMER Alphachain Capital Limited has used all reasonable efforts to ensure the accuracy of the information contained in this communication at the date of publication.

Any information relating the to past performance of an investment or investment service is not a guide to future performance. Actual performance may differ significantly from any back test performance shown on the website. The value of an investment can go up or down. Do you not invest what you cannot afford to lose.

Our publications do not offer investment advice and nothing in them should be construed as investment advice. Our publications provide information and education for investors who can make their investment decisions without advice.

The information contained in our website is not, and should not be read as, an offer or recommendation to buy or sell or a solicitation of an offer or recommendation to buy or sell any securities. Our website should not be seen as a recommendation to use any particular investment strategy over any other.

You should carry out your own independent research before making any investment decision. Our website or materials do not take the specific needs, investment objectives and financial situation of any particular individual into consideration and any investments mentioned may not be suitable for you. You should not base any investment decision solely on the basis of the information that we publish.

All back test results and historical performance mentioned throughout this website and all publications from Alphachain Capital does in no way infur similar future trading performance. Although reasonable care has been taken, we cannot guarantee the accuracy or completeness of any information we publish. Any opinions that we publish may be wrong and may change at any time. You should always carry out your own independent verification of facts and data before making any investment decisions. If you are unsure of any investment decision you should seek a professional financial advisor.

Any comments that may be found in this website or other online resources are the express opinions and property of their individual authors. Other sites linked herein are the express property of their individual authors.

This document is communicated by Alphachain Capital Ltd. (11112250) with its registered office of: Abbey House, 25 Clarendon RoadRedhill, Surrey, RH1 1QZ, UK

“We don’t have to be smarter than the rest, we have to be more disciplined than the rest.”

Warren Buffet

“An investment in knowledge pays the best interest.”

Benjamin Frankin

“People who invest make money for themselves; people who speculate make money for their brokers. And that, in turn, is why Wall Street perennially downplays the durable virtues of investing and hypes the gaudy appeal of speculation” Benjamin Graham

CONTENTS Pages 5-7: Cryptocurrency Market Overview

Pages 8-9: Is Bitcoin a safe haven?

Pages 10-11: Market Outlook

Page 12: Eth Trending Alpha Strategies - What's New?

Page 13: ETAS Factsheet

Page 14: ETAS - March 2020 update

Page 15: ETA Factsheet

Page 16-17: ETA - March 2020 update

ALPHACHAIN CAPITAL MONTHLY REPORT

PAGE 05

MARCH 2020

CRYPTOCURRENCY MARKET OVERVIEW

March has been an extremely eventful period for cryptocurrency markets and one which will be remembered for many months ahead.

We experienced one of the most aggressive selloffs the market has ever witnessed, pushing the total market cap back under $200bn. ETHUSD fell 65% across just six days, resulting in the highest volatility the market has experienced in over three years.

Here’s a look at ETHUSD realized volatility over the previous three years:

Figure 1: ETHUSD Realized Vol over three years

ALPHACHAIN CAPITAL MONTHLY REPORT

PAGE 06

Over the previous three years we have rarely experienced a 10-day realized vol over 200%. You can see the 10-day realized vol for March 2020 at the far right of the above chart, spiking to 400% in March’s selloff.

This can be more clearly seen on the 3m chart below, showing a 4x increase in volatility from the beginning of March.

Figure 1: ETHUSD Realized Vol over three months

We can go some way to explaining the cause of the selloff by splitting the market into its three primary types of market participant: Investment Funds, Miners and Hodlers.

Each of these market participants contributed to the selloff in different ways intensifying the move lower:

ALPHACHAIN CAPITAL MONTHLY REPORT

PAGE 07

1. Economic slowdown as a result of COVID-19 (Hodlers)

We have seen demand for liquidity across all financial markets over the past few weeks as a result of the global turmoil brought about by COVID19. Cryptocurrency markets have not been able to escape, despite many people claiming how it will act as a safe haven in times of global stress, time will tell if that story plays out. However, the rational is simple. Over the last 4-6 weeks people have been losing jobs across the world. Just last week the U.S. reported that 16m people that have lost their jobs within three weeks and this trend is set to continue. When people lose jobs, they need cash for bills, shopping and other family expenses, therefore selling liquid assets such as stocks and cryptocurrencies is a logical thing to do. It is not just individuals, but also businesses that may be struggling due to the effects of the virus and will also need liquidity from selling their assets. This has been a major contributing factor. We’ve seen this activity across all markets, even safe havens such as gold (initially).

2. Miners fixed costs (Miners)

Miners provide consistent sell pressure on the price of Bitcoin. They receive all the newly minted BTC (or other crypto) and must sell it in order to fund CapEx and OpEx for their mining operations. In fact, the majority of capital outflow on the bitcoin network is driven by miners.

54,000 new bitcoin are minted each month, approx. $378m of BTC value.

Much of the expenses of a mining rig are fixed (e.g. electricity), therefore when the BTC price falls, miners have to sell more BTC to cover their costs, particularly those older less-efficient miners. This has the economic impact of causing greater selling pressure from miners when prices are lower, exacerbating bear moves.

