Under The Hood - January 2022 - Crypto Autopilot
The market capitalization of the top 200 crypto assets is now where it was in early February of 2021 before euphoria gripped the markets. But is it cause for concern? Maybe not.
OSOM is the all-in-one Crypto Wealth Manager. With wallets, exchange, Crypto Robo Advisor, DeFi Earn to lend in DeFi, and Crypto Strategie, it is all you need in a Crypto Asset Manager. Our bots trade and invest for you with a long-term perspective so you don't have to. From crypto on-and-off ramps to passive income and diversified portfolios, OSOM has you covered.
We offer a Crypto Wealth Manager with a Robo advisor and strive to fully automate your crypto trading and crypto passive income strategies thanks to artificial intelligence, but we also think it's worthwhile for you to understand the crypto revolution. Our bots get your assets to where they need to go so you don't need to do anything manually, but you'll better be able to assess the crypto strategies we propose to automate if you understand the state of play.
It's been rough in the markets since November, and, as you'll see, January didn't offer better conditions. In fact, right now, it looks like all the gains since February 2021 have been erased. The market capitalization of the top 200 assets excluding stablecoins is now roughly where it was in early February of 2021 before euphoria gripped the markets. But is it cause for concern? Maybe not.
For context, all markets are having a tough time. The stock market, in general, has had the worst month since Oct 2020. The Nasdaq has the worst January since 2008. Inflation and interest rates on the rise in the US are leading the market participants' behavior. What we're seeing is a bit of a typical rotation from "Growth" stocks to more "value" stocks: away from tech and into banks, telcos, and cars.
Crypto, being seen as a "risky" asset and, in many ways, as a "tech" asset, only follows that investors treat it somewhat similarly to tech stocks. The fact that it's perceived as riskier because it's very young only enhances the severity of that response. And the newer the asset, the more it is perceived as a "risky" bet, so it stands to reason that BTC is doing a little better than its peers.
But as you will be able to read below, all that may be nothing but noise when looking at the long term. There have never been so many developers working on Web3 and the ecosystem numbers look excellent.
The OSOM Crypto Autopilot € performance was -30.14% while the ₿ performance was -17.15%. That's in a market where the index of the Top 200 excluding stablecoins did -22% and Bitcoin lost -19%. TFuel, NEAR, and Loopring helped the ₿ performance while GALA and LUNA pulled most in the other direction.
The Autopilot holds: BTC: 35.9%; BNB: 14.1%; KLAY: 11.7%; NEAR: 11.6%; LUNA: 8.7%; ATOM: 7.1%; GALA: 4.%; CELO: 3.7%; ONE: 2.2%; IOTX: 1.1%
This month we look at the much anticipated Electric Capital Developer report which - in 130 slides - shows that we reached new all-time highs in terms of Web3 devs and that they tend to stick around even when prices decline for a bit. We mention AAVE's new product to let institutional investors play in DeFi and take a look at Ethereum's earning report and roadmap before concluding with Terra(LUNA)'s recent further decentralization efforts.
For February, we talk about following some recent developments on Polygon, the wonderland.money saga and Messari's new "Governor" platform to follow DAO governance.
We end with letting you know about Anton's - our CEO - recent appearance on our podcast to talk about this year's CEO letter.
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.
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🔬Markets: Focus on Inflation and Interest Rates
(1) The Global Market Capitalisation of Crypto has been pretty much steadily falling since November 2021 and closed the month about € 400 Billion lower than where it started. That's roughly a 20% drop. It's even a 22% drop if we focus on the Top 200 and exclude stablecoins (INDEXNASDAQ: CMC200).
Bitcoin, which had already lost about 19% in December, lost a further 15.62% in January to end the month at €34,501.82
Bitcoin, as well as the market cap of the Top 200 assets excluding stablecoins, is now roughly where it was in February of 2021 before euphoria truly kicked in. Looking at those charts highlights the importance of adopting a long-term perspective when looking at investing in an asset class this young.
(2) In relative terms, Bitcoin did well this month and the Market Capitalisation excluding BTC did worse than the market overall, losing 36.73% if we take the Top 200 excluding BTC and the stablecoins (INDEXNASDAQ: CMC200EX).
As can be seen from this visualization from Cryptobubbles.net, outside of the dollar stablecoins (USDP, USDT, USDC, BUSD, DAI,...) there were not many assets beating Bitcoin.
Amongst the (73) assets investable in the OSOM Crypto Autopilot Universe, there was only Fantom (FTM), Decentraland (MANA), and Cosmos (ATOM), which actually outperformed Bitcoin over the past 30 days; and only by a couple percent.
