Happy Sunday!
If you had gone for a nap last week and woke up today a week later, you may be slightly disappointed with where prices have gone. Bitcoin is down slightly more than ten percent on the week to around $58,700 from $65,900, while Ethereum ended the week at $4,260 after beginning the week at around $4,720.
However, that masks the intraweek volatility that sent market participants into a dizzy with Bitcoin going as low as $55,500 during the week after reaching as high as $69,000, while Ethereum briefly went below $4,000 at certain points as well.
This is on the backdrop of a fairly quiet news week. We didn’t have any random Elon Musk tweets, nor did we have any new stories about China banning crypto for the one thousandth time.
For those that believe that the crypto markets are in a bull cycle today that has room to grow, weeks like this underline an important point - volatility is higher in crypto than any other risk asset you may be familiar with, and it is important that you are mentally prepared for the occasional stomach churning declines.
While a weekly drop of 20% in the equity markets can typically signal capitulation in the markets, the same decrease in the crypto market is almost always par for the course.
Portfolio Review
On a weekly basis, my portfolio is down around 8.8% from the prior Sunday. Ethereum drove the largest decline on an absolute basis as it makes up the majority of my portfolio, while Chiliz - a coin that makes up 0.08% of my portfolio has the largest week-on-week decline in percentage terms, decreasing from $0.58 to $0.44 for a decline of around 23%.
In contrast, my largest gainer in percentage terms is a metaverse token called Sand which was up 38% for the week. Sadly, it also only makes up 0.08% of my portfolio , and does not move the needle.
Despite the declines that we saw in the market this week, my portfolio is still in the green when compared against my cost basis. As of this week, my unlevered returns on the portfolio are at +2.9%, while my levered returns are around +8.0%. This, of course, is in stark contrast to where we were last week when levered returns were at +36.6%.
Conclusion
Looking ahead, some market commentators have argued that Bitcoin’s weekly close below its 8 week moving average ($59,000) could portend a more aggressive move by Bitcoin to the downside this week to where the 20 week moving averages are (closer to $50,000).
While I almost always take these commentary with a grain of salt, it never hurts to be prepared to know that your portfolio may bleed in the short-term.
To the extent the market continues its decline, it may be a good time for those that are not in the market to take a closer look at deploying capital for the first time.
Given that I’m fully deployed, I know I’ll be looking jealously from afar!
Nov 21, 2021. 7pm ET.