3. Hedge Fund stops (Investment Funds)

Unlike Alphachain Capital, many investment funds in the cryptocurrency industry are currently long-only. They therefore typically have a long-term bullish bias, but use stop-losses to preserve capital during significant moves to the downside. $6500 BTC was a critical level of support where many funds would have placed stops just below.

When prices approach this level and stops start to get triggered, it begins a cascading effect of stops being hit all the way down, each one a sell order, pushing the price lower until new support is found. This was certainly a contributing factor in the move lower.

ALPHACHAIN CAPITAL MONTHLY REPORT

PAGE 08

MARCH 2020

IS BITCOIN A SAFE HAVEN?

It’s too early to say. At the beginning of March we also saw Gold selloff quite agressively, falling from $1700 to $1460 within a week.

Gold is supposed to be a safe haven in times of global stress, yet each time we see the emergence of a global recession gold sells off immediately along with all other assets, often stinging many new retail traders who wonder why this so-called safe haven is not so safe.

We saw similar behaviour in 2008 just after the Bear Stearns rescue when gold fell +25% just before it started to climb up to new highs.

Figure 3: Gold price during 2008 recession

ALPHACHAIN CAPITAL MONTHLY REPORT

PAGE 09

It is too early to say whether the same will happen with bitcoin. It’s followed the pattern of an aggressive selloff to start as did most global assets with the search for liquidity, however, will a strong recovery follow? Below is chart showing Gold price in blue and Bitcoin in orange since May ’19 to date.

Figure 4: Gold (blue) vs Bitcoin (orange)

Although not a strong correlation we can see some similarities in how the assets have moved over that period. We can see both assets selloff at the same time in March 2020 before Gold goes onto to reach new highs in April. We are yet to see similar behaviour in Bitcoin. It will be interesting to watch how this plays out over the coming months.

ALPHACHAIN CAPITAL MONTHLY REPORT

PAGE 10

MARCH 2020

MARKET OUTLOOK There has been much excitement about the bitcoin halving event next month where the world’s biggest cryptocurrency by market value is set to undergo its third mining reward halving.

While the halving event is supposedly a bullish event for the BTC price we are yet to see it play out in the price.

A look at the options market gives us a picture of what other market participants may be pricing in over the coming months. Below is a chart showing the probability of BTC being above a certain price at maturity, derived from the options markets. We can see that traders believe there is a less than 12% chance that BTC will be above $15k by December 2020 and only a 23% chance it will be above $10k. This tells us that there is doubt from market participants that the market will rally even after six months have passed since the halving.

Figure 5: Options derived BTC price probability

ALPHACHAIN CAPITAL MONTHLY REPORT

PAGE 11

Looking at the bigger picture we are still very much in a long term down trend in most major cryptocurrency markets as can be seen from the BTC chart below. We would be looking to see a confirmed breakout of the resistance line and the psychologically important $10k level before we can begin to know if a significant recovery is on its way. If the market continues lower we’ll see should support around $4500 before we reach the multi-year long support of $3000.

Figure 6: BTC price in downtrend

Early April we begun to see ETH outperform BTC quite significantly reaching 3x performance on April 6th. While ETH had always been a more volatile asset it has rarely been at these levels. I believe this is a trend which will continue over the coming months due to the growth we have seen in the DeFi space and the increasing interest in ETH as a cryptocurrency. This reconfirms our ETA strategies as an optimal choice (i.e. ETH) for those looking to get managed exposure to the cryptocurrency market.

ALPHACHAIN CAPITAL MONTHLY REPORT

PAGE 12

MARCH 2020

ETH TRENDING ALPHA STRATEGIES

What's New?

1. As many of you now know we have now upgraded both of our ETH Trending Alpha strategies onto the new structure which now include interest bearing USDC (cUSDC) when the assets sit in cash as well as a more aligned fee incentive model for the managers, benchmarked against ETH. 2. Mid-march saw the release of ETH Trending Alpha ST 2.0 and its performance optimisations.

3. Beginning of march saw the release of ETH Trending Alpha LT 2.0 and its performance optimisations.

4. I published an article on 'Fund Management on Ethereum' explaining some of the issues with the fund management industry and how Ethereum helps to solve many of them.

| ALPHACHAIN CAPITAL

PAGE | 13

Data as of 13/04/2020

ETH TRENDING ALPHA ST (ETAS)

March 2020 Key Facts

Launch Date:

25/02/20

Token:

ETAS

The objective of the set is to provide capital growth over

Manager:

Adam Haeems

the medium to long term while beating its benchmark

AUV:

$750k

asset. The set will aim to meet its objectives by employing

Benchmark:

ETH

two primary investment techniques:

Base Currency:

USD

1. Formula-based trend following 2. Compounding-based position sizing Performance (% return) Mar-20 ETAS (vs ETH)

+76%

ETAS (vs USD)

