Key Highlights:
- Post-election optimism
- Bitcoin outperformance
- AI Agents
- DePIN for AI perception by Auki Labs
- DeFi on the rise
- Sigil Stable
- Changing market dynamics
Dear Investors,
In the Q4 of 2024, Sigil Core recorded +53.22% vs EUR, +42.39% vs USD, -4.10% vs BTC.
Over the course of the entire year 2024, the performance of Sigil Core was +63.94% vs EUR, +53.73% vs USD, -30.62% vs BTC.
Sigil Core Net Performance vs EUR Q4 2024
The final quarter of 2024 showcased strong growth, setting up a positive year-end result of +64% NET vs EUR for Sigil Core. Although the quarter began on a weaker note, the market quickly rebounded, driven primarily by significant inflows into crypto ETFs.
Markets anticipated Donald Trump’s re-election on November 5, 2024 as a turning point for crypto. His administration’s pro-crypto stance reverses restrictive policies led by Senator Warren and SEC Chair Gensler. This shift aims to create a more favorable regulatory environment and position the U.S. as a leader in the crypto industry.
Relative outperformance of Bitcoin continued thanks to institutional capital inflows into Bitcoin ETF, as well as Microstrategy TWAP (MSTR currently owns 2.28%% of BTC supply). There are also serious talks of SBR — Strategic Bitcoin Reserve under which Bitcoin bitcoin would become one of the assets for the U.S. Treasury. Some US states and other nations, including the Czech Republic, are also debating buying bitcoins independently.
Growth in Q4 was primarily driven by two key factors: post-election optimism and the emergence of AI Agents, a transformative trend in the crypto space that highlights the promising synergy between AI and blockchain technology.
AI Agents
Agents are software programs that use AI to perform tasks and achieve goals relatively autonomously (unlike simple scripts and algorithms). In crypto we can use AI agents to automate execution on the blockchain and abstract away complexities of DeFi, trading as well as governance, making it a convenient tool for users without deep technical expertise. Instead of interacting with smart contracts and wallets, users can simply interact with AI agents via chatbox. Apart from Wayfinder which we covered in previous letter, Sigil invested in two more projects that are enabling AI agents interacting with crypto: Virtuals Protocol and Olas
Virtuals Protocol
Virtuals Protocol allows users to develop autonomous, multimodal AI agents that operate across platforms like X (Twitter), Telegram, TikTok, and Roblox while maintaining consistent personalities and memories. Focused on Twitter commenters and more recently gaming and entertainment, these agents can interact with their environment, make decisions and manage crypto transactions.
AIXBT by Virtuals is an AI crypto influencer — market intelligence platform that analyzes trends and provides strategic insights. It automates data collection from news, social media, and blockchain activity to help investors make informed decisions. The AIXBT token grants access to premium features, facilitates transactions, and supports governance within the ecosystem
Olas
Another AI agent platform Olas focuses on DeFi and data marketplaces. The platform’s Proof of Active Agent system rewards AI agents for their on-chain performance and network contributions. This incentive ensures the development of useful, reliable AI agents with lasting value. Olas also prioritizes open-source framework and interoperability, allowing agents to operate across different blockchain networks.
A notable AI agent within the Olas Network is BabyDegen - an autonomous trading agent designed to operate in DeFi markets. BabyDegen executes trades on behalf of users, aiming to optimize investment strategies without requiring constant human oversight.
Auki Labs — helping robots navigate the real world
If you happen to be familiar with Pokemon Go — an augmented reality game with over 1 billion downloads where players catch virtual monsters outdoors — you might be surprised to learn that these players are actually collecting spatial data. This data, which describes the location and characteristics of objects or features on or near the Earth’s surface, is used to train AI models that map the physical world.
Auki Labs, through its decentralized protocol posemesh, enables users to create, share and access spatial data, effectively turning smartphones and wearable devices into distributed spatial computers. With its vision of “giving robots eyes,” posemesh aims to create a shared spatial map that machines and AI can use to collaboratively understand and navigate the physical world, particularly within interior spaces.
What makes Auki Labs even more compelling is its proven business model, having already secured customers in the retail industry. This innovative approach driven by a strong team, makes it a highly compelling addition to our long-term investment portfolio.
Auki founder Nils Pihl talking to Fiskantes and Joe from Sigil:
DeFi on the Rise
DeFi has rebounded strongly, almost doubling in in TVL due to anticipation of future regulatory clarity. Key metrics are recovering, with platforms like Aave surpassing past levels and promising newcomers like Hyperliquid gaining traction, which we added to our portfolio early after its launch.
Hyperliquid is a decentralized trading platform for high-speed, low-cost perpetual futures. It’s getting dominant market share in decentralised perpetual futures thanks to its advanced on-chain order book, deep liquidity and superior UX for professional traders. The founders are professional traders themselves and were able to bootstrap a superior trading platform without taking external capital. The only way to acquire HYPE tokens was through trading incentives or buying on the secondary market. The team plans to make Hyperliquid into application-specific blockchain focused on trading.
As DeFi adoption grows, it is set to become an attractive part of the global financial system, offering faster, cheaper and more inclusive financial services.
Notably, World Liberty Financial (WLFi), a DeFi protocol backed by President Donald Trump and his family, holds $388M in digital assets and plans to deploy capital on Aave v3 - the leading DeFi lending platform.
