January 2020 – Commentary on the Cryptocurrency Market

2020 kicked off the year with a boom as cryptocurrency markets displayed the type of parabolic behavior that pulls public interest like moths to a flame. Bitcoin finished the month at $9,338 representing a ~30% gain for the month. The real stars of the show were alternative cryptocurrencies (alts) with dozens of large-to-medium cap cryptocurrencies recording gains in excess of 50% for the month with some crossing the 100% gain threshold. While BTC remains king and will remain so for the foreseeable future, those that dismiss everything else are betting it all on one specific path of many possible outcomes. One of the few consistent truths in financial markets is that history is dominated by the unexpected. At the start of the last decade, no one would’ve guessed an experimental digital currency would rise 895,714,900% from roughly $0.0008 in 2010 to $7165.72 at the end of 2019. However, extrapolating that mind-bending return into the next decade is ignoring the most cliché disclaimer in all of investing, past performance is not indicative of future performance. The book has yet to be written on how this asset class achieves mass adoption. Cycles of speculation outside of, and including, Bitcoin will continue to persist as long as there is a belief in a decentralized future and an uncertainty around future outcomes. The Nest Fund continues to operate under the belief that buying and holding in this space is a losing proposition with low odds of success and high opportunity costs. To that end, the Nest Fund continues to operate short-to-medium term strategies that look to capture value from the boom and bust cycles that are so prevalent in speculative markets.