From The Fund Manager
Trading for the week started off smoothly, but when we got to the early week we had a couple of failed hedges and by Tuesday night, we were looking like we would have a week ending in loss.
However, late in the week the market got moving again, and oh boy did it get moving! We were lucky to see a few really good trades all in a row to end out the week (one of which was a double short with a position size close to 3.5 times of a normal entry). It might look like we had a pretty consistent week, but we were really saved by some much needed market volatility.
Selling of Buyback Tokens
Over the past few weeks, the fund received a number of expressions of interest from both individual and institutional investors about buying up our treasury of buyback tokens. We were at first receptive to the idea, as it could provide the capacity to take on more trading pairs, which also increases profits for the fund manager. However, after giving it more thought and after long discussions with the team, we did decide against it.
Our decision was not made lightly, as it is not often that a company chooses to make less money. Instead, we were driven by what we believe is the fundamental principles of reward for risk in investment are about. By selling our treasury of buyback tokens, when comes the time for forced liquidation, individual investors would each receive a lower payout as their percentage of ownership would be less.
Another consequence from selling our buyback treasury is that the buy-demand-liquidity will not make its way to the exchanges and therefore will not support the price of all other investor’s holdings, and at the moment, the majority of these investors are the ones who have taken the risk of investing earlier, before the fund’s performance was proven. We feel this is an especially important point as the whole idea of a closed-ended tradable fund unit is so that investors buying in later may have to pay the market premium to do so, and in turn rewarding the risk taken by early adopters.
Overall, we believe the selling of buyback tokens will not benefit existing investors, and as such we have been averse to do so, and will not be selling buyback tokens that we already hold, unless if we uncover any benefit to our investors, at which time will be communicated.
We are thrilled to have drawn interests from large investors, and we still look forward to having them on board, as they may support CHT prices on the exchanges, and the fund is also willing to help them acquire CHT by lining up potential sellers where possible. This is good news for both our investors, CHT and Countinghouse -- It shows us that we are doing the right things and will always have the interests of all investors in mind, big and small.
Coding progress has been coming along smoothly. Mostly testing things this week with back tests and Monte-Carlo stress testing etc. Not an awful lot to update you on here, testing and tweaking is a slow process but a much needed one. Slow is smooth, smooth is fast as Chris would say! So we will keep our axe to the grind stone and will update you on anything news as make progress.
Quick note on the negotiations for our new office -- We have managed to secure an excellent rent and have almost come to final approval on our desired conditions. This is expected to be resolved and finalised by the end of this week. Then, we will just need to move in and put up a big Countinghouse sign or two. It feels like an exciting step towards the expansion of Countinghouse and our new project that’s just around the corner now. You can look forward to more updates and some vlogs from the new office.
Today is also AmaZix’s last day with the CHT community. We are so grateful for all their efforts and guidance in community management and they will be sorely missed by both the Countinghouse Team and I am sure the community at large. Please take the time to wish them a happy farewell and to thank them if you have found their service of value to you as an investor. I know as a company we certainly have.
*** Thank you AmaZix team! ***
With that, it is time for me to get back to code testing. Thanks for taking the time to read the report and have a great weekend!
Market Activity Snapshot
Market Data Source: Telegram @BazzWatkins
Valuation – Jae Jun Method
Fundamental value (sometimes referred to as intrinsic value) is a calculation to determine the actual value of a share, unit or in this case a token when looked at as an investment.
We have chosen the Jae Jun Intrinsic Value Formula. The main reason we like the Jae Jun is because it is one of the most conservative calculations there is.
Now we have kept to how this is traditionally used and that is to base it on a 10 year return, factoring in the yield reducing over time. We have also taken an extra step to be even more conservative on this calculation; Jae Jun reduced the ‘no growth PE ratio’ from 8.5 to 7 but due to the increased volatility in the crypto market we think it is more prudent to reduce this value all the way to 1 (this value operates as a multiplier in the calculation so reducing it to one is very significant in the results the formula we return).
Credit: David Carboni @ Unsplash