Under the Hood - June 2022 - Crypto Autopilot
The Autopilot is doing swimmingly.
No trend reversal for Crypto prices. As the tide goes out, we keep seeing who's swimming naked, and that's quite a few people. The Autopilot, however, is swimming like a fully dressed Michael Phelps.
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The OSOM Crypto Autopilot € performance was -31.93% while the ₿ performance was +5.79%. That's in a market that lost between 27 to 34% in €, depending on how you slice it. BNB, TRX, and MKR offered the most support
The Crypto Autopilot holds: BNB: 31.1%; XLM: 26%; MKR: 17.9%; BTC: 12.8%; XRP: 10.9%; KLAY: 1.2%
In this month's recap of crypto news, we mostly look at the prospects of the Ethereum merge, the troubles of crypto lenders, and the 🇪🇺 regulations.
We also repeatedly tell you about our new referral deal
And for the details, read below ⬇️ If you don't want to read it 👀, we can deliver it to your ears in a couple of days! 🎶 Just sign up for the podcast. We also have it on Youtube if you don't have a podcast app. And if you lose it in your mailbox, it's on our blog.
We only send an email once a month but we do a podcast a little more frequently, so maybe you'll learn something fun.
🔬Markets: It's all Macro
All markets are hurting. Even asset classes that are supposed to be safe are taking a beating. The de-facto "refuge" assets, the Global government bond markets, are even on course for the worst year since 1865, according to Bank of America. And the S&P 500 capped its worst first half in more than 50 years. And the Nasdaq is 30% below its all-time high of November 2021. Crypto being on the "innovative" side of things, it makes sense that it isn't spared from those "macro" fluctuations and that it is even more affected. The global crypto market is down 70% from its November 2021 high.
It's mostly all from inflation (from the "war" against covid) and the literal land war in Europe. So it makes sense that it gets compared to WWI and WWII.
What's a little surprising is how much crypto-skeptics like to point out how much Crypto is tanking without taking the time to put it into a broader context.
Currently, Bitcoin is back to Q4 2020 prices, true. But so is gold. The Euro has lost 15% from its Q4 2020 prices. And Facebook has lost 40% of its value since then. So why so much talk about Bitcoin? Schadenfreude? 🤷
Just in case you are wondering, that's not the case of the Autopilot. In €, the Autopilot is up 105.77% since 20 December 2020. And in Bitcoin, it's up 107.34%. Long time's the charm ✨.
1️/ So, yes, as most markets were this month, the Global Market Capitalisation of Crypto is continuing its contraction.
It held relatively steady for the first third of the month before finally dropping below the €1 Trillion mark and then stabilizing around the €800 billion level. That's a loss of 33.29% over the month.
Bitcoin had a particularly bad month, losing 36.25% of its value to close at €18,881.34
2/ If we exclude Bitcoin from our calculations and focus on the market capitalization excluding BTC, then the numbers do look somewhat better, with a 27.84% loss only. If we look at the Top200 crypto assets without Bitcoin and stablecoins, the contraction is 32.59%. It makes sense to remove stablecoins when looking at how the market is doing because today they're worth about 15% of the "on-chain" value.
The bottom line is that the market capitalisation of crypto assets is down somewhere between 27 to 34% depending on how you like to look at it.
3️/ The OSOM Crypto Autopilot did again a little better than the market this month. And over the long term every "little bit" helps. This month the € performance was -31.93% while the Bitcoin performance was +5.79%
Large scale & interactive chart available here. **Since 26 September 2019, that's a 368.45% performance in € and 85.47% in BTC. ** That's 74.92% and 25.07% annualized, respectively.
🤿 Autopilot Deep-Dive
💰 What are the holdings in the Autopilot Exactly?
It’s the start of the second half of 2022 and the holdings are as follows. BNB: 31.1%; XLM: 26%; MKR: 17.9%; BTC: 12.8%; XRP: 10.9%; KLAY: 1.2%
✍️ Interesting Crypto Autopilot Moves in June 2022
The list of assets the Autopilot A.I. can invest in changed again quite a bit this month (we call that "the investable universe"). As opposed to the euphoric phase of market cycles when we can add a lot of new projects, this month it was all removals. After removing the 5 tokens below, the Autopilot now has a choice of 67 tokens to invest into.
❌ Omisego (OMG) was removed because we don't currently see the project and its token going anywhere.
