17 January 2023

Happy New Year!
We hope that this newsletter finds you well after a Christmas break of joy and time spent with family and friends. We hope your New Year resolutions are still intact and the year of the Rabbit will bring you great tidings.
December’s Price Action
December was overall a relatively quiet month in the markets. SCF remained relatively steady and was aided by an increase in the value of XAG which rose in value ~10%. BTC dropped ~3.8% and the S&P dropped ~7%. Perhaps most notable for the markets is the continued slide of the USD which fell ~2.3%.
Our Fiat Thesis
We remain convinced that the debt based fiat currency experiment will eventually fail and that the USD will be the last of the dominoes to fall.
The new era of the Federal Reserve rapidly raising rates from 0% to 4.5% has added a new level of pressure on the monetary system. Central banks are now posting losses. The Swiss National Bank lost CHF 132bn ($143bn) for 2022, the biggest loss in its 115 year history. In Japan, the BOJ made the surprise announcement that they would raise the cap of the 10 Year JGB to 0.5% in order to save the Yen. Last week it was forced to purchase $5T Yen’s worth of JGBs in a single day. The BOJ can now only leap from the frying pan to the fire. Simply put, the world’s monetary system cannot tolerate positive interest rates. And the Federal Reserve is determined to keep them high.
Future possible monetary scenarios?
If the fiat debt based system fails at some point in the future, there appears to be three most likely scenarios. The first and most historically credible would be a return to a gold standard and the movements of the BRICS central banks would suggest that this is what they have in mind. Second would be a triumph of Bitcoin as the world’s central ledger. Lastly, is a Great Reset scenario in which the financial system is taken down for a few weeks, a CBDC introduced which requires a digital bio ID and a social credit score system – similar to what they have in China.
The Great Reset
The World Economic Forum is currently in Davos Switzerland planning the last scenario. As Klaus Schwab tells us: “You will own nothing and be happy.” This year, Klaus has hired 5000 Swiss troops for the event’s security. He seems increasingly certain that there will soon be a cyber attack on the financial system. Given his superb ability to predict these types of crises we are inclined to believe him.
The Great Reset scenario is uninvestable and one is therefore left with either Bullion or Bitcoin as investing options. We should therefore focus on how to spread our investments.
Crypto currencies
We remain bullish about crypto currencies and see a realistic chance of a bottom for BTC this year. To reiterate, BTC seems able to preempt the actions of central bankers faster than other larger asset classes. However, we still believe that there is likely to be more crypto infrastructure damage ahead of us. Namely, we believe that Genesis, Gemini, Grayscale, Binance, Huobi and Tether might not exist a year from now. Liquidity is being drained from the crypto industry and we should therefore expect continued volatility. We believe there to be a good short term buying opportunity for BTC at approximately $12,000.
Silver and the Hunt Brothers
In the late 1970’s, the Hunt Brothers attempted to corner the silver market. Their thesis was based on the global inflation that had started with the forming of OPEC. Their strategy was to  buy up future contracts on the COMEX and hoped that a conglomerate of Saudi royals would join them and demand delivery of the silver. Although silver blasted to $49.50 in early 1980, the strategy ultimately failed. The Federal Reserve raised interest rates to 15%, the COMEX changed the rules and banned further silver purchases, the Saudis bailed and the price of silver collapsed and took the Hunt brothers with them. The price of silver would not reach $49.50 again until 2011.
A bull market for Gold and Silver?
There is much reason to be optimistic about bullion. BRICS central banks are accumulating gold at an ever faster rate and appear to be making arrangements surrounding commodity flows outside of the Western alliance. Secondly, the London Bullion Metals Association is getting drained of silver at a rather alarming rate –  its inventory was redeemed from 1.2 bn Oz to 0.8 bn Oz in 2022. Both metals have produced an upward trend now and seem impervious to the interest rate hikes. Unlike the Hunt brother’s scenario, this appears to be the result of thousands of smaller actors, each trying to defend against counter party risk. At $24, silver is only half its 1980 price and should the LMBA falter, there could be a non linear event in the silver market.
SCF intends to increase its bullion allocation on the next pull back in gold and silver prices. Whilst we believe the S&P will see new lows this year, we believe that a significant new bull run in bullion is likely to take place.

