Dear Alternative Investment Enthusiasts, While the FTX saga continued with the $8 billion - or more - in customers’ money still being tracked down, another small headline just barely caught my eye, and I’m sure missed many others’, before Christmas. Danske Bank, a Danish bank that many people worldwide may have never heard of, paid a $2 billion penalty for helping to launder $230 billion, $160 billion of which was done through US banks. Yes, you read that right: almost 29-times the amount we are talking about with FTX! During December, that was one-fourth of the entire crypto market laundered by one single regulated and licensed bank. One of those things that make you go “hmmm?”, as “digital” continues to be the media’s whipping boy apparently.
For the month of December, we are down an estimated -3.75%, while the market (BCGI) was down by -9.46%, BTC -3.30% and NASDAQ -9.06%. While we were down an est. -48.80% for 2022, BCGI was down -70.19%, BTC -64.30%, and NASDAQ -32.97%. All things considered, we felt we were able to weather the storm and continue to outperform both BGCI +29.04% and BTC +24.98% on an annualized basis. As we alluded to in the last update, with FTX’s downfall, we were waiting for the next shoe to drop, and it didn’t take long with Genesis’s (once a leading lender in the space) Chapter 11 filing mid-January. This bankruptcy is again putting pressure on the next set of names…which we can say we didn’t have any exposure to. I like to compare these FTX/Luna/3 Arrow Capital events to throwing a rock into the water. While the first waves are the largest, there are still more (and usually smaller) waves that follow. We had been waiting to deploy further capital until more clarity on the Genesis case was gained, given the explosive potential this larger player had in the industry, and we also first wanted to see the Genesis bankruptcy creditor list. The good news is that after each fallout, the system has aggressively cleansed itself of the brazen or malicious actors, overleveraged positions, and the entangled web of loans and interests. Many service providers and funds have gone under in recent months, resulting in an expedited “survival of the fittest” showdown. With that, we resumed deploying capital into new investments we’ve been scouting and interviewing over the past 6 to 9 months. The time frame gave us the opportunity to see how funds performed under these extreme circumstances. To wrap up, I want to share a fitting quote from Warren Buffet: “Holding cash is uncomfortable, but not as uncomfortable as doing something stupid.” Also, don't forget to save the date and signup for our next live event at SHED in Zug on March 2nd, starting 17:30. More info will be pushlied here. Have a great day and feel free to let us know if you have any questions. Follow us on LinkedIn and Twitter to stay informed. Marc, and your AltAlpha Strategies Team