Under The Hood - March 2022 - Crypto Autopilot
War rages on. Weirdly enough, so do the markets.
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The OSOM Crypto Autopilot € performance was +4.91% while the ₿ performance was -1.86%. That's in a market where the index of the Top 200 excluding stablecoins did +8.28% and Bitcoin +6.77%. Terra (LUNA), Waves (WAVES), and Near (NEAR) are most to thank
The Autopilot holds: BTC: 39%; KLAY: 29.8%; TRX: 9.5%; ATOM: 8.2%; LUNA: 7.7%; WAVES: 2.2%; GALA: 1.6%; NEAR: 1.4%; IOTX: 0.5%; KDA: 0.1%
This month we keep our actions to help Ukrainians, details here
In the month's recap, we look at bridges getting hacked and Terra buying Bitcoin. It was the same last month, but this time it's different. We also take a look at interesting builders (MINA, AAVE v3, ETH) and we dive a little deeper into the trouble that the EU has with defining its Web3 ambitions.
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 almost weekly, so maybe you'll learn something fun.
🔬Markets: The war rages on but crypto focuses on bullish news
In February, as Ukraine was ruthlessly and illegally invaded by Russia, crypto assets and the crypto community showed the world they could be used and relied upon to come to people's aid quickly, efficiently, and in numbers.
On the back of that demonstration, it looks like all subsequent news was interpreted in a pretty positive light. Or that is, at least, until a vote in an EU Parliament commission put a bit of a damper on things, showing the world that there is still a bit of education to be done around Web3.
1/ The Global Market Capitalisation of Crypto kept the trajectory it took last months and went up by 14.22%, roughly a € 235 billion move. It's a little less if we look at the top 200 assets and exclude stablecoins, but it's still an improvement of about 8.28% (INDEXNASDAQ: CMC200)
Bitcoin closed the month at €41,124.80, a 6.77% percent increase compared to the close of the previous month.
2/ Bitcoin was far from the best performing asset, though, as **the index for the top 200 cryptos excluding Bitcoin and stablecoins **(INDEXNASDAQ: CMC200EX) moved up 14.26%
For a quick glance at how the top 100 assets did this month, take a look at this visualisation from Cryptobubbles.net - can you spot Bitcoin in the bottom left? It's not easy because GMT had a very good month.
3/ The OSOM Crypto Autopilot took a bit of a breather this month. This month the € performance was +4.91% while the Bitcoin performance was -1.86%.
If you want to know more about Terra (LUNA) and what has been driving the recent frenzy, we've got a podcast episode going into the details here.
💰 What are the holdings in the Autopilot Exactly?
A couple of days into spring in the northern hemisphere, the holdings are as follows:
BTC: 39%; KLAY: 29.8%; TRX: 9.5%; ATOM: 8.2%; LUNA: 7.7%; WAVES: 2.2%; GALA: 1.6%; NEAR: 1.4%; IOTX: 0.5%; KDA: 0.1%
Just as it has been doing since the start of the year, it is therefore holding a relatively concentrated portfolio of 10 assets, which have stayed remarkably consistent across the month.
📅 Crypto News & Happenings in March - Month in Review
March was an exciting month full of crypto news. Some of it will sound familiar.
As a reminder, last month we talked about Terra's expansion and about someone stealing from a "bridge" (Wormhole) between two blockchains. This month we'll start with the story of a bridge being hacked and the story of a bet around Terra.
1/ The "play to earn" game Axie Infinity moved to a dedicated "side-chain" to reduce the fees incurred by players. To keep the interactions possible with Ethereum, they had built a "bridge". Recently, that bridge got hacked and, so far, it's the largest ever hack. It's estimated that $625 million worth of crypto was stolen. There is no resolution thus far and the story continues.
On the back of the $320 million theft from the wormhole bridge last month, it's a stark reminder to treat bridges with caution.
2/ Last month we focused on Terra to talk about their MLB partnership and the purchase of $1 billion in Bitcoin to protect the stablecoins from a death spiral. And now we have to let you know that it's apparently going to be more like $10 billion and that two traders made million-dollar-sized bets with the founder of Terra, Do Kwon, on the price of LUNA in 1 year. So we took some time to go over what it all means and what Terra is really trying to achieve with all that Bitcoin in our Podcast Episode #19 "Terraform Labs CEO Do Kwon bets $11 million on LUNA's future price". Oh, yeah, and also, there's now more value staked on the Terra Proof-of-Stake consensus mechanism than on Ethereum's. It is a pretty big milestone.
3/ Other builders also keep on building and some of them had exciting news this month.
MINA, the 22kb blockchain that is doing some pretty crazy maths with Zero-Knowledge (ZK) proofs, raised $92M to spread awareness about their crazy-cool maths.
Aave launched Aave V3, which is packed full of innovations. The team at Aave was recently called "the shippiest" team in DeFi to describe how good they are at "shipping" new features to market, and it sounds about right.
On Ethereum, it is increasingly looking like the move to "proof-of-stake" will happen before the summer. This is quite likely the biggest news in crypto probably since Ethereum launched as it will radically change the tokenomics and "power consumption" profile of the chain. And it looks like the closer we get to it the more the stakeholders are getting excited.
If you are thinking of building in Web3, Electric Capital announced they have $1 billion to invest in Web3. Maybe go and ask, really, it's yours to lose.
