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Performance Update January

Dear Clients and Partners,

The global markets got off to a volatile start in 2022 with big tech stocks in particular suffering 20-30% losses in just one day. The overall crypto market status as a “non-correlating” asset has been increasingly challenged (or perhaps, even, temporarily dissolved) as we saw an increased correlation to the equity markets throughout the past year. We have seen a divergence from the public to private crypto sector while the public market suffered, as one can see in the Bloomberg Galaxy Crypto Index (BGCI) being down -22% in January. The private sector doubled down on their crypto investments; one example saw venture capital firm, a16z, raising $4.5B for a new crypto fund.

For January 2022, we were down by -5.35%. This negative performance was attributed to our long-only positions, which had to navigate a challenging period that saw the month’s overall performance being impacted by even just a few days of particularly heavy volatility.

To take advantage of this price opportunity, we expanded and entered new positions in long-only and long-biased funds at a great value, which we believe will positively materialize in the coming months in the performance figures. While we believe we are not out in the clear just yet regarding overall negative market sentiment (e.g. interest rates, geopolitical tensions, etc.), and that this can continue to have a short term negative/sideway impact on the markets, it doesn’t change the positive long-term outlook we have for the overall crypto space. We feel well positioned to participate in the next growth wave across promising sectors like gaming, DeFi, NFT infrastructure, stablecoins (i.e. underlying layer 1 blockchains), payment systems, and blockchain interoperability, to just name a few.

After having used these downturns to build exposure in our “offensive” positions, we will look towards increasing our “defensive” positions through market neutral strategies such as arbitrage trades, DeFi yield farming, market making, etc.

I’ll leave you with this quote a “crypto friend” sent me during the turmoil of January:

“All past market declines look like opportunities, all future market declines look like risks.”

Have a great day and feel free to let us know if you have any questions.

Marc S. on behalf of Frank, Dirk, and Marc B.

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