Under the Hood - October 2022 - Crypto Autopilot
An interesting month on multiple accounts: regs, hacks, prices, governance.
With two months to go until the end of the year, let's look back at what happened in the Crypto markets and what the OSOM Crypto Autopilot has been up to in October of 2022.
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The OSOM Crypto Autopilot € performance was 4.87% while the ₿ performance was 0.23% in a market that also did very well overall.
The OSOM Crypto Autopilot holds: BNB: 31.8%; XRP: 20.8%; BTC: 16.8%; MKR: 10.7%; CHZ: 9.8%; LTC: 7.5%; CAKE: 1.6%; EOS: 0.9%
We take some time this month to look back at what happened to Ethereum since "The Merge", Crypto Hacks, MakerDAO, the sheer numbers of devs working in Web3, and CAKE.
We also give you a list of interesting content we saw in October that is still relevant if you want to dive further down the rabbit hole.
🔬Markets: Back to 1T
➊ The Global Market Capitalisation of Crypto is back over €1 Trillion since Oct 28 after starting a big leg-up on Oct 25. It gained 6.56% over the month.
Bitcoin, like the global market cap, did alright, with a positive performance of 4.62% over October. Roughly in line with the S&P500's performance.
➋ If we exclude Bitcoin from our calculations and focus on the market capitalization excluding BTC the performance comes to +7.97%. Similarly, the Top200 cryptos excluding stablecoins gained 10.90%, while the Top200 excluding stablecoins and Bitcoin gained 19.52%.
The conclusion is that Bitcoin did alright, but most "large" crypto alternatives did better. ETH did about +17%, for example.
➌ The OSOM Crypto Autopilot, after ripping through September, was more in line with the overall market in October. This month the € performance was 4.87% while the ₿ performance was 0.23%.
Since 26 September 2019, that’s a 511.14% performance in € and 122.36% in ₿. That’s 79.35% and 29.42% annualized, respectively.
🤿 Autopilot Deep-Dive
The only change in the list of assets the Autopilot can buy was the removal of Helium (HNT). It is moving from its own chain to Solana, and it was getting difficult to trade reliably. So, for now, it's out. Should things change it might very well make a comeback.
If you read this monthly update diligently, you'll notice that the assets have not changed from a month ago. The weights are a little different but, for now, it looks like the Autopilot is happy with what it's holding.
💰 What are the holdings in the Autopilot exactly?
BNB: 31.8%; XRP: 20.8%; BTC: 16.8%; MKR: 10.7%; CHZ: 9.8%; LTC: 7.5%; CAKE: 1.6%; EOS: 0.9%
🏎️ What are the coins driving the performance?
This month the ₿ performance was mostly driven by MKR. BNB helped a little but not nearly as much as last month.
XRP and CHZ, which had been a great help last month, were the worst performers in the portfolio this month. And in € too, they closed the month slightly below where they had started.
📅 Crypto News & Happenings in October - Month in Review
➊ We keep watching ETH. It has been 1131 days since we started the OSOM Crypto Autopilot and we have barely ever held ETH but we still think it's one of the most interesting assets out there, so we want to keep a close eye on its development.
The reason the Autopilot hardly ever held any is well understood: the price of BTC and ETH is highly correlated but ETH has a worse profile when it comes to "downward volatility". Meaning ETH has worse negative price swings. As the Autopilot is all about minimizing drawdowns, BTC is more attractive than ETH.
So, what can we see?
It has been 47 days since "the merge". Since then, there has been a "net*" increase in the supply of 2290 ETH. It would have been around +560'000 ETH under the old "proof of work" system. Additionally, the new ETH issued to stakers is currently locked up and will only be unlocked with the Shanghai hard-fork (expected in 6 to 12 months), so, for now, there is virtually 0 new ETH entering circulation, but 75'321 ETH were burned.
Since there is still quite a bit of activity on Ethereum (about 1.2M transactions a day) and trading volumes remain broadly in line with what they have been over the past year, this fundamental change in issuance is a likely cause for ETH's excellent recent performance.
We fully expect that if the trend continues we will see ETH being added to the Autopilot basket within the next year.
.* The "net" supply is the difference between new ETH issued to stakers and the ETH burned in transaction fees thanks to EIP1559 (currently around 1.5K ETH a day).
