September 2019 – Commentary on Cryptocurrency Markets

September witnessed the cryptocurrency markets continued retreat from yearly highs with the notable collapse of a 3-month long range that the BITX entered after reaching a high of ~15,059 at the end of June. In typical crypto-fashion, that range was broken as prices dramatically fell ~17% in a single day.

Over the last 3 months, these markets have exhibited strong surges followed immediately by equally strong retreats; a type of range bound behavior that challenges the systematic long-volatility strategies run within the Nest Fund. The breakdown is certainly a welcome respite. Where do the markets go from here? Cryptocurrency prices are reflexive in nature — i.e. they are dependent on what everyone else believes and those individual perceptions are constantly changing. This results in a market that weaves in and out of forceful positive and negative feedback loops. The BITX’s breakdown from the 3-month range does open a path back towards normality in these markets: trends, trends and more trends. It’s certainly possible the market reaccumulates and we begin trending back to new yearly highs but there would be no surprise from our team if prices continue towards a double bottom of 2018 lows, or even lower.

The Nest Fund will continue to systematically enter and exit the markets to exploit these persistent feedback loops. Our goal is to compound investor capital in advantageous market conditions and protect during the significant downturns. Short strategies are now an active element of our portfolio and contributed positively to September’s return profile. Keep an eye out for our upcoming research as we dissect the results of a variety of different investing strategies within the cryptocurrency realm as well as explore implications from traditional asset classes that may serve as a guide moving forward.