cryptocurrency

A metallic coin with the Ethereum logo on it (ie. an Ethereum token)

Ethereum Merge
Ethereum Merge 1884 1152 cryptonews@arxnovum.com

A critically important event in the evolution of the crypto currency industry occurred early this morning.  The Ethereum network completed its migration from a network supported by proof of work (PoW) consensus to one that will be validated by proof of stake (PoS). This major milestone will address a number of issues that have been raised surrounding PoW consensus validation.

The biggest benefit to completing this migration is the projected 99% reduction in energy consumption that occurs with PoW consensus validation.  Concerns of ESG-focused investors will applaud this technical achievement both in terms of the benefits through energy conservation and in terms of the potential increased scalability to attract new developers to create innovative solutions on the ethereum network.  

With the Ethereum merge now complete, we anticipate that the market will begin to look for the next catalyst for growth.  We think there could be a number of winners but it’s unclear to us who will rise above.  What is known is that this network upgrade was successful and the uncertainty around the merge is now behind us for ether and the many applications and protocols that are built on the Ethereum network.

Last week we published a series of blog posts that highlight the benefits of building a diversified portfolio of cryptocurrencies.  Investment strategies that employ a diversified exposure, like the Arxnovum Multi Crypto Index Fund, help take the guesswork out of trying to pick a winner.

The products and services offered by Arxnovum are available to qualified investors in certain provinces and territories of Canada. Individual investors should contact their own financial professional to determine the most appropriate investment options for their financial situation. This material contains the opinions of the manager and such opinions are subject to change without notice. This material has been distributed for informational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission.
 
All investments contain risk and may lose value. Investing in the cryptocurrency market is subject to risks.  Cryptocurrency, often referred to as “virtual currency” or “digital currency”, operates as a decentralized, peer-to-peer financial exchange and value storage that is used like money. Cryptocurrency operates without the oversight of a central authority or the banks and is not backed by any government. Even indirectly, cryptocurrencies such as bitcoin may experience high volatility, and related investment vehicles may be affected by such volatility. Cryptocurrency is not legal tender. Federal, state, provincial, territorial or foreign governments may restrict the use and exchange of cryptocurrency, and regulation in North America is still developing. Cryptocurrency trading platforms may stop operating or permanently shut down due to fraud, technical glitches, hackers or malware, which could have an adverse impact on the net asset value per unit of the Fund. Please consult the Funds Term Sheet for a complete list of risks.
 
Certain statements in this document are forward-looking. Forward-looking statements (“FLS”) are statements that are predictive in nature, depend upon or refer to future events or conditions, or that include words such as “may,” “will,” “should,” “could,” “expect,” “anticipate,” “intend,” “plan,” “believe,” or “estimate,” or other similar expressions. Statements that look forward in time or include anything other than historical information are subject to risks and uncertainties, and actual results, actions or events could differ materially from those set forth in the FLS. FLS are not guarantees of future performance and are by their nature based on numerous assumptions. Although the FLS contained herein are based upon what Arxnovum Investments Inc. and the portfolio manager believe to be reasonable assumptions, neither Arxnovum Investments Inc. nor the portfolio manager can assure that actual results will be consistent with these FLS. The reader is cautioned to consider the FLS carefully and not to place undue reliance on FLS. Unless required by applicable law, it is not undertaken, and specifically disclaimed that there is any intention or obligation to update or revise FLS, whether as a result of new information, future events or otherwise.
Crypto index tilts heavily to the largest constituents

Addressing concentration of cryptocurrency market
Addressing concentration of cryptocurrency market 1024 536 cryptonews@arxnovum.com

How to address concentration risk in portfolio construction? Today we will explore different ways to design an index that tilts so heavily to the largest constituents while keeping an eye on tradability and risk management. 

Historically, index providers have used fixed weight capping to mitigate large concentration in one or more securities, where the extra weight is redistributed to smaller non capped constituents. Recall from our first blog in the series the weights as follows:

Market capitalization: 

Bitcoin and Ethereum represent over 80% of cryptocurrency market capitalization

Source: CF Benchmarks, as of March 1, 2022

By applying a fixed cap of 25% to these weights, bitcoin and ether would exceed the cap at inception, with no difference in weighting based on market capitalization or liquidity.  Different capping weights would result in similar results and lead to the index trading more like a fixed weight index than a market capitalization weighted index. 

The point on liquidity is probably the most impactful for a small burgeoning asset category like cryptocurrency.  For an index to be representative of the market it needs to be tradable.  Smaller constituents generally have a significantly lower liquidity profile, thus making it difficult for institutional managers to replicate the market beta when the smaller constituents receive a higher weighting that results from capping the very largest constituents. Therefore an index that significantly re-weights to much smaller and illiquid names creates a benchmark that may not be representative or tradable.

