Here’s why my fund, amidst a ferocious drawdown in the cryptoasset markets, has chosen to draw a line in the sand. My firm, , opened for business on May 1st of this year. Normally launching a fund with a long-biased — though by no means long-only — strategy to coincide with a 60% market drawdown would elicit sympathy from others in the investment community. In this case, I guess I’d call us (relatively) lucky: many of our peers who entered the market a few months earlier have faced an 80%+ correction and, in quite a few cases, are now out of business. Kosmos Capital Management As we’ve learned firsthand from personal experience and more recently with Kosmos, the sensation one feels when actively trading crypto can be reliably equated with that feeling one experiences when juggling chainsaws in a dark room. Violent and unpredictable moves, loose to non-existent regulations, and a sizable coterie of less-than-ethical market participants all contribute to the stew that makes this asset class what it is. Not all of our trading decisions have been on target since launch — our LPs can attest to this — but we have managed to avoid most of the carnage and therefore have earned a seat at the table to participate in Crypto Meltdown 5.0. If you don’t understand what I mean, see the table below with credit to legendary trader Peter Brandt. This now somewhat dated chart succinctly summarizes the rollercoaster that has been — and the cryptoasset class more broadly — over its brief ten-year lifespan. Bitcoin Courtesy: Factor LLC Research Since the publication of the above, prices have fallen further, dropping as low as $3,456 on Coinbase, a level that coincidentally matches the 82.6% drawdown that was experienced (over just 2 days!) in 2013. I have no clue whether the bottom is in and unless you’re the Mt Gox trustee then you probably don’t know either. But one thing is absolutely clear from the above: for the first time since the second half of 2015, Bitcoin is unequivocally cheap in historic terms relative to its recent highs. It’s cheap at $3,500, at $4,000 and anywhere in between. Retreating to and remaining on the sidelines amidst a financial meltdown — which in crypto terms this certainly represents — is normal, natural, easy — and wrong. Whether you’re telling yourself you’re waiting for it to go lower or are looking for the confirmatory rebound to keep from catching the proverbial “falling knife”, coming up with a reason to sit things out feels “prudent”. If you want to wait for a two-handle then good luck to you. You may get it, but you may not. We don’t make investment decisions based on technical analysis alone. Support is support until it collapses. However, this range — in the mid $3,000s — was a level that was successfully defended over several days in late September 2017 just before the bull run kicked into high gear and has now held for almost 4 days since the fall from $4,200. Will it continue to do so? Again, who knows. But we’re buying here and it seems we’re not the only ones who think the drawdown is largely out of steam. Source: Coinigy, Coinbase There is no simpler investment philosophy than to buy cheap and sell dear. Right now, we feel that Bitcoin is valued attractively. Our fundamental beliefs in the viability of this asset remain intact, and we have just sustained an 83% drawdown. Can it go lower? Absolutely. But we have medium-to-long term conviction that current levels remain highly compelling. ======================================== Obligatory disclaimer follows: I shall wrap up this article by pointing out explicitly that nothing in this column is intended as investment advice and you definitely should not interpret it as such. I am an investment advisor, but I am most likely not your investment advisor. And as I am not your advisor, I have no idea whether cryptoassets are a suitable investment for your particular needs. Don’t rely on my advice, or for that matter anyone else’s advice, when making investment decisions. Doing your own research is the key to success in any market. ======================================== I work at Kosmos Capital Management , which actively trades the emergent class of digital assets. Follow me on Twitter @kvirgil ========================================

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