0%

Since Inception* +82.8%

-12.8%

ETH/USD

-39.12%

-42.85%

BTC/USD

-24.91%

-30.75%

*Data from 25/02/20 to 13/04/2020. Past performance is not necessarily a guide to future performance

Performance Analysis Since 25/2/2020

Charges

% Positive Months:

Entry & Exit Fees:

100%

Codes

Best Month:

+76% (Mar '20)

Performance Fees:

Worst Month:

+76% (Mar '20)

Streaming Fees:

Average Month:

+76% (Mar '20)

0.00%

Token Ticker:

ETAS

15.00%

Token Type:

ERC20

2.00%

Set Page:

TokenSets

Token Address:

ETAS

Contract:

Etherscan

Monthly Performance (% return ETH) Jan 2020

-

Feb

Mar

Apr

-

76%

-

May -

Jun -

Jul -

Aug -

Sep

Oct

Nov

-

-

-

Notes

1. ETH and BTC data from Binance.com 2. Past performance is not necessarily a guide to future performance 3. Since inception data includes performance from 25/02/20 (inception) to 13/04/20 (time of print)

Dec -

Total +82.8%

ALPHACHAIN CAPITAL MONTHLY REPORT

PAGE 14

MARCH 2020

ETH TRENDING ALPHA ST (ETAS) It’s been a strong start for the ETAS strategy on TokenSets. As of writing ETAS is currently up 82.8% vs ETH since inception on 25th February 2010.

While our in-house ST model completed two successful shorts during March (posted in our Telegram group) the ST set decided to stay in cash during this period since we are not yet able to short.

This helped preserve 100% of set buyers capital during one of the most aggressive selloffs the market has ever seen (see below) and made up the vast majority of outperformance vs ETH to date.

The ST set remains the best performing social trading set since inception in ETH terms.

Figure 1: ETAS performance (green) vs ETH (blue)

There were no trades in March for the ST set.

| ALPHACHAIN CAPITAL

PAGE | 15

Data as of 13/04/2020

ETH TRENDING ALPHA LT (ETA)

March 2020 Key Facts

Launch Date:

11/02/20

Token:

ETA

The objective of the set is to provide capital growth over

Manager:

Adam Haeems

the long term while beating its benchmark asset. The set

AUV:

$85k

will aim to meet its objectives by employing two primary

Benchmark:

ETH

investment techniques:

Base Currency:

USD

1. Formula-based trend following 2. Compounding-based position sizing Performance (% return)

ETA (vs ETH)

Mar-20

Since Inception*

+42%

+46.2%

ETA (vs USD)

-1.2%

-1.2%

ETH/USD

-39.12%

-42.85%

BTC/USD

-24.91%

-30.75%

*Data from 11/02/20 to 13/04/2020. Past performance is not necessarily a guide to future performance

Performance Analysis Since 25/2/2020

Charges

% Positive Months:

Entry & Exit Fees:

100%

Codes

Best Month:

+42% (Mar '20)

Performance Fees:

Worst Month:

+42% (Mar '20)

Streaming Fees:

Average Month:

+42% (Mar '20)

0.00%

Token Ticker:

10.00%

Token Type:

1.00%

ETA ERC20

Set Page:

TokenSets

Token Address:

ETAS

Contract:

Etherscan

Monthly Performance (% return ETH) Jan 2020

-

Feb 0%

Mar 42%

Apr

May

Jun

-

-

-

Jul -

Aug

Sep

Oct

-

-

-

Notes

1. ETH and BTC data from Binance.com 2. Past performance is not necessarily a guide to future performance 3. Since inception data includes performance from 11/02/20 (inception) to 13/04/20 (time of print)

Nov -

Dec -

Total +46.2%

ALPHACHAIN CAPITAL MONTHLY REPORT

PAGE 16

MARCH 2020

ETH TRENDING ALPHA LT (ETA)

Our LT set went live on 11th February while our in-house LT model was already in a trade.

We therefore opened the set in ETH approximately half-way through the trade. This resulted in the LT set closing at approximately breakeven while it was a successful trade for the in-house model.

Figure 2: LT Trade closed in profit

During the remainder of March the LT set also decided to stay in cash, again preserving all set buyers capital during the 65% drop resulting in +46% gain vs ETH at time of writing.

ALPHACHAIN CAPITAL MONTHLY REPORT

PAGE 17

Figure 3: ETA LT performance (green) vs ETH (blue)

While we are still very much in a long-term downtrend, the LT was nimble enough to catch the bull move early Feb as indicated by the arrow in the chart below.

Figure 4: ETA LT catching up-trend early Feb ’20

While the model will trade less often compared to the ST it is certainly trading as it was initially intended, catching some of the larger trends that evolve in the market. When we start to see some significant upwards momentum with a trend beginning to emerge, we should see LT re-enter the market.

Our Address: Abbey House, 25 Clarendon Road, Redhill, Surrey, RH1 1QZ, UK Our Email: info@alphachain.co.uk Blog: https://medium.com/@adamhaeems Alphachain Capital: https://www.alphachaincapital.co.uk/