So how to solve this problem? Instead of applying a fixed cap, the index will benefit from a smoothed capitalization methodology where each additional percentage weight is discounted sequentially more than the previous one by a defined amount.  This progressive redistribution from large to small caps benefits from keeping the final index weights relatively close to free float market capitalization while still achieving diversification. 

In order to achieve the smooth capitalization redistribution, the discounting will increase exponentially using the inverse step function applied to each additional 4% bucket. The inverse stepped function basically reduces each tranche by 1/ nth tranche.  To illustrate, if we were to apply the inverse step function with a 4% tranche to the 60.31% market capitalization weight to bitcoin, you would have a process that looks like the following chart and we have a new bitcoin index weight of 37.11%. 

Bitcoin diversification step example:

BTC diversification step

Source: CF Benchmarks, as of March 1, 2022

By applying this process to the whole index you achieve a redistribution that looks like the following.

Diversified weights:

Crypto portfolio with BTC and ETH concentration lowered to 65% of the total

Source: CF Benchmarks, as of March 1, 2022

The smoothed capitalization redistribution allows investors to achieve the primary goals of a market capitalization weighted index, to be representative of the market, to reduce concentration to the largest weights and to remain tradeable. 

Our blog series continues tomorrow with a discussion on how the use of index inclusion and exclusion screens can be used to help reduce risk.

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The products and services offered by Arxnovum are available to qualified investors in certain provinces and territories of Canada. Individual investors should contact their own financial professional to determine the most appropriate investment options for their financial situation. This material contains the opinions of the manager and such opinions are subject to change without notice. This material has been distributed for informational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission.
 
All investments contain risk and may lose value. Investing in the cryptocurrency market is subject to risks.  Cryptocurrency, often referred to as “virtual currency” or “digital currency”, operates as a decentralized, peer-to-peer financial exchange and value storage that is used like money. Cryptocurrency operates without the oversight of a central authority or the banks and is not backed by any government. Even indirectly, cryptocurrencies such as bitcoin may experience high volatility, and related investment vehicles may be affected by such volatility. Cryptocurrency is not legal tender. Federal, state, provincial, territorial or foreign governments may restrict the use and exchange of cryptocurrency, and regulation in North America is still developing. Cryptocurrency trading platforms may stop operating or permanently shut down due to fraud, technical glitches, hackers or malware, which could have an adverse impact on the net asset value per unit of the Fund. Please consult the Funds Term Sheet for a complete list of risks.
 
Certain statements in this document are forward-looking. Forward-looking statements (“FLS”) are statements that are predictive in nature, depend upon or refer to future events or conditions, or that include words such as “may,” “will,” “should,” “could,” “expect,” “anticipate,” “intend,” “plan,” “believe,” or “estimate,” or other similar expressions. Statements that look forward in time or include anything other than historical information are subject to risks and uncertainties, and actual results, actions or events could differ materially from those set forth in the FLS. FLS are not guarantees of future performance and are by their nature based on numerous assumptions. Although the FLS contained herein are based upon what Arxnovum Investments Inc. and the portfolio manager believe to be reasonable assumptions, neither Arxnovum Investments Inc. nor the portfolio manager can assure that actual results will be consistent with these FLS. The reader is cautioned to consider the FLS carefully and not to place undue reliance on FLS. Unless required by applicable law, it is not undertaken, and specifically disclaimed that there is any intention or obligation to update or revise FLS, whether as a result of new information, future events or otherwise.
Diversification means not having all your eggs in one basket

The benefits of diversifying cryptocurrency exposure
The benefits of diversifying cryptocurrency exposure 800 600 cryptonews@arxnovum.com

Do investors even need exposure to more than just bitcoin and ether? Today we will address the benefits of a diversified portfolio of cryptocurrencies. 

While it is true that bitcoin and ether have historically experienced high correlations, the same can’t be said for bitcoin or ether versus the largest alt coins. This can be seen in the historical daily correlation table below. Note that the May 2020 analysis period was selected as the start date because it represents the common inception for all cryptocurrencies included in the analysis. 

Cryptocurrency correlations across various market environments:

Cryptocurrency correlations are usually close to or below the 0.60 threshold

Source: Coingecko May 1, 2020 through July 20, 2022

Diversification benefits typically accrue to an investor’s portfolio when correlation coefficients are less than 0.60.  As you can see the correlation coefficients are generally close to or below the 0.60 threshold, with the median correlation of 0.52.  

As with any market based statistics, these correlations are dynamic and have changed over time and in different market environments. Historically, correlations of traditional asset classes have tended to fall in rising markets while securities have tended to become more correlated in falling markets. As the cryptocurrency market has matured, it too has tended to follow a similar pattern. This can be seen by looking at the correlations during the market rise between May 2020 and the all-time high in November 2021. The median correlation during this rising market was 0.47. 

Cryptocurrency correlations during bull market period:

Cryptocurrency correlation values tend to trend down in a bull market

Source: Coingecko May 1, 2020 through November 1, 2021

By comparison the median correlation during the crypto winter from November 1, 2021 through July 20, 2022 jumped significantly to 0.75.