Happy New Year! We wish you and your family a happy and prosperous 2022. 2021 turned out to be rather different from what we imagined on many fronts. Some things did not change – as of today (10th January,) BTC/USD is the same price of $41,500 as of a year ago and Covid still dominates the news and our daily lives. Some things did change greatly; the geopolitical map of crypto shifted profoundly from China to the West, NFT’s became ‘the new thing’ and after 20 years, $3 Trillion and 4 Presidents, the USA replaced the Taliban with the Taliban.   

In the Hedge Fund business, it is important to have some world views and attempt to step outside of comfortable assumptions. In order to make money, it is necessary to hold some outlier views. Here are a few: 

  1. Bitcoin will finally break the long awaited $100,000 barrier.
  2. The covid pandemic shall come to an end in Sweden, England, Mexico, Brazil and South Africa.
  3. A large cyber pandemic will attack the financial system and be blamed on the Russians. 
  4. A large debt crisis will have started in Italy. 

December’s Price Action
As discussed in last month’s newsletter, we expected the rest of December to be a poor month for the crypto markets. We have been rather cautious since BTCUSD failed to take $70,000 and have sat largely in cash since. This caution has taken some of the edge off Bitcoin’s 42% pullback. We briefly attempted to buy a breakout around Christmas time – which was stopped out at a loss. The graph we provided in last month’s newsletter predicted that BTC would touch $40,000 and this was reached on the 10th January. We believe that the bull market will likely resume back up to $70k in the next couple of months.

Reasons to be Bull(ish)
We believe that BTCUSD reaching $40,000 was a significant buying opportunity. In terms of Technical Analysis, there was strong horizontal and diagonal support at around the $40,000 mark. This was acknowledged by a substantial bid stack at that level. In terms of the derivative markets, Bitmex’s funding rate has been below par or even negative for almost two months and this normally unwinds quite abruptly. Lastly, the supply of Bitcoin keeps leaving the exchanges and this may suggest a supply shock.  

Tapering and Interest Rates
Nevertheless, Fed tapering and interest rates do provide some reason for caution. Inflation is becoming a significant problem in the West and this puts Biden in an intolerable situation with regards to the midterm elections in November. The Federal Reserve has stated that there will be three rate rises throughout 2022. These can be safely ignored, as they dare not make the US debt burden unbearable. The greater concern is the tapering of Federal Reserve asset purchases. The markets were saved in 2020 by a staggering level of money printing – even greater than in the 2008 GFC. The world’s economy and financial system are entirely dependent on not just more freshly printed money, but an ever accelerating rate of it. There remains the likelihood of a substantial ‘Risk Off” event in 2022 which results in a pullback in equities and crypto. Nevertheless, this will be solved by the resumption of massive stimulus and the upward trend of financial assets and an acceleration of cryptocurrencies. 

The debt based monetary system is heading to its inevitable conclusion and this current crypto cycle is not over. Therefore, SCF will most likely make significant gains in 2022.

12 November 2021.

“The restaurant is shut because we can not hire staff” apologised the manager of a smart hotel in Porto. This piqued my interest as I have never in my life heard this before. She explained that the minimum wage is only slightly higher than the welfare cheque and so young people do not want to work in the F&B industry. The same story is now prevalent in the US and the UK and even China. Millions of young Chinese believe the best form of passive resistance against China’s extreme work culture, high taxes and an income to house price ratio of 27x in the larger cities is Tangping or ‘lying flat.’ Perhaps too much welfare has made people lazy in the West. Perhaps the monastic experience of the Covid lockdowns has caused people to renounce the rat race. Certainly, the demise of the ponzi scheme debt-plus-interest-fiat monetary system will be accelerated if young people start to think like this. And what is it that these young people spend their day doing?



