One cannot escape the pervasiveness of narratives in financial markets and the crypto currency markets are no exception. There is never a shortage of thought leaders who will tell you exactly where the market is going, despite prediction accuracy that should create pause. The most dominant narrative of 2019 has been the Bitcoin and Litecoin halvings and how new all-time highs were right around the corner. At the height of this mania in July, we published research which concluded that a miner reward halving’s impact on price was indiscernible from broader market behavior. Bitcoin and the broader markets have since fallen ~47% from their yearly highs and there is no shortage of explanations as to why. The OneCoin ponzi scheme, miner capitulation, and a Chinese government led cryptocurrency crackdown are a few of the many narratives used to explain this bearish behavior. Could the market really reach new all-time highs in the short term as many would lead you to believe? Absolutely. However, there also exists the very real possibility of new lows and market participants who ignore the potential for new multi-year lows do so at their own peril. The Nest Fund does not participate in price prediction but rather takes a probabilistic approach to these markets by analyzing what’s happening as a function of real-time data. November witnessed the introduction of new data sources designed and developed by our team. This data provides an alternative way to evaluate what’s occurring within these markets using more sophisticated methods of tracking cash flows between market participants. On November 17th, the fund deployed a new strategy into the active portfolio which utilizes new data sources. These strategies provide the first opportunity for the fund to fully weight the portfolio short and allow the fund to benefit economically from major market movements in either direction.