❌ Tron (TRX) was removed on June 13 because of fears that the de-pegging of USDD would lead to forced-selling of TRX. Close to 30% of the Autopilot ideal basket was held in TRX and there was a non-zero risk of a second "Luna-like" event, and it was deemed better to err on the side of caution. We talk more about Tron and why it was removed in this article & in the corresponding podcast episode.
❌ SiaCoin (SC) was removed because we couldn't find enough reliable liquidity to trade it.
❌ Bancor (BNT) was removed because they've stopped their attempt at solving the Automated Market Maker's liquidity provider "Impermanent Loss" by issuing new tokens. Doing it in the first place was not a great idea, but stopping the program in the middle of one of the worst months for price action in crypto led to a real loss of confidence.
If most of what we've written above sounds like gibberish but you want to understand, The DeFiant has a good piece that covers the details with links to resources.
❌Ren (REN) was removed on June 27 because it no longer satisfies the technical requirements (market capitalization + liquidity) to be included. The market capitalization is actually not bad, but the liquidity isn't great. We still like the idea of Ren, so if the parameters improve, we'll have it back in.
🏎️ What are the coins driving the performance?
The Autopilot held pretty much the same basket throughout the month, with the exception of Tron which got booted mid-month. Apart from Klaytn (KLAY), all tokens contributed positively to the BTC performance this month. BNB, TRX, and MKR contributed the most positively. It's coincidentally also the 3 tokens we covered in our recent "get to know" article & corresponding podcast episode.
📅 Crypto News & Happenings in June - Month in Review
1/ Binance set up a $500 million Web3 fund. Showing that while prices markets are down, some do want to keep it developing.
2️/ Ethereum merge 🐼 tracking: the Ropsten testnet merge went fine, "Gray Glacier" pushed the difficulty bomb back by 100 days (leading one to believe that the merge should happen before early Octobre). The Sepolia Testnet is merging in the next couple of days. Then there will be only one more testnet to go. So it seems to all be going according to plan even if it is nerve racking and everyone would like to see it move faster. But when you're handling about $ 200B worth of assets and trying to change the engine while flying, 3 dress rehearsals is probably not unreasonable.
3️/ NFTs are getting noticed by marketers. Salesforce has started looking into them and a Belgian startup called Sayl.Finance is using the term "Owner Relationship Management" for their CRM platform that uses NFTs to enhance brand >< users relationship.
4️/ We mentioned above that on June 13th is when the markets took a turn for the worse. That's because it's the day that Celsius (the very centralized crypto lender) made it clear that it couldn't honor withdrawals. And started selling some assets to try and remain solvent.
The fear and the forced selling by Celsius created a drop in prices, which created liquidations because the people who had borrowed against their crypto assets couldn't repay their loans. A lot of forced selling meant that more assets were for sale and prices were further depressed. Which led to a little more liquidations. It was then "rinse and repeat" of that loop a couple of times until it was all liquidated.
It's the same principle as when prices go up (people borrow against their crypto to buy more crypto, pushing the prices higher), but in reverse. So instead of compounded buying pressure, we get compounded selling pressure.
It's a little violent, but really nothing that a long-term focused, disciplined, and patient investor should be worried about.
On the contrary, long-term focused, disciplined, and patient investors usually see that as an opportunity to buy some assets at a discount from distressed sellers. It's exactly the behaviour we've seen this month amongst our customers at OSOM. Lots of deposits and almost no withdrawals this month. And we're very proud to have such smart customers ❤️.
As a reminder, at OSOM we should never be in a position to freeze your funds for insolvency as Celsius did. We are a custodian, we don't do anything with your assets for our benefit: we don't trade with your assets, we don't lend your assets, we don't leverage your assets. If they are traded to follow the Autopilot, it's because you asked. If they are lent in DeFi it's because you asked. We put in a place the strategy you choose and do nothing else with those assets. If they are in the wallet, they stay in the wallets. Always 100% fully backed. We don't just give you a claim on those assets, those assets are there and they are yours. It's the same reason why should we go bankrupt, our creditors can't lay claims on your assets.
5️/ The Ethereum community was visibly shaken when one of its top projects - the decentralized exchange "dYdX" - decided it would launch a new blockchain based on the Cosmos SDK instead of a design as an Ethereum Layer-2. There are however some good reasons and it doesn't mean everything will leave Ethereum.
