Dear Investors,
2024 started on a strong note being driven by the much-anticipated approval of the spot Bitcoin ETFs. The impact of that approval was greater than initially expected. In fact, it was the main driver behind the continuous relative outperformance of the BTC.
This dynamics could potentially signal an earlier onset of the cycle compared to what we‘ve seen before. Historically, bull markets were triggered by the BTC halving events with prices starting to surge after the event, not before. This time round, we’re seeing a new scenario with the fourth halving taking place on April 20, 2024.
From there on, the freshly minted BTC earned by miners are being reduced by 50% (during the next 4 years only 450 BTC will be created each day). The next halving event is planned for 2028. We encourage you to read our analysis of the previous BTC halvings, their effect on triggering past bull cycles and fostering the overall growth of crypto. You can read it here.
In the Q1 of 2024, Sigil Core recorded +58.39% vs EUR, +54.88% vs USD, -8.24% vs BTC.
Sigil Core Net Performance vs EUR Q1 2024
BTC spot ETFs
BTC surged to a record high of $73,805 on March 14, 2024 driven by the approval of the first 11 Bitcoin spot ETFs by the U.S. Securities and Exchange Commission on January 10, 2024. Among these ETFs, Blackrock emerged as the clear winner accumulating over $18B in assets under management. However, during the same period, the Grayscale Bitcoin Trust (GBTC) saw substantial outflows, totaling over $15B in the last three months.
This trend was primarily attributed to GBTC’s historical trading at a discount reaching 48% which was caused by operating without a redemption mechanism. The discount presented an appealing trading opportunity which traders seized upon as the discount closed after the conversion to a spot ETF, resulting in profitable trades. Moreover, GBTC imposes significantly higher fees compared to its competitors. Many GBTC holders from the previous cycle were waiting for the discount to decrease so they could exit their positions for a fair price. Nevertheless, overall market flows were positive: $12B in Q1 2023 into BTC spot ETFs.
The chart below illustrates rolling inflows/outflows which have contributed to a slightly higher market volatility, particularly in March.
ETH
Ethereum requires no further introduction. However, to delve deeper into understanding how ETH is investable under the traditional finance (TradFi) approach. We recommend you to watch this brief video:
"But perhaps the best kept secret about $ETH is that it has real, investable economics" pic.twitter.com/PGygND7FJz
— Token Terminal 📊 (@tokenterminal) April 9, 2024
ETH has been lagging behind other major cryptocurrencies in terms of price, with proxy tokens such as Lido (LDO, the dominant liquid staking protocol on Ethereum) showing similar trends.
This is partly due to the lowered expectation for the launch of an Ethereum spot ETF in this approval cycle’s deadline on May 23. Markets along with Bitcoin spot ETF issuers, anticipate the SEC would reject such products. This sentiment is supported in prediction markets such as Polymarket.
However, we believe that after the markets witnessed the Bitcoin spot ETFs as the most successful ETF launch in 30 years, the involved parties will be eager to introduce an Ethereum spot ETF as well in the next 1–2 years. Of course spending some legal back and forth with the SEC.
Polymarket — The Uniswap of Forecasting
Sigil is proud to announce its participation in the private round of Polymarket. Polymarket is a leading prediction market, set to grab attention in 2024. Focused on forecasting politics, news, culture and tech events while enabling trading with stablecoins, it already achieved a significant product-market fit. With the upcoming US presidential elections, a significant hype is anticipated.
Currently the markets are created by the team behind Polymarket, but we believe Polymarket could enable user-generated markets. Ryan Selkis, Messari founder, stated Polymarket recorded $6M in volume in December 2023 and expects a substantial increase to $300M by October 2024.
Prediction markets such as Polymarket aim to elevate data, news, and public discourse by gamifying “the truth”. People ”in the know” have an incentive to bet on the outcomes of given events, correcting the odds and providing probability estimates often times better than other methods such as public polls.
