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While your cryptocurrency holdings may be severely under water, at least you do not have to make them public.
It is coming in that time of year that all cryptocurrency funds must report quarterly numbers, and they do not look good. They are all struggling with the impact of previous quarters and subsequent falls.
We will take a look at some of these funds and what are the falls in their wallets for the broader crypto ecosystem.
Quarterly Reckoning
While many of the encrypted funds are private and will try to keep their returns out of the public eye, we have an idea of two very important funds in space.
These are Galaxy Digital is Capital of Pantera.
Galaxy Digital
For those who do not know, Galaxy digital is managed by Wall Street veteran Mike Novogratz. He is a celebrity in the cryptocurrency ecosystem that has attracted a lot of interest from Wall Street to the crypt.
Unfortunately, Galaxy Digital has had the last difficult quarters.
As the company is listed on the TSX Venture Exchange (TSXV), these quarterly results are required to be published. On 29 November, they published the results for the third quarter and the results for the nine months ended September 30, 2018.
The galaxy lost $ 76 million in the third quarter of the year that made up the bulk of the $ 175 million loss that occurred in the first nine months of the year. This is also quite unpleasant since Mike called a fund in the encrypted market in mid-September.
This is the BGCI chart … I think yesterday we put a weak spot. retouched the highs of the end of last year and the point of acceleration that led to the great rally / bubble … the markets love to go back to the breakout … we have retraced the whole bubble. #callingabottom pic.twitter.com/EasTBYgjSj
– Michael Novogratz (@novogratz) September 13, 2018
As the call arrived just before a short rise in price, it fell back down again. After the disclosure of the numbers, the price of shares of Galaxy Digital fell by more than 10% and the TSX had to suspend trading.
Unfortunately, these numbers did not capture the losses that most likely occurred in the last month of November. Apart from a miraculous rally in the coming weeks, the fourth quarter and indeed the whole year will probably be a lot more bleak.
Mike Novogratz was quite open about the challenges the Crypto funds had faced during the year. In an interview that he held with financial times at the end of November he said:
[But] this year has been challenging. It sucks to build a business in a bear market
All of us believers can be on agreement. Mike, it really sucks!
Pantera Capital
Unlike Galaxy Digital, Pantera is not a listed company. This means that they do not have to publicly disclose their earnings to the broader market.
However, according to a letter to his clients, the billions of dollars fund also had a difficult year.
As you can see, the fund recorded a loss of 72.7% in the year until the end of August. They even reported a loss of 40.8% in the fund from December 2017 (before the upward trend). These numbers are only until August so, as in the example above with Galaxy, they have not captured the recent sale of which we have witnessed.
Despite this, Dan Morehead (the founder of Pantera), is still a long-term bullish on the price of Bitcoin. He said this in an interview with Bloomberg
Six or eight years ago there were probably a million people who used it, now there are 50 million people who use it … I believe that in a decade there will be billions of people who use it …
As long as Pantera's investors are convinced of the long-term trajectory of Bitcoin and cryptocurrency, Dan can keep it in the long run.
It's not just the funds
While cryptocurrency funds are the most current example of companies that feel the heat of the crypto crash, they are certainly not the only example.
Cryptocurrency miners are another activity heavily exposed to prices. They do not sell only an asset that is diminishing in value, but must cover monthly expenses such as electricity (not to mention the return on capital equipment).
There have been rumors for a while now that Bitmain, the biggest mining operation, is having problems with their impending IPO. For example, there were concerns about the IPO given the amount of Bitcoin money they had on their books.
Furthermore, the SCMP reports that Bitmain and other producers of mining equipment are likely to suffer collateral damage due to a potential trade war between the United States and China.
So you also have the impact that the decline in cryptocurrency trading is likely to have on trade.
Even if the exchanges are not public and they hardly report their earnings, you can have a good idea of how well they are doing traffic statistics as well as their audience 24 hours volumes.
As you can see from the image above, there has been a decline in the Alexa rank of coinbase.com continuously from the start of the year. The Alexa ranking is one of the most accurate metrics of how a site accumulates in terms of rankings.
By taking a look at the picture above, we have the 24-hour volume of the Bittrex exchange from January 2 on the left and December 9 on the right. As you can see, the volume of the last 24 hours is now only 1% of the volume that was at the height of the bull market.
Exchanges make money on taxes. Lower Volume => Lower Rates => No Christmas Bonuses.
Now where?
While these numbers are really rather depressing, the way things tend to progress depends in reality on the vision of the company or fund.
Much like the way you view your cryptographic wallet, these CEOs and managers will likely look coldly at their operations, assets and long-term vision. Do they fall for the FUD and leave the game or adapt and become more agile / selective?
Some great players have chosen this last one. For example, Joe Lubin (co-founder of Ethereum) sent a letter to his Consensys employees about how the company will adapt to new market conditions.
In terms of the funds we have examined above, it is likely that they will keep it. Mike Novogratz and Dan Moorhead are members of the power of blockchain and cryptocurrency technology. They seem to be there for the long game and have strong investors behind them.
For more green shots of a potential recovery, you need to look beyond where other institutional investors are entering the market. Monetary managers, high-frequency trading companies and investment banks are making the leap into the world of digital assets.
So, while you're not alone in your great cryptic losses, you're not even alone in your beliefs of a brighter cryptic future.
Image in the foreground via Fotolia
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