Cryptocurrency correlations during bear market period:

Cryptocurrency correlations in a bear market tend upwards to 0.75

Source: Coingecko November 1, 2021 through July 20, 2022

The lower correlations in a rising market illustrates the idiosyncratic risks that exist between the largest cryptocurrencies. Small differences in governance structure, consensus mechanism, cryptography, fees, or transaction times between the different cryptocurrency blockchains can have a material impact on how they perform and contribute or detract from a diversified portfolio.

A diversified portfolio of cryptocurrencies including both core positions in bitcoin and ether complimented by a basket of altcoins can add diversification benefits in rising markets and across multiple market cycles.

Check back tomorrow where we will explore how smart index construction can be used to reduce the concentration risk inherent in building a market capitalization weighted index that includes bitcoin and ether.

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The products and services offered by Arxnovum are available to qualified investors in certain provinces and territories of Canada. Individual investors should contact their own financial professional to determine the most appropriate investment options for their financial situation. This material contains the opinions of the manager and such opinions are subject to change without notice. This material has been distributed for informational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission.
 
All investments contain risk and may lose value. Investing in the cryptocurrency market is subject to risks.  Cryptocurrency, often referred to as “virtual currency” or “digital currency”, operates as a decentralized, peer-to-peer financial exchange and value storage that is used like money. Cryptocurrency operates without the oversight of a central authority or the banks and is not backed by any government. Even indirectly, cryptocurrencies such as bitcoin may experience high volatility, and related investment vehicles may be affected by such volatility. Cryptocurrency is not legal tender. Federal, state, provincial, territorial or foreign governments may restrict the use and exchange of cryptocurrency, and regulation in North America is still developing. Cryptocurrency trading platforms may stop operating or permanently shut down due to fraud, technical glitches, hackers or malware, which could have an adverse impact on the net asset value per unit of the Fund. Please consult the Funds Term Sheet for a complete list of risks.
 
Certain statements in this document are forward-looking. Forward-looking statements (“FLS”) are statements that are predictive in nature, depend upon or refer to future events or conditions, or that include words such as “may,” “will,” “should,” “could,” “expect,” “anticipate,” “intend,” “plan,” “believe,” or “estimate,” or other similar expressions. Statements that look forward in time or include anything other than historical information are subject to risks and uncertainties, and actual results, actions or events could differ materially from those set forth in the FLS. FLS are not guarantees of future performance and are by their nature based on numerous assumptions. Although the FLS contained herein are based upon what Arxnovum Investments Inc. and the portfolio manager believe to be reasonable assumptions, neither Arxnovum Investments Inc. nor the portfolio manager can assure that actual results will be consistent with these FLS. The reader is cautioned to consider the FLS carefully and not to place undue reliance on FLS. Unless required by applicable law, it is not undertaken, and specifically disclaimed that there is any intention or obligation to update or revise FLS, whether as a result of new information, future events or otherwise.
The cryptocurrency market includes more than bitcoin

Cryptocurrency investing is more than bitcoin
Cryptocurrency investing is more than bitcoin 1920 1080 cryptonews@arxnovum.com

Cryptocurrency investing includes more than just bitcoin and ether, but with over 10,000 tokens available to investors, how does one select which currencies to hold? 

In a series of blog posts we will seek to outline the case for investing in a diversified portfolio for cryptocurrencies by exploring the concentration of the cryptocurrency market, the benefits of diversification, index construction and selection criteria designed to minimize risk. We will kick off the series with a discussion of the concentration of the cryptocurrency market.

Historically cryptocurrency markets have been dominated by bitcoin which also has the distinction of being the oldest, largest and most widely known. Following its launch in 2015, ether quickly gained prominence and moved into the number two spot after only 6 months. Since the beginning of 2016 bitcoin and ether have dominated the cryptocurrency markets and the public discourse surrounding crypto investing.

As recently as March 2022, bitcoin and ether comprised nearly 90% of the cryptocurrency market. I think it’s important to clarify that we are focused solely on cryptocurrencies and have excluded stablecoins and asset backed tokens from this analysis. 

Market capitalization:

Bitcoin and Ethereum represent over 80% of cryptocurrency market capitalization

Source: CF Benchmarks, as of March 1, 2022

The dominance of bitcoin and ether in cryptocurrency markets can be attributed to a number of factors but the foremost of which is the infancy of the space in general. The average age of all constituents in the index is only 5.75 years. When you remove the largest, that average age falls to only 4.75 years. 

