Dear Partners,

The present financial system’s debt growth remains significantly and continuously higher than its economic growth. In turn, we anticipate the continuation of investors’ shifting into previously perceived risk assets in 2024. A select group of today’s risk assets will ultimately be the foundation of an improved global economy, one where economic growth exceeds debt growth. Economic growth higher than debt growth remains the only path to a sustainable global economy

10/1/2023 - 12/31/2023 (4th Quarter):

1/1/2023 - 12/31/2023 (2023):

1/1/2022 - 12/31/2023 (Inception):

On Crypto

The bank collapses of March and the subsequent rallies of Bitcoin and Ethereum reminded that the digital asset class remains a viable hedge to the traditional financial system. The Federal Reserve responded to the collapse by implementing Bank Term Funding Program (BTFP), which returned to all-time-high usage in December. The BTFP covered and insured all US banking deposits, allowing the weakened banking entities to obtain substantial cash holdings without selling their underwater American debt products. The BTFP acted as crypto’s first liquidity enabler, which has arguably been the most instrumental factor in risk assets’ outperformance in 2023.

Following the rise of Bitcoin and Ethereum, animal spirits returned to crypto markets in the summer of 2023. We witnessed a mini on-chain summer, driven by new speculative energy in Ethereum-based meme tokens, such as $PEPE. High gas fees continued to persist on Ethereum, but this did not deter Ether from ranging around its major $1,800 - $2,000+ price support levels, as well as turning Ether into an even more deflationary asset from its previous post-merge lows. Bitcoin continued to hover around the $30k USD levels, while we began to see the first signs of interest in Bitcoin Ordinals—an on-chain Bitcoin trading ecosystem—as well as the outperformances of certain, highly volatile altcoins.

After a relatively lackluster third quarter of crypto price action, the fourth quarter rendered a significant influx of market demand through the pending approval of the first Bitcoin ETF. It had been speculated for months that the SEC would finally approve a Bitcoin ETF, and those rumors were firmly solidified in early January through the approvals of 10+ different ETFs from major entity players. It is important to note that a Bitcoin ETF had been talked about for years, but it was the drive led by traditional finance giants, such as Blackrock, which enabled such a fast turnaround.

In the first few days of Bitcoin’s ETF launch on January 12th, Bitcoin bypassed silver to become the second largest ETF commodity asset class in the United States. The ETF narrative should continue to playout through 2024, as it has become clear the level of institutional demand that exists for crypto-based ETF products, with Ether best positioned as the next approval. 2024 will also harbor a Bitcoin Halvening, an event only once every four years and often leading to significant speculation throughout the entire asset class.

What we have seen from Solana in 2023 has been staggering, with very similar echoes to the massive drives in Ethereum’s on-chain metric appreciation in 2021. Solana was undoubtedly the leader of the crypto market’s fourth quarter price rally, with its price increasing 423% quarter over quarter, with over 1000% growth year over year. Reflecting the massive price increases, the chain saw a surge in network activity, with non-vote transactions and fee-payers growing by 65% and 102%, respectively.

Despite Ethereum’s relatively muted price action, the leading blockchain’s underlying fundamentals have only grown stronger. Ethereum’s rollup networks—its on-chain scaling solution—now transact three times the volume of the Ethereum mainnet, increasing by over 9 100% in the fourth quarter alone. Most notably for the start of 2024, Ethereum's upcoming Cancun-Deneb (Dencun) upgrade is finally around the corner. Dencun renders Ethereum’s rollup transactions 10x more cost-effective, bringing Ethereum’s layer-two fees to an order of magnitude lower than Solana’s and other competing layer-one chains’. Dencun highlights the promise for Ethereum’s scaling vision, that of a singular blockchain offering faster, cheaper, and more secure transactions than any competing chain. The upgrade is currently under testing and is expected to be released in March. In turn, Ethereum’s ecosystem shows the strongest growth for the first quarter 2024, with both Dencun and much anticipated launches by Eigenlayer, Blast, and several other competing ETH restaking mechanisms, which allow ETH stakers to earn additional yields by both securing Ethereum’s mainnet and its layer-two scaling solutions. From an investor’s standpoint, these fundamentals align very strongly with long term value accumulation, as long-term ETH holders surpassed BTC holders for the first time in 2023.

On 2024

We are currently in the early stages of a new crypto market bull cycle, where price and liquidity reflexivity play a significant role in the performance of crypto assets. Our positions are reflected to best maximize the correspondence between macroeconomic liquidity and true crypto fundamentals. We will be looking, however, more aggressively in 2024 to capitalize on the market’s reflexivity, where prominent asymmetric bets remain to be made. We are very excited at specific verticals of the crypto space in decentralized science (DeSci), decentralized physical infrastructure (DePin), and ETH restaking through layer-two scaling solutions.

As we have experienced in present and past crypto cycles, the market is seldom rational at either the start or the end of a cycle. At the start of the cycle, the market’s newest entrants are directionally right, but have seldom done the research to make educated investments. As a result, investments with the strongest mimetic potential—those most easily able to be understood— perform the best. Thus, we underperformed a select group of crypto-assets in 2023, namely Bitcoin, Solana, and several other meme coins. Interestingly, both Bitcoin and Solana provide zero economic utility to the global economy, with the former upended by Ether’s superior digital gold product and the latter by Ethereum’s superior layer-two scaling options.

We are quite excited for 2024, as the start of the year has already signaled that the market is becoming slightly smarter and aligned with our theses. As the market begins to recognize that Ether is the only relevant sovereign cryptocurrency, we are well-prepared for the world an efficient crypto market will create. Our networks across the entire field have enabled us to see most of 2023’s best-performing tokens on-paper, including those with long-term potential for true fundamental value. While DeSci, DePin, and ETH restaking are still mimetic spaces, with no project accruing revenues yet, all three appear to be some of crypto’s few defensible sectors thus far. 2024 will likely see real revenues and thus real liquidity enter the sectors. We are well- prepared for real-world assets to enter a highly scalable, singular blockchain, what we believe will be the strongest narrative of 2024.

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