The superb quality of today’s games and over a billion regular players explains why the computer game industry is larger than film and music industries combined. A superb essay by Piers Kicks entitled ‘Into the Void’ projects the likely course of the ‘Metaverse.’ Kicks argues that Nakamoto’s invention of Bitcoin and with it the concept of digital scarcity unlocked the vast investment potential of the gaming universe. Non Fungible Tokens means that players can own the items in their game worlds and trade them. After much research into the investable surface of blockchain based gaming universe, SCF invested ~5% of NAV into Enjin in early October due to its promising fundamentals, meeting the SCF liquidity requirements and an excellent technical analysis set up. We believe that ENJ/USD specifically will continue to  outperform in the near term and the crypto gaming industry generally will dramatically grow for the foreseeable future. Many young people may be ‘lying flat’ but they are creating and populating new universes where they are writing the rules in their own favour and to their own liking. 

The Mayor of New York

Eric Adams, the mayor elect of New York City has promised to take his first three paychecks in BTC and claims that “NYC is going to be the center of the cryptocurrency industry.” Presumably, he wishes to compete for business with the Mayor of Miami, Suarez, who has created Miamicoin. This legitimacy of association adds fuel to the current crypto bull market. It also makes the future government crackdown more complex. To reiterate, the current financial system is so  incredibly favourable to governments and financial elites, it seems unlikely that they will simply let it be replaced. We continue to believe that the current cryptocurrency bull market will crescendo in the spring of 2022 and yet it will attract the ire of powerful governmental forces, eager to demonstrate their control and extract their tribute.   

October’s Price Action

October was generally positive for cryptocurrencies and SCF. As stated in the previous newsletter, we were confident that the Bitcoin Dominance Index (BDI) would increase for the first few weeks of October and was ~70% long BTC. SCF had a target of 47% for BDI and then partially rotated in favour of  ETH and a selection of alt coins. On the 20th October, BTC and ETH both broke their all time high’s causing SCF to go leverage long on both, only to be stopped out a few days later. SCF’s trading system is designed to catch the breakout moves and being whipsawed like this is the cost of doing business. This took a little bit of shine off an otherwise well traded month and we remain bullish for the month of November. 

Welcome to the panel discussion about application of multidisciplinary approach to the cryptocurrency investing. Our CEO, James Cox was invited to speak along with James Check (Lead Analyst at Glassnode) and Jamie Coutts (member of Board of Director of the Chartered Market Technician Association and Onchain Advocate). 

The CMT Association is a global credentialing body with nearly 50 years of service to the financial industry. The Chartered Market Technician® (CMT) designation marks the highest education within the discipline and is the preeminent designation for practitioners of technical analysis worldwide.

(Oct 13, 2021)

Taipan Trading and Investments Pte Ltd was registered in Singapore on 6/10/2012. TTI had humble beginnings as a self funded, after work project to see if Technical Analysis could be applied to Bitcoin (there were no other cryptos then.) TTI has since made staggering returns, is supported by a board of directors and advisors; James, Marco, Rhys and Jamie (known as the Taipans) and a team of a full time Chief Operations Officer, Business Development Manager and Data Engineer; Katy, Richard and Glenn. In 2020 TTI became the manager of the Straits Currency Fund and now has dozens of clients. We would like to thank directors, team and clients for their endorsement in this enterprise. We look forward to being able to host you all at the Singapore Cricket Club once again at the annual October party next year…
Latin American Ripple Effect
Brazil – Latin America’s largest country with 212 million recently proposed a bill to regulate crypto currencies. Brazil’s Federal Deputy Aureo Ribeiro has revealed that Brazilians could soon be able to buy houses, cars and even McDonald’s with Bitcoin. Whilst BTC will not be legal tender as in El Salvador, it is clear that Latin American countries are turning to BTC as a possible solution to their long standing currency problems as previously discussed last month. To emphasize this point, Argentina is currently grieving the demise of its ninth version of the Peso since independence. We imagine that Argentinians will cash in Peso #10 for BTC reasonably promptly.     
September’s Price Action
September was a month that began well for the broad crypto markets but then BTC/USD suffered a 25% and ETH/USD a 35% pull back. After taking a (comparatively small) initial hit, SCF moved largely to cash for the rest of the month and greatly reduced trading in order to avoid being ‘whipsawed’ in and out of the market and a potential drop for BTC to $35,000. This allowed us a large cash position to buy BTC as October started as we believe it will outperform as the Bitcoin Dominance Index temporarily moves higher in the next few weeks. Despite this recent setback, we remain very bullish about the current crypto cycle for at least another 5 to 6 months. 
Onchain Metrics
Whilst we are first and foremost focused on price action, we have always taken futures premiums into account. However, Jamie Coutts kindly invited TTI to speak at a panel for the recent Chartered Market Technician Association APAC Summit alongside an analyst from Glassnode. The age old debate of fundamentals vs technicals was brought to the brave new world of blockchain analysis and algorithmic trading and an agreement was reached that both are important. We intend to further explore how onchain data such as flow of funds to exchanges, hashrate and age of coins sold can be added to our toolbox.  
Pactolus & the Mamacos Ratio
Our data engineer Glenn Mamacos, gave a lecture in September regarding the quantitative trading strategy named Pactolus which was well received by all. Integral to the success of any machine based learning is a mathematically defined ‘goal.’ Having explored the traditional finance risk adjusted return measurements and found them wanting, Glenn has created a new metric that provides more guidance to the computer as a holistic measure of success. His essay that explains the Mamacos Ratio can be found in the SCF website. In the meantime, Glenn is working on integrating Pactolus with the crypto brokerage FTX, and SCF will allocate 2% of funds to Pactolus – hopefully in November.