Each cryptocurrency network is supported by miners, node operators and users. Bitcoin, which is now over 13.5 years old, has had more than twice as much time as the average constituent to establish a network effect of participants. Since its inception, the bitcoins blockchain network has accumulated 37.5 million active non zero addresses. By comparison, the smallest constituent in the index which, coincidentally is the same age as the average age of all the index constituents, has accumulated only 130k active non zero addresses. (Source: Glassnode, July 18, 2022)

These smaller networks add diversification by gaining exposure to new and innovative technologies that strive to improve upon the existing experience users have in bitcoin or ether. While their technology is not as revolutionary as bitcoin, they are no less disruptive and can add diversification.

Tomorrow we will further expand on the benefits of diversification, even in an asset class that has experienced high historical correlations.

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The products and services offered by Arxnovum are available to qualified investors in certain provinces and territories of Canada. Individual investors should contact their own financial professional to determine the most appropriate investment options for their financial situation. This material contains the opinions of the manager and such opinions are subject to change without notice. This material has been distributed for informational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission.
 
All investments contain risk and may lose value. Investing in the cryptocurrency market is subject to risks.  Cryptocurrency, often referred to as “virtual currency” or “digital currency”, operates as a decentralized, peer-to-peer financial exchange and value storage that is used like money. Cryptocurrency operates without the oversight of a central authority or the banks and is not backed by any government. Even indirectly, cryptocurrencies such as bitcoin may experience high volatility, and related investment vehicles may be affected by such volatility. Cryptocurrency is not legal tender. Federal, state, provincial, territorial or foreign governments may restrict the use and exchange of cryptocurrency, and regulation in North America is still developing. Cryptocurrency trading platforms may stop operating or permanently shut down due to fraud, technical glitches, hackers or malware, which could have an adverse impact on the net asset value per unit of the Fund. Please consult the Funds Term Sheet for a complete list of risks.
 
Certain statements in this document are forward-looking. Forward-looking statements (“FLS”) are statements that are predictive in nature, depend upon or refer to future events or conditions, or that include words such as “may,” “will,” “should,” “could,” “expect,” “anticipate,” “intend,” “plan,” “believe,” or “estimate,” or other similar expressions. Statements that look forward in time or include anything other than historical information are subject to risks and uncertainties, and actual results, actions or events could differ materially from those set forth in the FLS. FLS are not guarantees of future performance and are by their nature based on numerous assumptions. Although the FLS contained herein are based upon what Arxnovum Investments Inc. and the portfolio manager believe to be reasonable assumptions, neither Arxnovum Investments Inc. nor the portfolio manager can assure that actual results will be consistent with these FLS. The reader is cautioned to consider the FLS carefully and not to place undue reliance on FLS. Unless required by applicable law, it is not undertaken, and specifically disclaimed that there is any intention or obligation to update or revise FLS, whether as a result of new information, future events or otherwise.
CAASA logo

Arxnovum Investments Founder to speak at CAASA Super Week: PE/VC & Digital Assets Conference
Arxnovum Investments Founder to speak at CAASA Super Week: PE/VC & Digital Assets Conference 328 153 cryptonews@arxnovum.com

Arxnovum Investments is pleased to announce that Shaun Cumby is scheduled to present at CAASA Super Week: PE/VC & Digital Assets Conference in Toronto Ontario, on September 27, 2022 at 9:00am EST.  

Shaun will be joined onstage with a distinguished panel including Kerem Kolcuoglu, Managing Partner at Penrose Partners and Koleya Karringten, Executive Director of the Canadian Blockchain Consortium in a discussion of the Origins of Blockchain, Bitcoin and Cryptocurrency.

To register or for a complete conference agenda, please visit caasa.ca/Super-Week-2022:PE/VC & Digital Assets

The products and services offered by Arxnovum are available to qualified investors in certain provinces and territories of Canada. Individual investors should contact their own financial professional to determine the most appropriate investment options for their financial situation. This material contains the opinions of the manager and such opinions are subject to change without notice. This material has been distributed for informational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission.
 
All investments contain risk and may lose value. Investing in the cryptocurrency market is subject to risks.  Cryptocurrency, often referred to as “virtual currency” or “digital currency”, operates as a decentralized, peer-to-peer financial exchange and value storage that is used like money. Cryptocurrency operates without the oversight of a central authority or the banks and is not backed by any government. Even indirectly, cryptocurrencies such as bitcoin may experience high volatility, and related investment vehicles may be affected by such volatility. Cryptocurrency is not legal tender. Federal, state, provincial, territorial or foreign governments may restrict the use and exchange of cryptocurrency, and regulation in North America is still developing. Cryptocurrency trading platforms may stop operating or permanently shut down due to fraud, technical glitches, hackers or malware, which could have an adverse impact on the net asset value per unit of the Fund. Please consult the Funds Term Sheet for a complete list of risks.
 