(3) The OSOM Crypto Autopilot is holding as best it can in this market but it has also endured some losses. This month the € performance was -30.14% while the Bitcoin performance was -17.15%.
The coins that most contributed to the positive Bitcoin performance this month were TFuel, Near, and Loopring. The two most polling in the opposite direction were GALA and LUNA.
Since 26 September 2019, that’s an 815.19% performance in € and a 101.47% in BTC. That’s 156.47% and 34.71% annualized, respectively.
As a reminder of the importance of patience in this market, here is an analysis of the average, minimum and maximum returns (%) when investing in the OSOM Crypto Autopilot between Sept 26, 2019, and Jan 30, 2020, depending on the time horizon of the investment, excluding fees and in EUR.
Those who held their investment for 400 days would on average have made a return of 548.93% and even when buying and exiting their investments at the very worst points in time they would still have enjoyed a return of 32.78%. But over a month the performance could have been -58.56% or 157.29%; making it a bit of a coin toss.
At 500 or 600 days, anyone yet has to see a loss.
Don’t let volatility play with your head or mess with your mood. Stick to your plan.
🤿 Autopilot Deep-Dive
💰 What are the holdings in the Autopilot Exactly?
As February rolls around, the OSOM Crypto Autopilot is holding a relatively concentrated portfolio of 10 assets, after having held up to 15 at the same time earlier in the month. That's out of the 73 currently whitelisted.
BTC: 35.9%; BNB: 14.1%; KLAY: 11.7%; NEAR: 11.6%; LUNA: 8.7%; ATOM: 7.1%; GALA: 4.%; CELO: 3.7%; ONE: 2.2%; IOTX: 1.1%
✍️ Interesting Crypto Autopilot Moves in January 2022
With markets generally down, there wasn't any movement on the assets in the universe. Some assets are under consideration for inclusion in the universe but their maturity is yet to be determined.
The most interesting thing to note is that the Autopilot seems to be going from a strategy of wide diversification - as it held up to 15 assets this month - and concentration as the end of the month sees it holding only 10.
The Luna position, which had again been included in the basket to the tune of 23% at the end of December, was slowly wound down to represent only 8.7% today.
📅 Crypto News & Happenings in January 2022 - Month in Review
TL;DR, in the words of David Hoffman: "prices bad, but crypto still good"
We leave the analysis of short-term price action and dive into things that are more meaningful for the long term for a little bit. Because once the fear, uncertainty, and doubt around the US Federal Reserve's actions and inflation will have dissipated, the market should hopefully start looking at fundamentals again. The market can stay irrational for a long time, but not forever, so if you are in it for the long term, here is some of what we believe is worth considering.
(1) Electric Capital has released their annual developer report. We had also shared it with you last year, and it's interesting to see the progress made.
Indeed, no devs = no decentralized apps (dapps). No dapps = no fees. No fees = no point. Because if there aren't any fees paid to use the Network, the assets backing a layer 1 chain cannot capture any value.
So while fees are a good "lagging indicator" for an ecosystem's health, Developers are a good "leading indicator" of an ecosystem's future health. This is why we like to have an idea of what layer 1s devs are joining.
So, what is the report saying? We read the 130 slides so you don't have to, and here are the highlights we found most interesting:
- 34,000+ new developers committed code in 2021 --- this is the highest in history. To be clear: there have never been this many people working on Web3. And the pace at which they are joining is accelerating.
The largest ecosystems (more than 300 developers) are Ethereum, Bitcoin, Polkadot, Cosmos, Solana, BSC, NEAR, Avalanche, Tezos, Polygon, and Cardano, each with 250+ monthly active developers
We told you "buidlers keep building". EC shows it with the commits: "Developer growth goes up with price, but holds steady through bear markets. Across 2018 and 2019, monthly active developers have stayed flat around 11,000 even as prices fell more than 80% from peak."
For the “smaller” ecosystems (with 50 - 300 developers), the fastest-growing ones are Terra, ICP, Fantom, and Harmony. They all multiplied their open-source developer numbers by 4.
Whether or not you are a developer, if you want to join the people building Web3, this Twitter thread has some interesting links to get you started. And if you are a developer, this thread by Nader Dabit - who has documented his journey since April 2021 - lists his 17 favorite videos and guides.
(2) Moving on to what developers have actually built, AAVE has added a "permissioned" (read "invite-only") liquidity pool alongside its decentralized product to draw in institutional participants who need different forms of regulatory compliance. It's called AAVE Arc and was launched in partnership with Fireblocks.
There are now "30 licensed financial institutions to participate on Aave Arc as suppliers, borrowers, and liquidators." It shows that everyone - from you to international actors - is interested in the possibilities offered by decentralized finance.
