Divine Investing

Post 1/2

After the dust has settled at least a little bit it's time for a new post. In the past week we've seen huge sell offs in the crypto and also in the stock markets.

The biggest Japanese stock index NIKKEI has seen the biggest two-day sell off since 1987, it has dropped over 12%, which is almost unbelievable for a stock index. This was due to the fact that the Japanese central bank increased interest rates, which have been close to 0 and sometimes even negative. 

This allowed investors to borrow money cheaply, convert Yen to USD and profit from the exchange rate, because the Yen was weakening and USD strengthening. Additionally investors could take these Dollars and invest them into the US stock market for example S&P 500. This is called the Yen carry trade.

Once the Japanese central bank increased the interest rates the Yen strengthened and investors that borrowed the Yen started to close the positions, which strengthened the Yen even further and consequentially the stock markets dropped.

Because the market is global, the reaction was also felt in crypto, $BTC dropped all the way to $50k, while altcoins had even worse losses, which is also reflected in our strategy. The cryptocurrency market as it stands is very uncertain. Altcoins have been bleeding since March/April, Bitcoin has been in $54k to $72k range since early March (with the latest exception which was rebought quickly) and in the meantime the US stock market has been performing very well, it was just at all time highs in the middle of July.

In our opinion this has been the hardest bull market to navigate (if we can even call it that so far) ever since we've entered the crypto market back in early 2017. We were positioned in a way that we were early in the market in the current bull run with the expectation of a proper altcoin bull run when the mass retail participants enter the market as it was in previous bull runs. Only time will tell if this will be the case.

Most altcoins are heavily beaten down, some are even at or below the levels of 2022 bear market, which is quite unbelievable to say. There are only a few overperformers that you can cherry pick such as for example $SOL and most investors would outperform the vast majority by just holding Bitcoin in the past 6 months for example. 

Continued in the next post.

Post 2/2

While it is impossible to predict the future, we expect that the FED will decrease the interest rates in the next FOMC meeting in September, the majority of market participants think so as well. That should have a positive effect on the stock market. There has been talks of recession in the past week and that the FED has been too aggressive, that they've made a mistake by not cutting the interest rates already in July and they will probably want to calm the market down.

We will see what happens, but the election years in the US have historically been very good for the stock market, there are talks of quantitative easing again, which would increase the amount of money supply as well. This does not necessarily mean that crypto will prosper too, we've seen it do the opposite in the last 6 months as described before, however we remain optimistic, historically speaking the past 6 months are more of an outlier rather than a rule.

If you are more risk averse, but still want to profit on potential crypto gains then our opinion is that just buying Bitcoin is not a bad idea (DCA every month). The BTC ETF has been a huge success, $ETH got its own ETF which adds validity to crypto and that it's definitely here to stay as a new asset class. As far as the altcoins go, the future is not as obvious as we believed and like we said earlier, only time will tell where we end up.

Like always, do not invest what you aren't prepared to lose fully, especially in crypto, because the market is very volatile. Nothing written above is a financial advice, but rather of an informative nature. Here's to better months ahead 🥂

Quick update, our last rebalance is looking quite good currently, $INJ seems to be waking up a bit. $BTC is still consolidating/is in a $60-70k range. We remain bullish in the short to mid-term, especially up to the US election in November. There have not been any major changes in the crypto market in the past ~3 months, that's why we have not been posting as much lately, because there is not much to analyze. No changes in the portfolio for now.

Yesterday $BTC went up to almost $70k because of a lower Consumer Price Index (CPI) print than expected, meaning that inflation was lower than the market anticipated, but afterwards the FED chair Jerome Powell had a FOMC speech and this is when the sentiment shifted a bit, because he hinted at less rate cuts than the market was pricing in. All in all until we are in $60-70k range we can just wait patiently.

We are rebalancing everything back to original weights with one major change - we are swapping our $FET holding for $RNDR. The decision for this is that FET is merging their token with $OCEAN and $AGIX to form Superintelligence Alliance and a new token called Artificial Superintelligence ($ASI).

We could not find any info on when exactly this will happen, however that means that the FDV of the new token will be over two times bigger than FET's current FDV. Because of this uncertainty we have decided to rotate into Render, which also covers the AI narrative in the market and has had one of the stronger bounces recently.

Below we are attaching $FTM's chart from 2021. We want to use it as an example of what could happen in the coming months. You can clearly see large drawdowns which are very painful to hold through and our belief is that this is happening again to some extent.

The large majority of coins have already seen huge drawdowns, but due to the fact we have entered the positions early in the bull market we remain in the green. A great example of this is $INJ which is about -55% down from the all time high, but our expectation is that it is just one of these large drawdowns as we can see on Fantom's graph. These are quite difficult to trade or to time. Many people trading with leverage get liquidated on such moves, that is why just holding spot positions is much better for the large majority of investors.

We will see what happens, but we remain optimistic and think that the largest and volatile moves still lie ahead of us. As always - not financial advice and do not risk what you are not willing to lose fully.

We are switching our thinking on L2's slightly and are removing $OP from the structure. One reason is that there are numerous L2's on the market with more coming and there is no clear answer which one will be the winner. Another reason is that even though $ARB and $OP have good fundamentals a large majority of the tokens have not been vested yet and are unlocking daily/monthly. Therefore the market caps for these coins is going up at a much faster rate than the price.

These are the reasons we are moving Optimism's share of the portfolio into $RUNE. We have had it in our structure in the past, most of the tokens are already vested and with it we are adding our exposure to the $BTC's ecosystem. It has also had a very similar retrace from ATH compared to Optimism.

As far as our other coins go - $INJ and $TIA have had the strongest bounces, while $FET has been performing the best overall.