Certain statements in this document are forward-looking. Forward-looking statements (“FLS”) are statements that are predictive in nature, depend upon or refer to future events or conditions, or that include words such as “may,” “will,” “should,” “could,” “expect,” “anticipate,” “intend,” “plan,” “believe,” or “estimate,” or other similar expressions. Statements that look forward in time or include anything other than historical information are subject to risks and uncertainties, and actual results, actions or events could differ materially from those set forth in the FLS. FLS are not guarantees of future performance and are by their nature based on numerous assumptions. Although the FLS contained herein are based upon what Arxnovum Investments Inc. and the portfolio manager believe to be reasonable assumptions, neither Arxnovum Investments Inc. nor the portfolio manager can assure that actual results will be consistent with these FLS. The reader is cautioned to consider the FLS carefully and not to place undue reliance on FLS. Unless required by applicable law, it is not undertaken, and specifically disclaimed that there is any intention or obligation to update or revise FLS, whether as a result of new information, future events or otherwise.
Illustration of a man and woman riding paper planes while looking through telescopes

Quarterly Crypto Market Review Highlights
Quarterly Crypto Market Review Highlights 2560 855 cryptonews@arxnovum.com

The following are the key highlights and takeaways from our June 2022 Quarterly Crypto Markets Review letter to investors.  

  • LUNA, an algorithmic-driven pair that attempted to peg UST 1:1 with the US dollar, failed miserably impacting retail and institutional investors.  We had no exposure to the LUNA/Terra/Anchor fiasco.
  • The fallout from LUNA has us keeping a close eye on other stablecoins like USDT (“Tether”) and USDC (“Circle”) as neither are bankruptcy remote from a backing point of view.
  • Furthermore, Silvergate Bank (SI-NYSE) and Signature Bank (SBNY-NASDAQ) are also on our mind for counterparty losses.
  • Bitcoin has been through such periods before and appears to move in four year cycles related to the halving events where the supply of bitcoin created with each block is reduced by half.
  • Bitcoin is perhaps best regarded as a technology with massive potential to address a fundamental human activity – value transfers – through network activity with extremely low costs outside of traditional channels. 
  • Bitcoin is and will remain highly volatile which reduces its use case as a store of value or a medium of exchange – both of which have faced a wall of anxiety by regulators and central bankers.
  • As with any risky asset, the valuation of bitcoin is sensitive to rising rates and when the Fed’s hiking turns to cutting, we expect that bitcoin will rally accordingly.
  • Staking of ETH2 is so far operating according to plan though with relatively low yields that are comparable to the yields available in Canadian bank or energy pipeline stocks.
  • The primary issues that have prevented our involvement in staking are that the ETH2 is locked until the full merge of ETH into ETH2; that yield is paid out only when the merge happens and finally there are some issues around the custody of ETH2 that has given us pause.
  • We did not invest in or with Celsius, BlockFi or any other yield farming platforms that we viewed as offering unsustainable and unsupportable yields. 

If you are interested in receiving future Quarterly Crypto Markets Reviews please sign up at investor registration.

The products and services offered by Arxnovum are available to qualified investors in certain provinces and territories of Canada. Individual investors should contact their own financial professional to determine the most appropriate investment options for their financial situation. This material contains the opinions of the manager and such opinions are subject to change without notice. This material has been distributed for informational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission.
 
All investments contain risk and may lose value. Investing in the cryptocurrency market is subject to risks.  Cryptocurrency, often referred to as “virtual currency” or “digital currency”, operates as a decentralized, peer-to-peer financial exchange and value storage that is used like money. Cryptocurrency operates without the oversight of a central authority or the banks and is not backed by any government. Even indirectly, cryptocurrencies such as bitcoin may experience high volatility, and related investment vehicles may be affected by such volatility. Cryptocurrency is not legal tender. Federal, state, provincial, territorial or foreign governments may restrict the use and exchange of cryptocurrency, and regulation in North America is still developing. Cryptocurrency trading platforms may stop operating or permanently shut down due to fraud, technical glitches, hackers or malware, which could have an adverse impact on the net asset value per unit of the Fund. Please consult the Funds Term Sheet for a complete list of risks.
 
Certain statements in this document are forward-looking. Forward-looking statements (“FLS”) are statements that are predictive in nature, depend upon or refer to future events or conditions, or that include words such as “may,” “will,” “should,” “could,” “expect,” “anticipate,” “intend,” “plan,” “believe,” or “estimate,” or other similar expressions. Statements that look forward in time or include anything other than historical information are subject to risks and uncertainties, and actual results, actions or events could differ materially from those set forth in the FLS. FLS are not guarantees of future performance and are by their nature based on numerous assumptions. Although the FLS contained herein are based upon what Arxnovum Investments Inc. and the portfolio manager believe to be reasonable assumptions, neither Arxnovum Investments Inc. nor the portfolio manager can assure that actual results will be consistent with these FLS. The reader is cautioned to consider the FLS carefully and not to place undue reliance on FLS. Unless required by applicable law, it is not undertaken, and specifically disclaimed that there is any intention or obligation to update or revise FLS, whether as a result of new information, future events or otherwise.
An illustrated rocket launches off of a laptop

Arxnovum Investments is pleased to announce another milestone in our growth
Arxnovum Investments is pleased to announce another milestone in our growth 1800 850 cryptonews@arxnovum.com

Our goal at Arxnovum Investments is to become Canada’s leading digital asset investor and we believe that begins with investor education and awareness. Digital asset investing, from bitcoin to other assets, can be overwhelming, even for the most sophisticated investors. We hope to make it clear. Given the many benefits and risks associated with investing in cryptocurrency, our investors can arm themselves with information to make more knowledgeable investing decisions.

