Dear Clients and Partners,
This month, FTX’s former CEO Sam Bankman-Fried (also known by his initials SBF) continued to dominate the headlines.
For November, the digital assets were down by -16.18% and -17.95%, BTC and BGCI respectively, concluding a very dark month for the industry. However, we are seeing the first rays of light. Some semblance of closure to the entire FTX situation was seen recently with the arrest of SBF in the Bahamas, after multiple law enforcement agencies hammered him with various charges revolving around fraud, conspiracy, and breaking campaign finance laws. After having spent some days at the lone, notorious prison in the Bahamas known as “Fox Hill”, SBF seemed much more inclined to be extradited to a US prison. The new FTX CEO, John J. Ray III, overseeing the bankruptcy, had some clear words during a hearing to describe what had happened at FTX: “This is really old-fashioned embezzlement”.
For the month of November, we are down an est. -17.90% in line with the market, with an annualized outperformance of 16.06% (for BGCI) and 17.39% (for BTC) at a strongly reduced annualized volatility of 29.08%. Our defensive positions had to absorb the realized write-offs of those underlying funds who had used FTX to trade a portion of their assets, while the general market sell-off that followed the FTX collapse was felt in our offensive positions. We have our dry powder in the ready and are intensely scanning the market for opportunities while also being cautious given potential ongoing contagion risk within the market.
In related news, Goldman Sachs CEO David Solomon wrote an interesting article on WSJ titled “Blockchain is more than crypto”. He sees blockchain technology as a promising innovation, despite the current FTX headlines, and especially sees potential within the tokenization of traditional assets, with how companies raise money or investors trade stocks as examples. The technology can be used beyond the financial world, even though blockchain remains largely synonymous to cryptos only for most. We couldn’t agree more as it forms a key basis to our investment thesis: “Cryptocurrency” is only one application of many, with limitless possibilities yet to be discovered and developed.
I’ll leave you with the words of legendary investor Howard Marks: “Move forward, but with caution.”
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.
And on behalf of the team, Merry Christmas and a Happy New Year!
Marc, and your AltAlpha Strategies Team