July 2020 Newsletter Hi Ember Crew,
We hope everyone is safe and sound. Please see below for our monthly updates.
📱Company & Product Updates: Important update: We've updated how we handle fees. It's become a bit unsustainable for us to continue to pay for mining fees so we've adjusted it so that users now take care of the mining fees.
We've listed Compound's token COMP!
We've noticed quite a few scammers posing to be Ember Fund admins and even a few carbon copy websites that have popped up. Please be careful, we will never ask you for your password and our domain is emberfund.io.
We’re hiring (again! for a different position) - Do you know someone that's passionate about operations and customer service? Check it out
here.
🔥Milestones: We've processed almost $30 million in transactions!
📊 Fund Performance Quant - The action we’ve all been waiting for finally arrived after months of range-bound markets. A Bitcoin rally of over 24% took many of us by surprise but not the Quant! We will be the first to admit that the model has underperformed in May and June but as we explained in the previous update, the model shows great returns over time and does not do well in side-way markets. The Quant gave us a return of 19.4% for the month of July as it managed to recognize a clear trend right before the rally. See the chart below. Typical of any market momentum system, systematic trend strategies need direction to make money. July was a perfect month for this.
https://i.imgur.com/8BIsFtm.png July started out much like May and June, trending directionless for the first three weeks. As a reminder, the core model that Quant was built on tends to average about 2 losing trades for everyone winning trade. The model was designed to create upside equal to or greater than a direct investment in bitcoin with about half of the downside volatility. The critical point though is that in order to deliver superior risk-adjusted returns, there has to be a tradeoff. In this case, the trade-off is that losing trades may be more frequent, but they will likely be small, while the winning trades are meaningfully more impactful to the long term results. Losing trades are cut short. On average, losing trades are typically in the low single digits while winning an average of about 18%. The struggle of course as a human is to sit back and watch the model “work”. In this case, working means taking losses and recognizing the pain so you can avoid the big drawdowns. As they say, “rule number one, don’t lose money. Rule number two, don’t forget rule number one.” For an asset like bitcoin, volatility is key to the model. Look at moves like we saw in July on the upside, and March on the downside. We quants call those tail moments. Quant loves tails. It treads water in the “middle” of the bell curve. It avoids the “left tail” moments and it adds value to the “right tail” moments.
It is hard to have faith when your portfolio keeps taking a dive every time the market decides to take a nap but during months like July, we can see why we trust the process. If you look at the chart below, it shows all the trades since inception and you will see that in sideways markets the Quant keeps deteriorating due to a thousand very painful papercuts. As soon as there is a clear trend - it’s right back on the horse.
We’d like to remind you that our strategy is a longer-term investment and one should not hope for ‘moon lambos’ in one month. Since its inception, the Quant is up over 172% while Bitcoin is only 97%. These numbers can not be achieved by pure luck or a lucky few trades. July has once again reminded us all to trust the process and not let our feelings get in the way even after a few months of significant losses. We hope this rally continues and we see a new all-time high by the end of this year. We all have paid (quite literally) the dues for new highs across the crypto market. Detailed Fact Sheet
linked. -Eric
S-Tier - After a wild month of DeFi hype and Bitcoin explosions, the S-Tier fund and Bitcoin are now fighting for the lead. This is currently the most interesting time in crypto as we see Bitcoin hitting its scalability bottleneck and major changes could turn the crypto world upside down. Altcoins are still seeing good growth, but Bitcoin is not being shy either. August will surely bring lots of interesting changes. The Halving is done, we have been in a heavy bull run since the Corona dump and August will decide if we will see a direct continuation of the bull run or rather a calming down. A continuation could surface completely new trends to follow up on the previous DeFi hype. A global stock market crash could also be just around the corner. Things remain interesting. Right now is the best time to make large financial gains, but probably only when buying in low after the big crash. However, the only way to make large profits is to be in USDC right now and buy in cheaper after a crash. If the market keeps going up, we can simply re-enter as well and readjust. We are playing both sides. Detailed Fact Sheet
linked. -Marius
Indexes - Bitcoin has rallied 20%+ in the past month after months of staying in range bound. We believe that along with numerous macro-economic conditions (government instability, quantitative easing) the recent announcement from OCC that federally chartered banks can now custody cryptocurrency is continuing to drive interest and price. We've also seen mind boggling growth in assets locked in DeFi protocols, $4.65 Billion up from $1 billion just last month. DASH, a coin in our DataDash index has also come out, guns blazing surging over 50% this past month. We are tweaking our outlook from cautiously optimistic towards bullish for Q3. -Alex
Feel free to reply to this email with any questions or comments.
Kindest regards,
Alex, Guillaume, Mario
Co-Founders | Ember Fund
W emberfund.io
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