Planting Coins: 09/24

Management Summary

• KDAC strategy lost 7.2% in August, marking the third consecutive month of losses
• Investors' patience is being put to the test and the continuously high volatility is having an additional impact on investor psychology
• However, such phases are neither new nor surprising, but have always been part of this asset class

What is the crypto investing series? 

This blog post is the nineth report in 2024 about the Kaleido Digital Asset Core Strategy. Read more about our crypto portfolio framework here. Don't forget to sign up to our newsletter to get the next reporting straight in your mailbox! 

Who can keep their patience?

August 2024 has been a turbulent month for both cryptocurrencies and the wider economy, characterized by significant developments that have amplified market volatility. During this period, there has been a constant interplay of macroeconomic pressures, geopolitical tensions and regulatory changes. All of which have contributed to the erratic performance of markets. The culmination of these developments was the market crash with double-digit losses on August 5, 2024, but shortly afterwards prices. The KDAC strategy subsequently lost 7.2% in the month of August.

Turbulent August for both cryptos and the wider economy

Persistent inflation concerns and weaker-than-expected economic indicators such as the disappointing non-farm payroll data led to increased nervousness on the markets. Investors are now anticipating a possible interest rate cut by the Fed in September, which could either stabilize or further unsettle the markets depending on the environment. At the same time, however, the GDP figures were again far from a recession.

The cryptocurrency sector was equally volatile in terms of inflows and outflows. Bitcoin, for example, recorded significant outflows at times, which were followed by institutional activity and significant inflows into Bitcoin ETFs, particularly from BlackRock. This indicates a relatively complex dynamic, with positive price trends tending to be observed during Asian trading, which were then sold off again in the afternoon European time at the opening of American trading. In terms of the diversified portfolio, Bitcoin (BTC), Avalanche (AVAX) and Cardano (ADA) were the best performers. In general, all holdings continue to move more or less in lockstep.

The sixth month of sideways consolidation

US Congress has made incremental progress on crypto legislation, although significant hurdles remain. International pressure for regulatory clarity, particularly from the EU and other leading economies, is influencing the US to potentially accelerate its efforts to create a more coherent crypto policy.

The staking rewards continue to be accumulated on an ongoing basis and held in the respective cryptocurrency. In volatile times, this increases the basis for profiting again when markets rise.

Ongoing coin accumulation through Staking

Not much has changed in the Fear & Greed Index. The increased volatility already observed in July continued in August, with the crash on August 5 being accompanied by the lowest values.

Fear & Greed Index continuously volatile

Outflows from crypto exchanges continue to increase for Bitcoin and the outflow curve is steepening the longer it goes on. By contrast, inflows were recorded for Ethereum in line with the price losses, with exchange holdings increasing by around 10%. However, it should be noted that the long-term outflow trend is still intact, reducing the remaining supply that can be purchased.

The Bitcoin outflow curve is getting steeper and steeper

Ethereum inflows with falling prices

The current crypto market is probably causing investors to lose patience the longer it goes on. After more than six months of consolidation and constantly slightly falling prices, this is hardly surprising. Looking back, however, there have been several such phases, which subsequently led to relatively impressive price gains in rapid succession. In macroeconomic terms, there are currently two opposing forces at work, although it is unclear which is ultimately more dominant. On the one hand, crypto bulls are expecting rising market liquidity, which would be positive for risk assets, while crypto bears are arguing that the markets will collude with the start of the FED pivot and a possible recession. We will stay tuned and look forward to the coming weeks.

Disclaimer: This piece of information is for marketing and entertainment purposes only and should not be taken as an investment recommendation. Remember that all investments involve risk. Please read our full Marketing Disclaimer here.