Another great news is that while Celsius (and other crypto lenders and hedge funds) were collapsing because they had not been prudent enough, the (truly) Decentralized Finance protocols are doing absolutely fine. AAVE, Maker, Compound, Uniswap, and Curve are just humming along, collecting fees, working as intended. Even though their "total value locked" was divided by 3, there was no stress whatsoever. That's really cool and it likely means that we all have some very solid bedrock to build on.
6️/ In the 🇪🇺 an agreement was reached between the parliament, the council, and the commission on two key pieces of legislation for Crypto.
First is the "Travel Rule", which aims to find a way to apply fiat Anti-Money Laundering guidelines to Crypto.
Second, is the much broader "Market in Crypto Assets" legislation.
They were both agreed upon at the very last minute before the end of the French presidency of the EU and the texts haven't been released yet so we don't have all the details.
What we do know is that it's not as bad as it could have been and it won't kill crypto. But it's also definitely not as good as it could have been.
And it looks like that's partly because some MEPs seem to have decided that being very willingly misinformed about the technical aspects of crypto and fantasizing about remote risks would be a career-making moment (and they were right, they got a lot of media attention waving around those very exaggerated threats. A little like Sen. E.Warren and her now-famous shadowy super coders).
While "not killing crypto" is good, we were hoping (and actively advocating for) a framework that would unleash creativity and capital in Europe so that it would become THE place for crypto and regain digital sovereignty. But we definitely didn't get that. And with Lagarde at the ECB already advocating for a MICA2 that would cover DeFi, our own advocating days are far from over.
As if to mess with the EU institutions, June 30th is also the day Circle decided it would launch its EUROC stablecoin. Circle is the issuer of USDC. It's good to see an institution that's widely trusted issue a € stablecoin. Now let's see if anyone wants it. Because traditionally, volumes for € stables have been very limited.
🌞What Does July Have in Store for us?
1️/ Price-wise, it's unlikely to be really fun. The US FED is likely to raise rates again, which usually is not great for tech companies. Also, the EU ECB should be doing the same, so that is definitely not going to help.
But those central banks have no choice. With inflation somewhere between 8 and 20% depending on where you look and what exactly you look at, they have to tighten the money reins.
Mid-July we will start seeing the "earning calls" of public companies. Everyone expects they are going to say that they made fewer profits than anticipated and we are likely to see more losses if those numbers are even worse than expected. If institutions take risks off the table it is likely to affect crypto too.
2️/ We'll keep watching all the cool Ethereum merge rehearsals and progress and keeping our fingers crossed that it all goes smoothly so we can look at an actual merge in August or September.
Other than that, summer will be in full swing and many people will be taking time off in the northern hemisphere, so it will likely be a little quieter. Let's see.
🤝 A couple things before we part
We hinted at it last month and gave you the link at the top, but in case those hints were too subtle let us tell you again: Our referral program has been updated. You can refer as many people as you want, the sky's the limit! You can choose between a fixed referral bonus or to share in our revenues from the people you refer 🤑!
You might have noticed that we often sign off with a quote from Stephen Dubner from Freakonomics. We love the podcast and it just so happens that they are releasing a 3 parts-series on crypto. Two out of the 3 episodes are out and it's an interesting composition. You might want to check it out while chilling out.
If after reading all this you are as convinced as we are that a lot of assets are underpriced right now and you find that you want to dollar-cost average your way into a portfolio with some crypto - #DCA 🐜 - remember that you can start from about 100€/month in the Autopilot and 30€/month in DeFi Earn. You can easily make monthly deposits into Crypto Autopilot and DeFi Earn directly from your bank account.
That's all for this month! 👋As always, thank you for your trust. Feel free to let us know if you have any questions, ideas for how we can improve - or anything else - by replying to this email!
And as Steven Dubner always says: Take care of yourself and, if you can, someone else, too.
This is not investment advice, nor a solicitation. Crypto markets possess a high level of risk, including volatility and regulatory uncertainty. Past performance does not constitute a guarantee of future results in any way. You are solely responsible for doing your own financial, legal, tax, or investment research before taking any actions.
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The Autopilot is for medium to long-term portfolios, which means 2.5 to 5 years. See the chart for an at-a-glance understanding of how time increases your chances for positive returns.