➋ October 2022 broke a record mid-month: It's the worst month for crypto "hacks". The prices suffered a bit upon hearing that news but, as we can see, it didn't matter much overall.
One way to look at it is that everything is growing, legitimate use and hacks alike. And as more people experiment, more hacks happen.
The hack of the Binance BSC bridge was a good reminder that all bridges are risky.
➌ MakerDAO is making moves.
First, they voted to invest $500M of their collateral pool into US and Corporate Bonds. It's the first time a DAO takes such a big stake in "real world" assets. And no one can fail to see the irony in the fact that a Crypto entity lends to the US government.
Second, it's undergoing its biggest reorganisation since its creation. But not without resistance. There is a true battle for MakerDAO's soul and a lesson in DAO governance.
➍ It's become a bit of a habit, but we can't help ourselves. In the news, you'll read about hacks and the fact that most of the market is down 60-70% from "all-time-high". And it's all true.
But nothing we can find beats Web3 in terms of people joining and building cool things (most Tech firms are in fact on hiring freezes or downsizing).
As Alchemy reports, "web3 developers are more active than ever. In fact, 2022 has been the biggest year yet."
If we look at 2 key tools which most Web3 devs need to download to get started, we see that the number of downloads has increased 10x since 2018 and is now over 1.5 million per week. That's 3x more than in Q3 2021 when the previous bull market was in full swing.
➎ If you are curious about what the Autopilot sees in PancakeSwap (CAKE), this might help explain it. It was previously only on BNB but has now also deployed on Ethereum. And it's looking at Aptos next.
Inspired by Uniswap it has extended to offer other DeFi features and wants to make those available to more users. Which should be good for its token since it burns CAKE with the protocol's revenues. So "More chains -> (hopefully) more users -> (hopefully) Higher revenue -> (hopefully) burn more CAKE -> price up (everything else being equal)".
➏ We want to keep this monthly update somewhat short, but we'd be remiss if we didn't flag all the good content we saw this month. So, in no particular order:
Kaiko reports in early October that "Bitcoin and Gold Correlation Hits Yearly High"
Luca Prosperi is one of DeFi's most interesting writer and his piece on Liquity is a great explainer of what a truly decentralized infrastructure is.
If you thought that NFTs were just for jpegs of Monkeys, take a look at this chart (and keep in mind that it's not even complete).
Do you know that it's possible to rebuild the entirety of social media with Web3? And that it's actually one of its main use cases? The Social Media Web3 space is on fire right now, and if you don't like Facebook, you'll love LensProtocol. Here is the summary of 1 week in Web3 social.
Debates around policy & regulation for crypto are raging right now. We spent 2 days with the industry talking to the EU regulators on all things Web3. SBF & Erik Vorhees "duked it out" on Bankless over the right approach for the US to regulate Web3. The EU wants to change liability rules for all software, which will definitely impact Web3 (the good news is that you can let them know what you think until December 11. Arguments to help you do that are here.)
🤝 A couple things before we part
Still fresh!! If you like what we are doing but can't use our products because you are in a country we don't support, we have a new solution for you: the OSOM Substack Subscription. We have adapted the list of investable assets for exchanges available in the USA 🇺🇸, Australia 🇦🇺, and for those using Huobi; and will be emailing rebalancing actions to subscribers weekly.
You'll need to do some manual work to rebalance your portfolio, but at least you'll have an A.I. on your side!
You did notice! Last month we removed the section that talked about what we're expecting for the next month. We heard that you all liked the fact that the update was shorter. Thanks for letting us know.
And if you have a different opinion, let us know too. We'll see how we can accommodate this.
💸 🎁 It's all over our social media accounts and probably also already all over your inbox, but in case it was still too subtle let us tell you again: Our referral program has been updated. You can refer as many people as you want, and there's no cap on how much you can make! You can choose between a fixed referral bonus or share in our revenues from the people you refer 🤑
Dollar-Cost Averaging is nearly universally regarded as the best strategy for long-term investors. By creating a standing order with your bank, you can entirely automate the deposits in OSOM. You can start from about 60€ in the Autopilot. Daily, weekly, or monthly, it's always up to you!
That's all for this month! 👋As always, thank you for your trust. Feel free to let us know if you have any questions, or 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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