Digital Wealth Insider Portfolio Update Feb `24

Digital Wealth Insider Portfolio Update Feb `24

First and foremost, thank you for joining us on this investment journey. Your support means the world.

Fund Performance

In January 2024, our fund's performance, after fees, closed at approximately -3.5%. This occurred in a market that experienced an overall decline of -6%, highlighting a widespread downturn.

The month was a bit of a rollercoaster, as BTC and the broader crypto markets reported negative performances of up to -20% and -13.5%, respectively, during the same period.

Here's how we managed to outperform:

• Our diversified strategy, notably with ETH outperforming BTC.

• Returns from interest-yielding strategies.

• Maintaining a cash position of around 20%.

Deployment of Capital

We wrote in our last newsletter that our portfolio had a cash position of about 20%, from which we were generating returns while waiting to capitalize on an anticipated market dip.

This anticipated dip materialized in January following the approval of ETFs, leading to significant redemptions of GBTC positions by institutional investors. To put it into perspective, BTC's maximum drop was around 20% (from a high of $49k to $39k), while the broader crypto markets experienced a maximum drop of 13.5% (from $1.86T to $1.61T).

Since then, we have significantly deployed capital, reducing our cash position to approximately 5%.

Portfolio Insights

Despite the recent dip, the approval of a Bitcoin ETF is a positive global signal, expected to drive greater adoption and, importantly, a surge of investment capital. We remain confident in our asset distribution and continue to identify promising investments. Here are a few standouts from the past month:

• Pendle ($PENDLE), one of our smaller positions, a DeFi service with a focus on tokenization of yield: is up 86% this month

• Merit Circle ($BEAM), a GameFi platform for true ownership: is up 57% this month We wrote about this project as part of our education series, (found here)

• We've also been actively participating in airdrop farming, a method where new projects distribute tokens as rewards for specific activities. This approach can be quite profitable, essentially offering "free money." Our engagement in these activities resulted in receiving substantial airdrops from both Manta Network and DYM.

Our portfolio comprises nearly 100 digital assets spread across over 10 blockchains, demonstrating not only resilience but also productivity, with an approximate 10% APR on top of asset appreciation.

See Fund Composition Insights Below:

Please visit the NAV LP Portal for access to your Investor Statements.

Thoughts on the Market

ETF Weirdness has settled

No reason to change what was said in our last report: Markets have been rallying in a seriously bullish way.

The initial oddities surrounding ETFs have settled. As we reported last time, the market has rallied significantly. The approval of the Bitcoin ETF on January 10th saw $4.6 billion in inflows within the first 24 hours. The newly launched ETFs have since averaged over a billion in daily inflows.

This was initially a "sell-the-news" event, leading to a price drop, attributed mainly to two groups:

1. Traders taking profits after a 10-week price rally, with significant selling pressure observed on platforms like Binance, OKX, and Upbit.

2. GBTC holders liquidating their positions, with $579M flowing out of the Grayscale ETF by the end of that week.

This dynamic introduces a macroeconomic effect to the crypto world: consistent demand. While anyone can mint a coin and create supply, the ETF approval ensures demand for tokens, a previously unguaranteed factor. As a result, Bitcoin has reached market cycle highs of $50k as of mid-February.

Our Strategy

We believe we're still in the accumulation phase, with new narratives, such as restaking (discussed below), emerging as we position for a new bull market. This period is exhilarating, but it's crucial to focus on quality projects with thorough vetting, as these are likely to perform best over multiple years.

Many projects remain undervalued, despite the market's rebound. We believe fundamentally strong projects will surpass their previous highs. By investing in undervalued assets with strong fundamentals, we pave the way for significant future financial growth. We aim to continue monitoring positions and project roadmaps, focusing on high-performing teams that may have been overlooked due to the emergence of new projects.

ReStaking (Yield producing Yield):

Crypto is laying the groundwork for a new fleet of financial tools and one of these is the idea of restaking.

Why this is a big deal

Restaking is a transformative development in cryptocurrency for several compelling reasons:

- Compounded Returns: It amplifies investment growth through reinvestment of staking rewards, similar to compound interest but with potentially higher returns due to crypto market dynamics.

- Network Security: Increases the security and stability of Proof-of-Stake (PoS) blockchains by incentivizing the locking up of tokens, making network attacks more difficult and costly.

- Passive Income: Provides a scalable passive income stream, allowing investors to earn more over time without additional capital input.

- Long-term Investment: Encourages holding investments longer by offering continuous rewards, potentially reducing market volatility.

- Financial Inclusion: Lowers the entry barrier for earning from crypto investments, democratizing access to financial growth opportunities.

- Ecosystem Innovation: Spurs technical and financial innovation within the crypto space, leading to new products, services, and opportunities for growth.

In essence, restaking not only boosts individual investment returns but also fortifies blockchain networks, democratizes finance, and fosters a more stable, innovative cryptocurrency ecosystem.

If the Educational Section was Helpful…

As we press forward, do continue to share topics that intrigue you, our valued investors. Your insight is paramount as we navigate the world's most disruptive and innovative markets. Our unwavering commitment is to keep all our partners not only well-informed but also instilled with confidence and readiness for the thrilling opportunities that unfold in our investment journey. Together, let's boldly advance in this dynamic and transformative financial landscape.

Announcement / Update

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