19 Oct 2023
Portfolio Vault Update week 42
Flagship's Portfolio Vault is managed by all of Flagship's analysts, known as the Captains, and includes stablecoins, gold, bitcoin, and the strongest crypto assets of the moment.
Performance
Over the past 7 days, the share price of Flagship's Portfolio Vault went from 27.52 to 27.75, which is an 1.61% increase.
Comparing this to the majors, the Portfolio Vault:
- Underperformed Bitcoin (+6.23%) by 4.62%
Vault rebalances
This week witnessed a couple of key events that have significantly impacted markets. The U.S. Federal Reserve will keep its key interest rate on hold on Nov. 1 and may wait longer than previously thought before cutting it.While a slight majority still see a cut before the middle of 2024, a significant minority of forecasters, around 40%, now see no rate reduction until the second half of next year or later, up from 29%.
The conflict between Israel and Hamas that broke out has the potential to disrupt the world economy — and even tip it into recession if more countries are drawn in. A sharper escalation could bring Israel into direct conflict with Iran, a supplier of arms and money to Hamas, which the US and the European Union have designated a terrorist group. In that scenario, oil prices could double in a matter of weeks and would cause a second run of inflation. This in turn would have led to another leg down in risk assets.
Risk profile
Our risk profile has shifted to Neutral due to Bitcoin's reaction to the false ETF announcement. The announcement propelled Bitcoin by 15%, which then retracted by 10% upon the discovery of its falsehood. This indicated that the market was not primed for an ETF. We believe that this announcement, coupled with under allocation, is prompting the market to reprice the eventual ETF.
For a complete overview of the biggest news and most important data, check out our weekly Market Update.
Rebalancing Decisions
A major reason we have decided to adopt a neutral stance is that Bitcoin is not aligning with either the global liquidity index or the US equity market. Over the last few days, Bitcoin has shown relative strength compared to these indicators. This leads us to believe that this strength will sustain.
Why we have not gone full bullish on crypto is because of the dollar index. The Dollar index is at a high time frame support. If we begin to see the dollar index closing below support and within its range, we can consider increasing our positions in long risk assets.
Portfolio Vault Assets update
Bitcoin has increased by 6.23% over the last 7 days, largely due to the fake ETF approval. In this announcement, Bitcoin rose about 15%; however, once it was discovered that the approval was fake, Bitcoin retraced about 10% of this move. If we see any more retracements and daily closes below $27,000, we will likely see a leg down in risk assets.
Due to the recent geopolitical unrest, gold has risen by 4.88%. Gold has always been viewed as a safe haven during geopolitical issues. If the geopolitical unrest in the Middle East continues, gold will likely maintain its status as a safe haven.
TON is 1.28% in the last 7 days has recently integrated with Telegram, opening the door to 800 million monthly active users. With this news, we believe positioning into TON will reap many benefits. On top of the recent news, TON has flipped its short-term trend; as long as it can hold this short-term trend, TON can move higher.
Pendle is up 9.5% in the last 7 days and has now flipped both its long-term and short-term trends. With a growing TVL and user base, we have allocated to Pendle for two reasons: 1) It's trading at high time frame support, and 2) It has shown consistent growth in TVL and recently broke its all-time high in TVL.
Removed/addition of new projects
Removed assets
We have decided to remove Frax from the vault. We observed that when the ETF announcement came, real-world assets underperformed, as the market is seeking higher returns than those currently offered by government yields.
Added assets
We have chosen to allocate a portion of our portfolio to Solana, driven by a variety of compelling factors. Currently trading at a 90% price discount from its all-time high, Solana presents a potential value proposition. This downtrend, influenced by the combination of FTX, Alameda, and a bearish market, didn't deter Solana's ecosystem which managed to maintain its level amidst this downward trajectory. Over recent months, there's been a notable 86% increase in monthly active addresses, outpacing many other popular chains, indicative of a growing and engaged community.
Despite many promising advancements like Solana Pay, Visa integration, and the Solana Saga Phone, the market response has been tepid thus far. However, optimism is garnered from the development of a second validator client, Firedancer, aiming to align transaction speed with Centralized Exchange speed for DeFi, thereby potentially unlocking a new market segment.
Vault Composition
The above has led to the following changes and composition of the Portfolio Vault:
From the Outposts
Interested to read more? Check out some of our latest market insights below:
- The Irony of Backing Stablecoins with US treasuries (Read More)
- A Honest Reflection of SocialFi (Read More)
Until next week,
Flagship’s Captain team
Disclaimer: Nothing on this site should be construed as a financial investment recommendation. It’s important to understand that investing is a high-risk activity. Investments expose money to potential loss.