4/ On the "corporate" front, this month also had a bit of news. Interestingly, the former president and CEO of Nintendo of America spoke about Facebook and its Metaverse at SXSW in Austin, Texas. There weren't a lot of praises to be found. At the same time, HSBC was establishing itself in The Sandbox.
5/ The EU has trouble defining its Web3 ambition and it sometimes looks like they are hell-bent on repeating the mistakes they made for Web1 and Web2.0. Which means just driving away the innovators, letting someone else take care of it, and then complaining when most unicorns and data-hoarders are foreign companies. (The US is moving too, but a little slower for now.)
The EU - parliament, commission, council - has the ambition to come out with a landmark crypto-asset framework called "MICA" - Market In Crypto Asset. It's aimed at addressing a bunch of topics from investor protection to financial stability and the prevention of money laundering and terrorism financing with Crypto. All in all an admirable goal and, if achieved this year, one that could really put Europe on the Web3 map, months or years ahead of most other jurisdictions, and which could make it the centre of the crypto innovation world.
IF it's done by people who actually understand crypto, tech, and the history of innovations. But apparently, other people who were also invited to give their opinions.
It started in the middle of the month when, for some reason, some entertained the idea that it would be good to regulate how blockchains arrive at consensus. It would truly have been the first time that they had anything to say about data centres, their operations, and what code runs on what servers but for a second there, they really were tempted to ban the "proof of work" algorithm that powers Bitcoin. Luckily, they thought twice about it and it looks like Europeans will continue to have access to Bitcoins without needing to travel to another country. Probably a missed opportunity for Switzerland but a good thing for Europeans. The package was then approved.
Then things took a turn for the worse. The sub-committee in charge of coming up with the rules on asset transfers decided to be even more aggressive than the EU Commission and made a proposal that is near-technically impossible for Virtual Asset Service providers to implement (verifying the identity of a recipient of a transaction made to a wallet outside of its custody), creates a surveillance system of asset movements (with the requirement to log and report to the regulator the identities of both parties involved in all transfers outside of its custody, no matter the amount), and creates huge privacy liabilities for all Europeans (since those databases of all transfers are going to get leaked or hacked and personally identifiable information will link you to blockchain addresses allowing anyone to lookup your on-chain net worth & activity).
And all that even if you're sending €10 worth of crypto to a friend for his birthday.
The industry was shocked by the proposal as, usually, regulations try to take an approach that is proportional to the risks, and (1) crypto is proportionally less used for money laundering than cash is, and (2) even banks don't have to report it to regulators when you take out €10 in cash at the ATM.
It's especially stunning that such a restrictive, liberticide approach was taken in regards to the MICA packaged previously approved as that called for "supporting innovation". But it's hard to innovate in a surveillance state that's constantly asking you to do near-impossible things while threatening you with fines for not achieving the impossible.
As an industry, and together with the other members and partners of Blockchain For Europe, we will continue to engage with the EU institutions to help them understand how blockchain works and that, for Web3, custody isn't a "nice to have" but the core feature that the new infrastructure runs on.
Web 1 was "read" Web 2.0 was "read and write" Web 3 is "read, write, own". You can't remove the "own" and expect to have Web3.
6️⃣ And, finally, let's end the recap of the month with a thought about our very human nature. It's a quote from Alexis Ohanian - founder of Reddit - which we found interesting as it highlights that "Homo Oeconomicus" doesn't exist and that sheds some light on the NFT craze: "If someone has 1 ETH and an NFT worth 1 ETH, they are more likely to part with the ETH than with the NFT. As a species, we are drawn to non-fungible stuff". And this is the scientific reason behind that observation.
🌱 What Does April Have in Store for us?
1/ **Tying it back to March: hopefully April will give us a chance to explain the particularities of Web3 to European law-makers. It's really priority #1 on our agenda.
2/ Secondly, we'll keep watching the progress of the Ethereum "merge" and the anticipated increased participation of institutions in Ethereum. We'll also keep a look at the price action because, as an increasing amount of ETH gets "locked" into ETH 2.0 there is less in circulation and that could have interesting price implications. As we get closer to the merge we will dive deeper into the new ETH tokenomics (no more issuance, the burn, staking rewards, the 6-month lockup post-merge,...) so you can get ready as best you can.
3/ We'll also keep an eye on the price of Bitcoin now that we know that the LFG foundation is hell-bent on buying some for $10 billion. Seeing that the current estimates are that there are only 1.3M BTC on exchanges and available for trading (worth about $52 billion at today's prices), a $10 billion buy would probably have some impact (they're not buying it all at once).
4/ We'll keep doing what we can to support Ukrainians. As a reminder, our fees are at 0% for Ukrainians on most products, and we donate 30€ for each deposit into OSOM.
🤝 A couple things before we part
New blog, who this? The blog section of our website has been entirely revamped. There are a couple of "kinks" we still need to iron out but we hope you'll find it more enjoyable to read than the previous one. If you spot something that could be improved, do let us know at firstname.lastname@example.org. That would be greatly appreciated!
We've been releasing more content on the Podcast. There is the $11 million bet by Do Kwon, but also an analysis by our senior economist, Etienne Goffin, on whether Bitcoin is truly digital gold. Take a listen.
Behavioural economists have found that "new beginnings" are a great time for new financial resolutions. Think about where you are going to invest your money as you are doing your spring cleaning. It's likely that your future self will thank you.
And if, while doing that, 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!
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 Crypto Autopilot looks at several months of past price data to build a portfolio for the medium to long term (2.5 to 5 years) with the objective of achieving stable growth - which means avoiding drawdowns.