To that end we’ve been working on something big and the time has come to launch something new. Our inaugural private funds are available for accredited investors and we are pleased to announce the launch of our website:

arxnovum.com

The website includes a number of new and exciting features designed to provide investors and crypto enthusiasts with timely and relevant content on our funds, our current thinking and the crypto market more broadly. 

There are three key areas included in the launch:

  • Fund summary cards – that include detailed information on the Arxnovum Bitcoin Fund, Arxnovum Ether Fund, Arxnovum DeFi Index Fund and the Arxnovum Multi Crypto Index Fund.
  • Insights blog – that include written and video commentary and educational pieces on the cryptocurrency markets.
  • Client access portal – that allows investors access to their account information.

One last thing, we are also pleased to announce the launch of Crypto Corner, our e-newsletter, which is a daily summary of the latest news impacting crypto markets globally. Sign up here to be added to the distribution list: Investor Registration

We are very excited for the launch but even more interested in hearing your feedback. Leave a comment below or email us at info@arxnovum.com.

The products and services offered by Arxnovum are available to qualified investors in certain provinces and territories of Canada. Individual investors should contact their own financial professional to determine the most appropriate investment options for their financial situation. This material contains the opinions of the manager and such opinions are subject to change without notice. This material has been distributed for informational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission.
 
All investments contain risk and may lose value. Investing in the cryptocurrency market is subject to risks.  Cryptocurrency, often referred to as “virtual currency” or “digital currency”, operates as a decentralized, peer-to-peer financial exchange and value storage that is used like money. Cryptocurrency operates without the oversight of a central authority or the banks and is not backed by any government. Even indirectly, cryptocurrencies such as bitcoin may experience high volatility, and related investment vehicles may be affected by such volatility. Cryptocurrency is not legal tender. Federal, state, provincial, territorial or foreign governments may restrict the use and exchange of cryptocurrency, and regulation in North America is still developing. Cryptocurrency trading platforms may stop operating or permanently shut down due to fraud, technical glitches, hackers or malware, which could have an adverse impact on the net asset value per unit of the Fund. Please consult the Funds Term Sheet for a complete list of risks.
 
Certain statements in this document are forward-looking. Forward-looking statements (“FLS”) are statements that are predictive in nature, depend upon or refer to future events or conditions, or that include words such as “may,” “will,” “should,” “could,” “expect,” “anticipate,” “intend,” “plan,” “believe,” or “estimate,” or other similar expressions. Statements that look forward in time or include anything other than historical information are subject to risks and uncertainties, and actual results, actions or events could differ materially from those set forth in the FLS. FLS are not guarantees of future performance and are by their nature based on numerous assumptions. Although the FLS contained herein are based upon what Arxnovum Investments Inc. and the portfolio manager believe to be reasonable assumptions, neither Arxnovum Investments Inc. nor the portfolio manager can assure that actual results will be consistent with these FLS. The reader is cautioned to consider the FLS carefully and not to place undue reliance on FLS. Unless required by applicable law, it is not undertaken, and specifically disclaimed that there is any intention or obligation to update or revise FLS, whether as a result of new information, future events or otherwise.
Illustrated version of Munch's Scream painting with glitches

Rising rates and stablecoins’ stumble
Rising rates and stablecoins’ stumble 1280 720 cryptonews@arxnovum.com

Across financial assets there are new dynamics on prices and yields as the US Federal Reserve (the Fed) has moved from passively watching inflationary pressures building to economic prints of 8.3% annual inflation.  Against this backdrop there is a war in the Ukraine and Covid lockdowns in major Chinese cities.  In our opinion, the main force impacting all risky assets is the Fed’s race to deal with inflation and we see them as woefully behind the curve.

US CPI year-over-year

In order to address the rising inflation levels that have clearly moved well past transitory, the Fed has embarked on an aggressive path of increasing interest rates.  Having already increased the influential fed funds rate by 75 bps (100 bps = 1.00%) at its last two meetings, the Fed has signalled to the market to expect more increases at future meetings.  

As US rates rise, capital will flow into the US and strengthen the US dollar (USD).  This has been evident in the Yen and the Euro.  Our view is that the USD is the largest asset globally.  Its recent strength means that anything priced in USD is falling – from bond prices to equities to commodities to bitcoin and cryptocurrencies.  

