(Mar 3, 2021)

It does not matter if you are talking about gold, dollars or cowrie shells, all forms of money are temporary mass hallucinations. 

BNY Mellon has announced it will provide custody services, Goldman Sachs has announced it will reopen its crypto trading desk and Citibank has just reported that Bitcoin is ‘at a tipping point’. If you have read the book “The Tipping Point” by Malcolm Gladwell, you will have a notion of how this works out. We expect the next few years to be wild in crypto land as increasing numbers of institutional and retail investors start to believe in new forms of money/value. This time next year, there will be few people outside of HSBC’s and the Financial Times’ senior management who will admit to being a ‘no coiner.’

The “Big 3” Coins

Our previous marketing materials stated that SCF would be trading BTC, ETH and XRP, largely for logistical reasons. When investing large amounts of client money, return of capital is more important than return on capital. Therefore when considering which coins to invest in, we consider: the fundamental strength of the project, the exchanges that a coin listed on, daily volume, cryptographic security and regulatory acceptance.

However, our BTC, ETH and XRP list needs to be reconsidered. Whilst Bitcoin continues to impose its ‘digital gold’ narrative, Ripple Labs has run into trouble with the SEC and XRP has been delisted from most of the exchanges that we trade on. Secondly, Ethereum’s congestion problem continues to worsen and its market share has been partially eaten up by previous employees’ ventures Polkadot and Cardano. This has been reflected in ETH’s recent poor performance. 

Whilst I still believe that both XRP and ETH will survive and thrive in the future, we are currently left with only BTC to trade and this makes the task of producing high quality returns more challenging. Therefore, we have changed our legal documents to reflect that SCF can trade alternative crypto currencies or ‘alt coins.’ 

“Alt Coins”

I am not a Bitcoin Maximalist and I have often found the notion that ‘all alt coins are scams’ to be offensive at best and lazy thinking at worst. Since the 1870s, there have been approximately 1400 automobile manufacturers in the USA alone – of which 4 major ones exist today. Almost all of these represent tens of thousands of man hours of smart hard working teams who risked their capital and ideas in the pursuit of making a popular product and in so doing make themselves rich. But for Tesla’s forerunner, “The American Electric Vehicle Co.” (1896-1902) and over a thousand others – for any one of a hundred reasons, it did not work out. That is capitalism. 

In our time, over 3000 alt coins have entered the crypto coliseum. No rules, no referee, no regulators. The prize? Money itself. It simply could not get any more exciting. We have front row seats for this intellectual bloodbath and our job is to bet on the likely victors. 

And so with two out of three of the original favourites looking less strong, SCF would like to have the freedom to bet on a few other contenders. Some favourites include Polkadot, Cardano, Dash and Uniswap. We may add to this list in the future and are opening an account at Gemini in order to facilitate this diversification. 

Algorithmic Trading

The ‘Straits Algo’ focuses (as we do) on 4 hour charts. It largely mirrors our own decision making but has the advantage of being relentless and entirely objective. It has been back tested twice and is undergoing a third back test this week. In backtesting price data since January 2016, it handsomely beats both the BTC and TTI/SCF. We shall continue to monitor and improve the algorithm and may well provide it with a CFD sub account with a tiny amount of AUM later in the year. 

The benefit of this for SCF clients is potentially enhanced returns and redundancy against any form of failure from our head of trading (myself). In the meantime, we often now look at the Straits algo as a head check before entering a trade. 

Our door is always open. 

If you would like to learn more or discuss our decision to trade alternative crypto currencies or further develop use of our trading algorithm please contact our Head of Sales, Richard Howe at richard@taipaninvestments.com.