Weekly Thoughts #4 - Have a thesis and stick with it



April 25, 2018

Like most people in the Western hemisphere, this morning we were hit with a brief feeling of dismay upon checking the status of the markets. At press time the market has traded down 7% in the past 24 hours, with small caps leading the way at -11%. Volumes continue to remain above average with just about $17B of excess in the past day. Most of that has been centralized with bitcoin, ether and not surprisingly EOS. The market appears to have found a bit of a local bottom as we speak, with most of the space slowly reverting higher by 2-3% in the past hour. Here are some of our thoughts for this week:

High intensity interval training is always followed by a brief but necessary cooldown. That is all we will say on today’s market move 🙂

If you want to separate yourself from the pack, have a thesis and stick with it. The age of social media has given everyone a platform to express their views and share their opinions in real time. This is especially prominent in the cryptocurrency world. YouTube has made a number of people that are great at selling (read: pumping) extraordinarily rich. It seems like in the past year that everyone has morphed into a Jim Cramer. FYI – That isn’t a knock on the man. Confessions of a Street Addict is an all time classic and having grown up on a trading floor, we recognize all too well the “Jim Cramer effect” on the short term price of an asset. However our point is that having so many market pundits berading us with their views on what the price of bitcoin will do at any given moment (with no accountability for their words) tends to make the space very noisy. This kind of banter tends to be annoying and useless over time. Unfortunately it’s not going away anytime soon. But we are witnessing that the great sell off of 2018 has left a fair amount of people understandably skeptical about the intent behind their favorite crypto pundits. And that is a good thing. We believe the idea of doing your own research, producing a thesis and then sticking with that thesis is a much better way to play these markets and that this type of strategy will pay off in the long term.

The regulatory risks are still very much a real thing. The negative consequences of punitive regulation to this asset class are risks that tend to get understated when Mr. Market is in a state of euphoria. In the past week, we read a headline that the former head of the CFTC believes ETH and XRP can be classified as non-compliant securities. Though he isn’t part of any regulatory body today, this type of headline is a very big deal. There is an incredible amount of dependencies and relationships that exist between various cryptocurrencies so any type of negative effect for a single name will most likely ripple (no pun intended) to the rest of the market. On the flip side, any type of positive regulatory release will be the single most powerful catalyst to price action we will have seen for 2018. That is why the state of the regulatory environment is something we at Element pay exceptionally close attention to.

*On a side note, we this week caught our first glimpse at the level of promotional marketing that will ensue in the next month. We read that Snoop Dogg will be performing at a party hosted by Ripple during Blockchain Week. Whether or not this stunt pays off in value appreciation for XRP is anyone’s guess. What we do know is that this couldn’t have been cheap. Google search puts Snoop Dogg’s appearance fee at anywhere between $150k-$1m (guess it pays to have a warchest like Ripple’s). Regardless, our hats off to Ripple attracting one of the most well known hip hop artists of a generation. Without a doubt, all the millennials at the event will be checking their portfolios with their minds on their money and their money on their minds.

Thanks for reading everyone. Questions or comments, just let us know.

Portfolio Management Team


Thejas Nalval  | Konstantin Antropov  | Kevin Lu


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