From The Fund Manager
We have a mixed bag of results this week. Trading started off with some amazing moves both down and up that Mintie was able to translate into profit, but the movements got a bit messier and smaller as the week progressed, and we saw a couple of failed hedges and a few small profits. The market then turned around on Wednesday/Thursday (depending on your time zone) and we saw a couple of bigger profits again, together with one larger failed hedge. All in all, we saw a strong profit for the week. If we had fewer failed hedges, this week could have been a record breaker!
Just before writing this letter, I sent off a signed contract to the Australian company that will undertake our audit. The agreement we have entered into covers auditing for the next few years with locked in pricing at what we consider to be a reasonable rate. They are aiming to have the audit completed before the end of the year. In anticipation for this, for our December reports leading up to the audit, we will be including more information about how our token price is calculated. This was a request from one of our larger investors, and instead preparing this information for the one investor, we want to share it with all our investors through our weekly report. We are also working on simplifying the way we manage the wallets and ledger leading into the audit for a smoother audit and then returning to our normal operation following that. Anyway, however we manage that part will all be covered and explained in the audit. Any errors or miscalculations will also be highlighted, should there be any.
In the coming week, we will be meeting this same company to discuss the setup of our new project as they have a lot of experience dealing with fund structure with the required licencing. Details of this company will be published next week.
Stage one of introducing our trading algorithm code update comes into play next week! This will see us bring into play a third trading pair -- Ripple against the US Dollar (XRP/USD). For now, the trade selection gate will have a bias toward the existing two pairs, only allowing trades on Ripple when the others are not in a trade, or if it has a negative correlation with them. The Ripple trading component will be tuned down significantly just while we trial it and once it has been fully tested, we will remove the bias in the trade selection, and then turning the risk up to normal levels. Further changes and tuning will be implemented one at a time so we can easily identify any issues should they occur.
A bit about buybacks, with the quickly devaluation of ETH we have been hesitant to buy any ETH for buybacks and as such the past couple of weeks the buybacks had slowed. Moving forward, we will be trialling TUSD buybacks on the DDEX exchange. There are some differences with DDEX as far as knowing whose trade is whose, but we are working on making this a smooth process and details will be passed on to individual investors as we reach their turn in the queue. If it proves to be too riddled with difficulties we will be forced back to ETH transactions on ForkDelta.
The buyback process is something the team has been working on to improving structure and experience. We have been in consultation with an Australian hedge fund with some ideas to both streamline the process and put some reliable structure around it. Some of the things under consideration include: -
Consolidation of buybacks requests to accommodate and minimize quarterly algorithm downtime (of at least 40 hours), matching up with timing of commission charging;
The possibility of redemption gates, which is a common redemption policy in other funds, to prevent large liquidation requests from affecting trading risk exposure, and provide a stable platform for management;
Queued tokens potentially being put into escrow to reduce investors using the buyback queue in a similar way to a put option, and slowing down the queue.
We have many other ideas that are being floated and the above points are a few of the main topics that we are thinking about. I know that the community like to give their input on this topic as well, so I believe it is important to include buyback discussions in this week’s letter.
On some completely different news, we are happy to welcome Bjorn (@bjornieand) as our latest volunteer moderator on Telegram! Our Telegram community knows him well. His sharp wit and friendly nature is sure to make him a valued moderator by the community. It’s great to have guys like Bjorn and Anders helping out with the channel and Bazz helping out with his CHT market activity analysis. It shows a really awesome community has grown around CHT and we are very glad to be part of that.
Speaking of our friend, Anders, we have finally received a generous shipment of Norway’s finest treats! These treats will be sent out to our community investors that have won the weekly guessing game on our Telegram channel and if you happen to live outside Australia, we will also pop in some Aussie goodies. A video on this will be coming soon and we expect some reaction videos from any of you unlucky enough to be sent some Aussie treats!
As you may already be aware, we will be closing the office from the 22nd of December to the 7th of January. When we return, our team will be a little bigger because we will have new talent on board for our new project! We are very excited about this and we think you may be interested as well. In Q1 of 2019, we should see the release of some documents detailing the new project. We will be producing videos and data about the new project and everything else you have come to expect from Countinghouse. Our new office should be fitted out by then; so, we can take you on a tour!
There’s a chance that I might be abroad over our end of year break. if so I will be sure to announce where I am heading on Telegram and if any investors will be nearby and want to have a drink and chat I would love to make that happen!
Heavens to Betsy! What a long letter I have written! Well I shall not hold you any longer. Thank you for using up your whole lunch break reading this report. The team and I would like to wish a safe and happy weekend :)
Market Activity Snapshot
Market Data Source: Thanks to @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).