(3) As we said above, the magic formula is "protocols+devs+dapps = protocol revenues". We've covered the Devs, we've covered an app, and now let's take a quick look at Ethereum as if it were a company, and understand its earnings report for 2021. Unlike a traditional company, everyone can put together an earning's report for the blockchain because all the data is publicly available. But not everyone does because it's really not that simple to query that data on the blockchain. Thankfully, the good people at Bankless did pull the Q4 earnings report for Ethereum.
What it shows is an astounding growth in revenues (up by over 1700%) and usage, and a decrease in the rate at which ETH is issued (thanks to EIP 1559).
(4) This month also gave us the opportunity to listen to Vitalik Buterin, the Ethereum founder, talk about the future of Ethereum on Blankless.
If you are anything like us, you'll find that episode: fascinating and crystal clear, but a little impatient at the fact that it's probably going to take another 6 years to achieve (Ethereum is 6 years old). It looks like "the merge" is still expected in 2022, but the other items will be shipped after that.
We think it's really important that you pay attention to the "'decentralization" aspect of the discussion. Because only something sufficiently decentralized is censorship-resistant. So only something sufficiently decentralized is robust enough to be "sovereign". And Ethereum's focus on decentralization is in great part why it's so horribly expensive to use today.
If you are looking for a way to keep wealth diversified into another sovereign state than the one you live in - and you consider Ethereum as a sovereign state; you need to grasp how important it is to have something that' absolutely and radically censorship-resistant.
If the government whose reach you are trying to mitigate can order developers to blacklist your address, you might not be achieving the goal you set out for yourself. This might not be a problem in a country with a stable currency and a stable government, but there are plenty of countries out there that do not fit that description.
If you want to see the roadmap as proposed by Vitalik, you'll find it here. It is to be read from left to right, but the vertical order doesn't matter.
As the year progresses, keep an eye out for "the merge" and the progress of "true" Layer 2's such as Optimism, Arbitrum, zkSync, and StartkNet.
(5) Ethereum is not the only chain recognizing the importance of decentralization. Terra(LUNA), the up and comer, is also putting a lot of effort into further decentralizing. To that effect, it has recently set up a non-profit organization "LFG". It is based in Singapore and mandated to build reserves supporting the $UST peg amid volatile market conditions and allocate resources supporting the growth and development of the Terra ecosystem. Terraform Labs gave LGF ltd 50 million LUNA (somewhere between €2B and €4B depending on recent market conditions).
❤️ What Does February Have in Store for us?
Here are a couple of things we will be keeping an eye out for in February of 2022.
(1) The impact of Polygon's own EIP1559. Polygon didn't have a very easy January as a game saw it get completely congested as it was passing EIP1559, aimed at burning fees the same way Ethereum does (not that the two were related). We'll be keeping an eye out for the impact of that move and the stability of the network overall.
(2) If you follow DeFi news, you might have seen the "Wonderland.money" saga. (Past) crimes, anons, whistleblowers, a Billion dollars in treasury, a lot of Twitter activity, and calls for resignation. It had all the ingredients of a great movie.
It's from a relatively "small" (but influential) corner of DeFi but we'll keep an eye on it to see if it has any ripple effects.
(3) Messari has recently come out with "Governor", a tool to track DAO activity. We'll keep an eye out for anything interesting. It's definitely a good tool to have as combing governance forums is a pretty tiresome job.
🤝 A couple things before we part
If you want to know more about OSOM and what goes on behind the scenes, read our CEO's letter or listen to the podcast episode where he goes through it all.
Behavioral economists have found that the start of the year is a great time for new financial resolutions. It might go great with Dry February. So think about putting some time aside to see what you want to be doing for your money in 2022. It's likely that your future self will thank you. And if 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. Did you know you can easily make monthly deposits into Crypto Autopilot and DeFi Earn directly from your bank account? Now you know.
If you have a business or know someone who does ⚖️ and would you like to invest in Crypto and/or make or receive Crypto Payments, we now accept companies as customers, so just go to app.osom.finance, click "create account" and make sure to tick the box ☑️ Business account under the "password" field. For questions, just reply to this email.
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That's all, folks! 👋 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!
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.
OSOM is the all in one Crypto Wealth Manager. With wallets, exchange, Crypto Robo Advisor, DeFi Earn to lend in DeFi, and Crypto Strategies, it is all you need in a Crypto Asset Manager. Our bots trade and invest for you with a long-term perspective so you don't have to. From crypto on and off ramps to passive income and diversified portfolios, OSOM has you covered.
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