(Sep 13, 2021)

“In the future you will own nothing and be happy” we are told by the World Economic Forum (WEF) founder Klaus Schwab. Just not as happy, we imagine, as Klaus and his mates – because they will own everything. We have recently read his book “The Great Reset” and much of it provides a well researched, insightful and accurate description of the challenges posed by Covid-19 in the economic, social and environmental realms. His proposed solutions however, are for far greater governmental control in all fields, under the influence of transnational authorities such as the WEF and made possible by Modern Monetary Theory. All of which has a predictable sense of inevitability. Ironically, many thought leaders in gold and crypto space have for many years, been using the phrase “The Great Reset” to describe what will happen when the great fiat currency experiment concludes. 

Although we are principally concerned with trading chart patterns, it is impossible not to be overawed by the accelerating rate of innovation in the crypto realm and the genius of its developers. The ‘Total Crypto Market Cap’ (TCMC) currently sits at approximately $2 Trillion. We are confident that TCMC will soon reflect and then overshoot the fundamental improvements in the crypto industry. However, we are also rather confident that the agendas driving the US Infrastructure Bill, the ‘suggestions’ of the Financial Action Task Force and the WEF regarding cryptocurrencies will significantly (albeit temporarily) impact cryptocurrencies market capitalization at some point in 2022. 


In a Historic milestone, Bitcoin became legal tender in El Salvador in early September. As discussed in our July newsletter, we predicted that this will be a long run success, will upset the IMF and would also inspire other Latin American countries. What we did not expect however, is that the next domino to fall would be Cuba. Given that Cuba is a communist country that has used inflation as an important tool in creating its ‘Utopia of the Soup Kitchen’, it seems at first an unlikely candidate to adopt Bitcoin as legal tender. However, survival always trumps ideology eventually and Bitcoin provides an opportunity for Cuba to evade US sanctions. Bitcoin’s appeal is infiltrating the minds of Latin Americans and it is possible that they are on the cusp of rejecting fiat currency en masse. 

August’s Price Action

August was a broadly positive month for cryptocurrencies. SCF outperformed BTC by leaning into some alternative crypto currencies such as Cardano. The decreasing supply of BTC from exchanges and the improving hash rate set the tone for a largely positive sentiment for the industry as a whole. It appears the ‘risk on/risk off’ relationship between BTC and the rest of the market remains fairly constant and the Bitcoin Dominance Index fell from 48% to 43% during the month.