Polymarket allows anyone to check the market odds of a given event, which provides value even for users who do not want to bet. The total addressable market for betting is huge. Consider the online sports betting market alone is projected to reach $9.65B in 2024 in the US.
Solana
In our previous letter we outlined our dollar-cost averaging (DCA) purchases of SOL between June 2023 and January 2024. Throughout Q1 2024, SOL’s price continued to strongly outperform the crypto market.
Solana blockchain’s unique proposition lies in its monolithic architecture — everything happens on one main chain, avoiding the fragmentation caused by scaling into multiple layers like on Ethereum.
Thanks to low fees and superior user experience, Solana has been successfully facilitating the onboarding and growth of the retail user base. This contributed to a recent SOL’s meme coin season (coins like $WIF) — seen as attention-driven trading games. This trend was reflected in the growth of Solana’s daily revenue which cumulatively reached $90M by the end of Q1 2024.
We’re excited to share with our investors that Sigil acquired 133,900 SOL from the FTX Estate at a significant discount — purchasing at $64 compared to the market price of $128 per coin. These tokens are subject to linear vesting with monthly unlocks which will progressively enhance Sigil’s performance. With the growth of Sigil’s assets under management, we will be utilizing similar distressed, private and over the counter opportunities in order to boost our performance. Per our current mandate we can allocate up to 10% of capital into illiquid or otherwise locked assets.
Press enter or click to view image in full size
COIN
We already informed you of our purchase of COIN (Coinbase stock) in our Q3 2023 letter. This investment has shown strong performance thus far, with an entry point of $57 that reached $265 by the end of Q1 2024. The surge in Coinbase shares followed the company’s announcement of a quarterly profit for Q4 2023, marking its first profitable quarter in two years.
Furthermore, we have followed the success of Coinbase’s launched Layer 2 network — Base. Base serves as a Layer-2 scaling solution for Ethereum, developed with the aim of enhancing the transactions speed while utilizing the security of the Ethereum mainnet. Currently, Base ranks third among Ethereum layer-2 solutions in terms of total value locked (TVL, measures the U.S. dollar value of assets locked or staked on a blockchain), boasting $4.15B. See the chart below illustrating the Coinbase’s total revenue from Base which has now exceeded $40M.
As Base has no plans to issue its network token, we believe that the market may not have fully factored this success into Coinbase stock price. Therefore, we intend to maintain our COIN position further.
Base:
Parallel
The sci-fi Trading Card Game (TCG) Parallel entered its open beta phase on February 29. Up until now, it has already held several tournaments, including one with a $25K prize pool and renowned world players like Bunnyhoppor, the reigning world champion in Hearthstone, and similar TCG heavy weights On top of it, Parallel unveiled the debut of the Parallel League — a global tournament series with a prize pool of $500K planned for this year.
Due to the continued strong performance of the Parallel’s PRIME token, our purchases made between $2 and $3 resulted in significant gains.
You can enjoy the open beta announcement trailer here:
If you haven’t seen the Private beta trailer earlier, check it out as well:
Conclusion
Following the approval of BTC spot ETFs and their robust buying power along with BTC halving, the current deflationary nature of ETH and numerous technological catalysts, the emerging bull market appears poised for significant positive momentum.
Entering the bull market phase brings increased dynamics and volatility. The chart below illustrates market trends in 2017 following the 2016 halving. It offers a more favorable example compared to the dynamics of 2021 which negatively impacted by an array of imploding entities. The most significant performance gains occurred in the last three months before the cycle’s peak. This suggests that despite the strong start in 2024, there are still favorable risk/reward opportunities for crypto investment, particularly during “buy the dip” moments.
Keeping this in mind, Sigil remains fully allocated to take advantage of the bull phase of the crypto cycle. We are steadfast in our commitment to continue to identify the best opportunities to enhance our performance.
Thank you for your ongoing trust in Sigil fund.
Bonus content
This video reflects the current market mood in a humorous way (which we agree with).