The strengthening US dollar can be witnessed through the US Dollar Index (Ticker: DXY), which is an index that measures the value of the US dollar relative to a basket of foreign currencies, including Euro, Japanese yen, British pound, Canadian dollar, Swedish krona and Swiss franc.  The 15% move higher in the US Dollar Index over the last year has been driven by expectations for higher rates and by a flight to safety in the face of geopolitical tensions around the globe.

Source: Bloomberg.com

The US dollar should revert to a weakening trend if rates return to a path lower to the zero-interest-rate boundary and this will occur if there is a U.S. recession or severe market crash or both.  The US yield curve has inverted which is seen as an advanced signal of a recession.  The next signal to watch is the unemployment rate against its 12 month moving average.

The digital asset market has not escaped the drawdown we’ve seen in other risky assets. The CF Diversified Large Cap Crypto Index which measures a basket of the largest and most liquid crypto currencies is down 49% year to date.  Bitcoin which is the largest, oldest and widely seen as one of the safer crypto currencies has not avoided the market carnage with the CME CF Bitcoin Reference Rate Index down 36% year to date.

Crypto currency markets were further roiled this past week with an algorithmic stablecoin called Terra depegging from the USD$1 it was meant to maintain.  From what we have seen this was an engineered attack, but no matter, our funds have no direct exposure to Terra, Luna nor Anchor.  Part of the Terra/Luna defence was to have bitcoin reserves which may have been sold in haste causing the fall in bitcoin prices.  Bitcoin is in a time period relative to its past halving where the price tends to move sideways as we move towards the next halving, which will be in May 2024.  We are watching the markets closely and welcome questions from our investors.

Disclosures

The products and services offered by Arxnovum are available to qualified investors in certain provinces and territories of Canada. Individual investors should contact their own financial professional to determine the most appropriate investment options for their financial situation. This material contains the opinions of the manager and such opinions are subject to change without notice. This material has been distributed for informational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission.
 
All investments contain risk and may lose value. Investing in the cryptocurrency market is subject to risks.  Cryptocurrency, often referred to as “virtual currency” or “digital currency”, operates as a decentralized, peer-to-peer financial exchange and value storage that is used like money. Cryptocurrency operates without the oversight of a central authority or the banks and is not backed by any government. Even indirectly, cryptocurrencies such as bitcoin may experience high volatility, and related investment vehicles may be affected by such volatility. Cryptocurrency is not legal tender. Federal, state, provincial, territorial or foreign governments may restrict the use and exchange of cryptocurrency, and regulation in North America is still developing. Cryptocurrency trading platforms may stop operating or permanently shut down due to fraud, technical glitches, hackers or malware, which could have an adverse impact on the net asset value per unit of the Fund. Please consult the Funds Term Sheet for a complete list of risks.
 
Certain statements in this document are forward-looking. Forward-looking statements (“FLS”) are statements that are predictive in nature, depend upon or refer to future events or conditions, or that include words such as “may,” “will,” “should,” “could,” “expect,” “anticipate,” “intend,” “plan,” “believe,” or “estimate,” or other similar expressions. Statements that look forward in time or include anything other than historical information are subject to risks and uncertainties, and actual results, actions or events could differ materially from those set forth in the FLS. FLS are not guarantees of future performance and are by their nature based on numerous assumptions. Although the FLS contained herein are based upon what Arxnovum Investments Inc. and the portfolio manager believe to be reasonable assumptions, neither Arxnovum Investments Inc. nor the portfolio manager can assure that actual results will be consistent with these FLS. The reader is cautioned to consider the FLS carefully and not to place undue reliance on FLS. Unless required by applicable law, it is not undertaken, and specifically disclaimed that there is any intention or obligation to update or revise FLS, whether as a result of new information, future events or otherwise.

Why investors should care about Bitcoin: Part 2
Why investors should care about Bitcoin: Part 2 2560 1706 cryptonews@arxnovum.com

High growth and low correlation make Bitcoin or cryptocurrency a compelling addition to an investor’s portfolio. Shaun Cumby, CEO & CIO of Arxnovum Investments, talks about Bitcoin’s value for investors. Arxnovum is an investment management company that specializes in cryptocurrency investing. Led by Shaun Cumby, Canada’s first CIO of a publicly traded Bitcoin fund, and a diverse team with years of investing expertise in both traditional and crypto assets, our strategies are designed to effectively combine crypto assets within traditional portfolio holdings. We’re excited to be introducing our Bitcoin Fund to Canadian investors.

Part 2/2. Click here for part 1.

The products and services offered by Arxnovum are available to qualified investors in certain provinces and territories of Canada. Individual investors should contact their own financial professional to determine the most appropriate investment options for their financial situation. This material contains the opinions of the manager and such opinions are subject to change without notice. This material has been distributed for informational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission.
 