TTI Quantitative Trading Strategy

As mentioned in the March newsletter, our engineer Glenn Mamacos has written a quantitative algorithm which codifies TTI’s trading strategy. It is based on 24 parameters and is called ‘Pactolus’. In order to improve this, Glenn also programmed a “Genetic Optimiser” which is in itself extremely interesting. After extensive back testing and demo testing, TTI placed $50,000 of its own funds into a brokerage account in August for the bot to trade. In less than a month, Pactolus returned approximately 24% with a Sortino ratio of 4.2. Whilst impressive, this was below Pactolus’s back tested long term median average. We shall be placing approximately 2% on SCF’s funds with Pactolus starting in October. We firmly believe that this will provide SCF with an edge over the markets. SCF will host a zoom call presentation about the Pactolus on Monday 20th September at 6pm SGT. Glenn will do a short presentation on the topic and there will be time for some questions and answers. A further email with details will follow in due course.

(Aug 13, 2021)

July’s Price Action 

It would appear that the crypto bull market has returned and the interim pull back is probably over. During July, BTC had a third trip below $29,000 and for a time threatened to go lower whilst at the same time BTC was withdrawn from exchanges. We believe that a multi month rally is now under way with far higher prices for BTC and alt coins is most probable. We also believe that the Bitcoin Dominance Index will head eventually below 10% within 6 months. Therefore, SCF has gained a minority exposure to some good quality alt coins beyond ETH and XRP.  

Fiat’s 50th Birthday. 

On 15th August 1971, President Nixon ended the convertability of the USD into gold in order to prevent the run on the US gold reserves from foreign governments, most notably De Gaulle’s France. This effectively ended the Bretton Woods agreement in which the other major currencies were linked to gold via the Dollar. The effect on society over the next 50 years was profoundly damaging: The USA’s Federal Debt to GDP ratio rose from 38% to 128% whilst its Gini Coefficient rose 25% from 0.39 to 0.49. The UK average wage to average house price ratio more than doubled from 4 to 8.5 whilst houses became smaller, damaging family formation. We believe that access to Bitcoin’s store of value function will play an important role in reversing these issues in the coming years.   

Ethereum’s London Fork. 

Ethereum’s long awaited London Fork (EIP 1559) upgrade went by smoothly on August 5th and is another stepping stone from proof of work to proof of stake for the network. Significantly, ETH is now burned with each transaction (in a similar manner to XRP) and it would appear that Ethereum could become a deflationary currency in the future. (It is fascinating to observe how almost all cryptocurrency projects comply to the free market’s demand of either a fixed monetary or a negative supply model.) Furthermore, DeFi protocols continue to build on the network and add to the demand for ETH. The price of ETH has increased significantly and makes up the largest proportion of SCF’s allocation. 

(Jul 13, 2021)

June’s Price Action 

The price action for cryptocurrencies over the last 6 weeks or so has been ‘sideways/choppy/down’ – which suits SCF’s trading strategy rather poorly. Of course, one can attempt to ‘buy the dip’ and assume that $30,000 for BTC is the bottom. However, it is impossible to know for sure whether this is true. Whilst we have been stopped out on a handful of occasions attempting to get long possible breakouts in both BTC and ETH, we have sat largely in cash for the month. Silver also fell approximately -8% in June. Unfortunately, it is possible that both crypto and precious metals continue a poor run further into the summer as USD rallies.  

The Big Picture

Which is more likely to happen first: the West lives within its means or China abandons tyranny?
This is one of the great questions of our times, and cryptocurrencies are going to force an answer. Bitcoin was a self emergent form of life that sprang into existence during the GFC (Great Financial Crisis) and has since percolated upwards through the ascending layers of power and will soon be the most significant topic debate in the halls of power throughout the world. At first, cryptocurrencies were the interest of obscure nerds, then mainstream people, then corporations and finally now sovereign governments.  

El Salvador 

El Salvador became the first country in the world to adopt Bitcoin as legal tender after 62 out of 84 congressmen approved President Bukele’s proposal. Such a move puts the country at odds with the IMF from whom it is hoping to get a loan. However, Bukele’s calculations may well prove to be vindicated in the near future. El Salvador currently does not have its own currency, but rather uses USD domestically. Without the luxury of printing money, it has less to lose from adopting a hard currency which should attract capital inflows into the country. Furthermore, Bukele has even floated the idea of using the currently unharnessed energy from its volcano to power a bitcoin mine. If this was achieved, El Salvador would have its own supply of Bitcoin denominated income making it independent from the control of the IMF. Unsurprisingly, this has attracted the attention of many politicians of indebted Latin American countries.  

