The portfolio hasn’t achieved the results on the scale we saw over the previous few months.
Nonetheless, we’ve still clocked up a solid amount of value growth in fiat currency terms.
Digital Currency Trading Results At End April 2017
So what happened in April? Well things started off mediocre for the first week or so. Either small daily rises or falls. As a result by the end of the first week the hedge fund was only 6% up on the start of the month in Bitcoin terms.
But in the second week we started to get into gear. Things were now moving strongly upwards. By the end of the second week, we were 62% up. Now it was looking great and it seemed as if we would be on target for doubling the trading capital by the end of the month. Maybe even exceeding that.
Unfortunately the market then started to go in the opposite direction. The portfolio value has declined practically every day. Only over the last few days have things started to pick up once again.
Final result is that we have ended the month only around 33% up on the start of the month in Bitcoin value, and around 66% up in fiat currency (EURO) value. This compares with a value appreciation for Bitcoin in April of around 25%. See the above chart from Bitcoinity showing BTC/USD.
So compared to Bitcoin, the hedge fund has done well with 66% increase in value. That’s a very good result in stock market terms.
But I’m not happy. I was reasonably confident we’d achieve at least 100% increase in April. And things were going well, but then the sector turned down. It was extremely annoying to see the value being tiddled away over most of the second half of the month.
Reasons For The Poor Trading Results For April
So what’s the reason for the poor trading results for April?
The first reason is Bitcoin itself. The BTC price has risen through April by around 25%. Bitcoin rises tend to have a contrary effect on altcoin prices which then tend to be depressed.
We also saw a sudden substantial fall in the PIVX price. The fund was was heavily exposed in PIVX with almost a third of the portfolio value invested in PIVX. This was far too high.
In the second week of April the PIVX price took off. So I took the chance to reduce some of the exposure by selling off some of the PIVX holding to get it down to safer levels. Currently we’re down to around 20% invested in PIVX. Still a bit too high but much better than before.
But then the PIVX price fell substantially and this negatively affected the value of the fund. Along with this, we saw a general fall in many values as a side effect of the Bitcoin price rise. So this also took its toll on the portfolio.
Part of my response to this was to try a number of short-term or day trades. Most of these day trades turned out to be loss-makers. I ended up closing the positions of most of these at a loss.
On the plus side my market research turned up a number of new coins – new for me that is. Among them were POSW – which saw substantial value appreciation, as well as TX (TransferCoin) and SIB (Siberian Chervonets). Also invested in a gold-linked coin called XAURUM.
April was also the month I subscribed to my first ICOs. Among them were humaniq and Taas.
What Have I Learned About Altcoin Trading in April?
So looking at the events of this month what have I learned for the future? What should be the strategy?
First thing I learned is that even the digital currency market can go down as well as up. We’ve had spectacular value growth these last few months. But that doesn’t mean you will see a continuation of this every month.
I guess market falls are part of the game. You have to be able to live with it and cope with it, you can’t always have market rises. And we have it a lot easier than traditional stock markets, not to mention Forex, which is like a snail compared to this sector. For Forex a fall or rise of 1% is a big occasion.
Whereas we in Altcoinland are used to day rises of 5%, 10% and more. In that sense we’re the spoilt brats of the investment world. But of course, market volatility moves in both directions.
And overall, we haven’t even had a fall in the total value of the fund. On the contrary, it’s still gone up – and by a substantial amount. All we’ve seen has been a slowing down in the rate of capital growth. So we’re not talking about a loss. We’re still in good profit for the month.
I also took advantage of the falls in the market to buy in a couple of values cheaply. All this will serve me in good stride later on. So that’s another thing I’ve learned: You have to continually look ahead in this biz. Buy in when values fall.
And related to that: market intelligence is the key. That means research. Knowing what is going on with different coin projects. Keeping a check on cryptocurrency news and events.
Another thing which turned out to be loss-making was margin trading. I tried this a couple of times this month, and on the whole it either yielded very little profit or else turned out to be loss-making. So for the moment I’m giving margin trading a rest.
The other strategy I’ve decided is to maintain a proportion of the fund in base currencies at all times, namely Bitcoin and Ethereum (ETH).
The fund was almost fully invested in altcoins when the falls came after the second week. If I had gradually transferred a proportion of the fund back into Bitcoin during the rises in the second week, then this would have protected at least some of the fund from the later falls.
So from now on I’ve decided to keep a 20% holding in Bitcoin and 10% in Ethereum. This will help shield the fund from the anti-cyclical movements of the altcoin holdings in relation to Bitcoin’s price movements.
I might also add Litecoin as a base currency, with maybe a 5-10% share.
Main thing is to ensure that we are not too exposed to the movements in the altcoin sector, and that these ratios are always maintained.
That means that as the altcoin holdings appreciate in value, I’ll gradually be selling off proportions of the altcoin positions to transfer to Bitcoin and Ethereum in order to maintain these base currency ratios.
Part of these holdings can also be placed on lending for margin traders. Interest rates vary but they are way above the APRs that you get from fiat currency deposit accounts with banks.
Finally I’m aiming to keep off day trading or even intra-day trading. Instead I’m working to a trading/investment time scale of around 1 to 3 months for around half to two thirds of the fund.
As far as short-term trading is concerned I’m looking at a time frame of 1 to 4 weeks for the other third to half of the fund.
This also has the advantage in that trading activity is not so frantic as it was during the previous two months. It cuts the time overhead and the amount of stress involved.
It also means I have more time available for my other business activities. This is important as I have a lot more to do than just managing this hedge fund.
So, that’s where we are at the end of April. Up a third in Bitcoin terms, and up two thirds in Euro terms.
Not exactly where I wanted to be. Altcoins are the motor which I use to achieve my capital growth and I had hoped for more.
But things could be worse. And a two-thirds value appreciation in one month is a damn sight better than anything the stock market can achieve.
Hopefully May will be a lot better.