All investments contain risk and may lose value. Investing in the cryptocurrency market is subject to risks.  Cryptocurrency, often referred to as “virtual currency” or “digital currency”, operates as a decentralized, peer-to-peer financial exchange and value storage that is used like money. Cryptocurrency operates without the oversight of a central authority or the banks and is not backed by any government. Even indirectly, cryptocurrencies such as bitcoin may experience high volatility, and related investment vehicles may be affected by such volatility. Cryptocurrency is not legal tender. Federal, state, provincial, territorial or foreign governments may restrict the use and exchange of cryptocurrency, and regulation in North America is still developing. Cryptocurrency trading platforms may stop operating or permanently shut down due to fraud, technical glitches, hackers or malware, which could have an adverse impact on the net asset value per unit of the Fund. Please consult the Funds Term Sheet for a complete list of risks.
 
Certain statements in this document are forward-looking. Forward-looking statements (“FLS”) are statements that are predictive in nature, depend upon or refer to future events or conditions, or that include words such as “may,” “will,” “should,” “could,” “expect,” “anticipate,” “intend,” “plan,” “believe,” or “estimate,” or other similar expressions. Statements that look forward in time or include anything other than historical information are subject to risks and uncertainties, and actual results, actions or events could differ materially from those set forth in the FLS. FLS are not guarantees of future performance and are by their nature based on numerous assumptions. Although the FLS contained herein are based upon what Arxnovum Investments Inc. and the portfolio manager believe to be reasonable assumptions, neither Arxnovum Investments Inc. nor the portfolio manager can assure that actual results will be consistent with these FLS. The reader is cautioned to consider the FLS carefully and not to place undue reliance on FLS. Unless required by applicable law, it is not undertaken, and specifically disclaimed that there is any intention or obligation to update or revise FLS, whether as a result of new information, future events or otherwise.

Why investors should care about Bitcoin: Part 1
Why investors should care about Bitcoin: Part 1 2560 1707 cryptonews@arxnovum.com

From Google to Amazon, software has been a major driver of change in our day to day lives. Arxnovum CEO & CIO, Shaun Cumby, explains why the software that underlies bitcoin and cryptocurrency assets is driving the latest technological revolution. Arxnovum is an investment management company that specializes in cryptocurrency investing. Led by Shaun Cumby, Canada’s first CIO of a publicly traded Bitcoin fund, and a diverse team with years of investing expertise in both traditional and crypto assets, our strategies are designed to effectively combine crypto assets within traditional portfolio holdings. We’re excited to be introducing our Multi Crypto Index Fund to Canadian investors. This is part 1 of a 2-part series on this topic.

Please click here for part 2.

The products and services offered by Arxnovum are available to qualified investors in certain provinces and territories of Canada. Individual investors should contact their own financial professional to determine the most appropriate investment options for their financial situation. This material contains the opinions of the manager and such opinions are subject to change without notice. This material has been distributed for informational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission.
 
All investments contain risk and may lose value. Investing in the cryptocurrency market is subject to risks.  Cryptocurrency, often referred to as “virtual currency” or “digital currency”, operates as a decentralized, peer-to-peer financial exchange and value storage that is used like money. Cryptocurrency operates without the oversight of a central authority or the banks and is not backed by any government. Even indirectly, cryptocurrencies such as bitcoin may experience high volatility, and related investment vehicles may be affected by such volatility. Cryptocurrency is not legal tender. Federal, state, provincial, territorial or foreign governments may restrict the use and exchange of cryptocurrency, and regulation in North America is still developing. Cryptocurrency trading platforms may stop operating or permanently shut down due to fraud, technical glitches, hackers or malware, which could have an adverse impact on the net asset value per unit of the Fund. Please consult the Funds Term Sheet for a complete list of risks.
 
Certain statements in this document are forward-looking. Forward-looking statements (“FLS”) are statements that are predictive in nature, depend upon or refer to future events or conditions, or that include words such as “may,” “will,” “should,” “could,” “expect,” “anticipate,” “intend,” “plan,” “believe,” or “estimate,” or other similar expressions. Statements that look forward in time or include anything other than historical information are subject to risks and uncertainties, and actual results, actions or events could differ materially from those set forth in the FLS. FLS are not guarantees of future performance and are by their nature based on numerous assumptions. Although the FLS contained herein are based upon what Arxnovum Investments Inc. and the portfolio manager believe to be reasonable assumptions, neither Arxnovum Investments Inc. nor the portfolio manager can assure that actual results will be consistent with these FLS. The reader is cautioned to consider the FLS carefully and not to place undue reliance on FLS. Unless required by applicable law, it is not undertaken, and specifically disclaimed that there is any intention or obligation to update or revise FLS, whether as a result of new information, future events or otherwise.
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Arxnovum is a traditional portfolio manager for separately managed accounts utilizing a breadth of financial assets and strategies. 
Arxnovum Funds, Arxnovum ETFs and Crypto Corner are trademarks of Arxnovum Investments Inc.
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