“China bans Bitcoin”

Since circa 2013 the above headline has been written time and time again. This time however, it appears to be for real. Coinciding with the CCP’s 100th Anniversary, the CCP (Chinese Communist Party) has started to roll out the Digital Renminbi which can be traced, blocked, frozen, charged demurrage and reversed. Central Bank Digital Currencies are the fantasy of any tyrannical ruler. Obviously, access to an opposite alternative currency must be removed. In June, the PBOC (People’s Bank of China) announced that Banks must not provide products or services such as trading, clearing and settlement for crypto transactions. Furthermore, banks are to cut the payment links to ‘fictitious currency’ exchanges. Chinese Bitcoin miners have also been taken behind the woodshed and have been forced to transport their equipment to neighbouring Kazakhstan or simply close operations. Given that China held approximately 65% of the hashrate, Bitcoin’s difficulty and hashrate have fallen significantly. 

The CCP’s crackdown on Bitcoin has no doubt played an important role in the ongoing collapse in cryptocurrency value. However, the hasrate has already increased 20% over the last month as Bitcoin miners have expanded their operations in the USA, Canada and Sweden. The migration west of Bitcoin’s hash power further decentralises Bitcoin and is therefore positive for the industry in the long run. 

The juxtaposition of Western largesse versus China’s tyrannical aspirations presents an overly simplified false dichotomy. China also has a vast debt bubble and the West is abandoning freedom of speech/thought and capitalism at an alarming rate. Cryptocurrencies are voluntary and provide monetary sovereignty to individuals via cryptography. These fundamental concepts are going to be hotly contested on the geopolitical level in the coming years.

(May 8, 2021)

My mother received her bank statement from LLoyd’s this month to discover that she received an interest payment of 28 pence – almost enough to buy a free range egg. It is hard to overstate the implications of this for people or entities who depend on yield on their investments. The experience must be bewildering for pensioners, frustrating for the majority of pension funds and extremely alarming for the minority of pension fund managers who have realised that rates are never ‘going back to normal.’ 

Negative Interest Rates

Last month we introduced the nascent concept of people living off Bitcoin dividends. Now we shall consider the implications for Bitcoin vis-a-vis mainstream finance’s low/negative yielding interest rates and Japan offers an excellent example of the problem in its full absurdity. Simply put, as Japan’s 1989 bubble imploded, the Bank of Japan (BOJ) printed Yen to buy Japanese Government Bonds (JGBs.) Naturally, this drove up the value of said JGBs and thereby lowered their interest rates. Japan’s citizens continued to age and the BOJ kept repeating the exercise. Fast forward to 2021 and Japan’s debt is a staggering $14.7 Trillion and has a debt to GDP ratio of 272%. The BOJ and the zombie mega banks continue to buy 5 Year JGBs at (concentrate…) -0.1%. So the interest rate cannot ‘go back to normal’ because the government’s debt load is 3x the size of the economy. 

The above ‘logic’ will continue to grow the $18 Trillion global pile of negative interest bearing bonds until it ends in what Bill Gross who resigned from PIMCO describes as a 

‘Financial Supernova.’

Interest rates in Bitcoin Land. 

The above is possible because of infinite fiat supply, an abundance of trust and a slowing economy. In cryptoland, Bitcoin’s supply keeps halving, the economy is booming and nobody trusts anyone. Whilst SCF does not engage in ‘yield farming’ the returns are indeed attractive. One can now get 5% p.a for BTC and 8% p.a on USDC (Circle’s stable coin.) Even greater returns are possible in more extotic cryptocurrencies which are ‘staked.’ Furthermore, lenders expect to lend approximately 70% of what the borrower posts as collateral of 100%. It seems only reasonable to assume that yield hungry mainstream institutions will be sucked into Bitcoin’s universe where one can get 8% on USDC. Therefore, we can assume that the market cap of negative yielding bonds will be sucked into crypto. This alone would require an 18x increase in BTC’s price.