Furthermore, lower borrowing costs and increased stablecoin growth are driving liquidity across the ecosystem, creating new opportunities for users and funds alike. This is an especially appealing option for investors seeking higher yields — which aligns with the strategy of our second fund - Sigil Stable.
Sigil Stable
Our second fund allows investors to pick up yields from the blockchain space with a set of market-neutral strategies. It eliminates the volatility of crypto markets by holding stablecoins and hedged positions accessing opportunities available within DeFi and on private OTC markets. Last year, the fund recorded a +35.12% NET vs USD with a Sharpe ratio of +2.54 and it aims to continue utilizing high-yield opportunities to achieve consistent returns of 15% — 30% p.a.
So far, the majority of Sigil Stable’s assets under management have been contributed by our own capital in order to build a track record and highlight our confidence in the fund’s strategy. After more than three years of solid track record and testing we’ve decided to offer Sigil Stable to external investors.
Discover the details of Sigil Stable’s unique strategy, its focus on curated opportunities and how it complements our vision for decentralized finance in our latest article: Invest Like an Insider: Sigil Stable Fund’s Next Chapter Begins in 2025.
What Do We Expect Next
1. Bitcoin is not early anymore
We are observing a significant shift in the crypto market. Institutional adoption of Bitcoin via ETFs and nation-state sovereign funds considering strategic Bitcoin reserves mark the new phase for Bitcoin. Bitcoin is no longer perceived as the financial counterculture, the illegal money for drug dealers and terrorists. It is becoming mainstream. While it’s likely that Bitcoin with its current size is not such an early asymmetric risk:reward asset as it once was, we still expect it to perform well. As the world around us is getting more and more indebted, it is likely that global liquidity will be expanding long term to monetise the debt. We are seeing more and more comparisons between gold and Bitcoin from investment professionals. While gold effectively retained its purchasing power over time vs inflationary fiat currencies, BTC has recorded extra returns thanks to it growing from lower base and being a “risk on technology bet”. Now Bitcoin becomes a mature asset and its ETF quickly surpassed Gold ETF in value invested via BlackRock:
2. Altcoin season is a pipe dream
In the past cycles we often observed “altcoins” (e.g. all the crypto assets apart from Bitcoin) to surge in price more or less together. However there are now simply too many tokens with too high valuations and upcoming unlocks. The market cannot absorb all of this supply sustainably. Going forward, we do not expect altcoins to behave like they used to, i.e. to move all together. Rather, we expect select winning crypto assets to reach escape velocity and become institutionally embraced alongside Bitcoin.
Blockchains are financial tech platforms, and as such need to have strong network effects. This means that we can expect few dominant players to capture most of the value, a bit like “Magnificent 7” capture most of the value on the stock market. It will become increasingly difficult to find new upcoming winners in the mid-cap and small-cap valuations due to the fragmented altcoin market and diluted attention of crypto native investors.
Occasionally we will see few pockets of outperformance among selected crypto segments (like we saw with memecoins or AI agents) and very few upcoming runners that will surge to gain escape velocity alongside established winners. While it will be very difficult to catch these winners early, we will keep dedicating significant effort to identifying possible future winners and outperforming segments early to give our investors the best possible exposure to wider crypto adoption trends.
3. We are not 100% risk-on at the moment
Navigating a bull market for us also involves allocating part of the NAV to stablecoins when markets become overheated. You may have noticed from your portfolio dashboard that we have allocated between 10–20% in stablecoins in early January. We noticed a few top signals like the Trump family coins, exhaustion in the memecoin & AI meta, as well as tighter central banks liquidity short term. While we were right, and it softened the downward volatility a bit, it is not our ambition to time the local tops and local bottoms of the market.
In the bull markets it is impossible to time the top for a timely exit. If you derisk too early, you may miss significant returns in the final parabolic stages of the bull run. If you remain optimistic while the market already topped out, the losses into the next correction can be significant. Nobody, including us, can reliably time the market so we recommend our investors to stay alert in the next 12 months and consult their individual situation and preferences to decide whether or not they want to potentially derisk their holdings with us.
Our mandate is to provide a crypto long exposure to our investors. Thus we will never have less than 50% of our capital allocated in long crypto positions. Those investors who wish to further de-risk their exposure themselves are welcome to do so by moving some of their Core position into Sigil Stable, which aims to provide competitive returns without significant price volatility. At some point if you believe markets can do +100% but also -50% (wholly symmetric risk reward), why not move your capital into Sigil Stable that reliably yields returns without market volatility?
While we expect the crypto market will be increasingly difficult to navigate, we still believe crypto adoption is a long term secular bullish trend, worth having significant exposure in. The Trump administration has already proven the appetite of the USA to unwind the last 4 years of crypto prosecution and become the bastion of crypto innovation. A lot of global debt needs to be refinanced this year which could lead to expanding global liquidity and extended bull run for crypto. We also observe other countries are ready to follow suit, including the Czech Republic, which recently approved a bill exempting Bitcoin and other digital assets from capital gains tax for holdings over three years.
Thank you for your ongoing trust in Sigil Fund.
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If you’d like to discuss your investment in Sigil Fund, please don’t hesitate to reach out to us at info@sigilfund.com