Altcoins and Uniswap

We did not need to wait until the summer for the Bitcoin Dominance Index to drop to 49% – it reached this point by the end of April. One of the altcoins we are bullish about is Uniswap. With Coinbase’s IPO valuing the exchange at $65 bn and Binance’s token suggesting a market cap of $98 bn, successful crypto exchanges are clearly money printing machines. The Decentralised exchange Uniswap has the advantage of charging eye watering fees but not the inconvenience of thousands of employees and dozens of offices. It appreciated ~40% in April and we believe it will help to put wind in SCF’s sails for months to come.

(Apr 12, 2021)

I had a Greek dinner on the weekend with a lawyer of a cryptocurrency firm who told me in all seriousness he did not ever intend to sell his BTC, but rather he intended to lend it out and live off the interest once it was over a million dollars, causing me to choke on my tzatziki. Whilst I believe that cryptocurrencies will remain far too volatile and risky to build one’s financial life around for the next few years, the implications of this nascent attitude do have significant implications for the broader economy and financial markets. Perhaps it might be a little easier to digest this intellectual frontier one soupçon at a time in our monthly newsletter.


Gold has been at the centre of the financial universe for centuries if not millennia and still holds a special place in our understanding of Monetary History. However, SCF owns almost none. Traditionally, the mystery of the gold markets, recently including the Fed’s implicit refusal to return Germany’s Gold and the legends surrounding Putin and the CCP stockpiling the metal have been intriguing beyond words. Yet despite the socio-political chaos and money printing of the last 12 months Gold’s price is unchanged in USD and down when valued in Euros. Assuming approximately 5 billion troy ounces – gold’s market cap has lost almost $2 Trillion in the last 6 months and Bitcoin’s has increased by approximately $0.8 Trillion. Clearly, there are extenuating factors in both moves, yet it seems fair to say that ‘physical’ gold is being eaten by its ‘digital’ nephew. The fact that we know the exact amount of BTC in circulation, exact future production, all previous transactions, its purity, its superior transaction speed and the fact that it does not go ‘beep’ at airport X Ray machines all suggest that young(ish) people will favour Bitcoin over Gold. Nevertheless, when measured in fiat currency, we still expect gold to increase in value over the next few years.The XAU vs BTC ‘store of value’ debate is interesting. Next month we shall consider the possibly more important topic of BTC’s ‘interest rate.’ 

Bitcoin Dominance

BTC is not the only exciting cryptocurrency. Analyzing the Bitcoin Dominance Index (BDI) which reflects the percentage of total market capitalization of cryptocurrencies held by Bitcoin is insightful. For the last two years the BDI has been range bound between 58% and 73%. As I write, BDI appears to be sitting on the ledge at 58%. This has been due to the growth of alternative crypto currencies rather than any drop in the value of BTC/USD.

It is hard to know which ‘alt coins’ will be the beneficiaries of this dynamic as well as the magnitude and longevity of the move. The 10 year BDI chart appears to fit Fibonacci retracement levels remarkably well and suggests a drop to 49% by the summer. However, it is entirely possible for the BDI to continue to drop whilst BTC continues to appreciate in the coming months should the alt coin boom continue to accelerate.   


On the subject of alt coins, the court case between Ripple Labs and the SEC as to whether XRP is a security that began in March and is of great significance to the crypto industry at large. Judge Sarah Netburn recently echoed the independent verdicts of the DOJ and Fincen, commenting; “My understanding about XRP is that not only does it have a currency value but that it has a utility, and that utility distinguishes it from Bitcoin and Ether.” Furthermore, the SEC stated that only Ripple Labs Senior management is liable for selling XRP which exonerates exchanges, institutions and private citizens from trading the currency. Therefore, SCF has begun to trade XRP again at Kraken. We remain bullish about Ripple’s use case and ironically, it’s uniquely transparent architecture and Ripple Labs’ commitment to compliance makes it an attractive… ‘investment.’