UST and LUNA: What Went Wrong?

Sarson Funds Analysts React to the Collapse of UST and LUNA.

Stablecoin UST, from Terraform Labs, lost it’s pegging to USD, which led to a cascade of events and saw a run on the algorithmic stablecoin, leading to a collapse of UST and LUNA.

What happened and what does this mean for the digital asset landscape? We asked the Sarson Funds cryptocurrency analyst team for their take. Here’s what they said:

 

Zachary Profeta, Portfolio Manager

 

 

 

 

 

 

 

“Its no secret the recent market dumps has been extremely tough on all of crypto but this is nothing we haven’t seen before. Tokens that did a 10x in November are now down to where they were or below exactly a year ago today. One project to take notice in a time of downward price movement is Helium (HNT). This time last year Helium was trading around $17 a token. There were less than 40,000 Hotspots supporting the decentralized wireless network around the world. Majority of the data credit usage was from location assertion of new hotspots. This past year the network grew to about 800,000 Hotspots around the globe. Helium has secured about half a Billion dollars in equity funding from Major Telcos and Venture Capital firms. Helium has onboarded over a dozen new hotspot manufacturers. The 5g network has grown to 5,500 hotspots compared to its blueprint stage a year ago and is soon onboarding DISH and Gigsky for data roaming through their network. Companies like Senet have begun using the Helium network to increase efficiency of water monitoring services and freight tracking in Municipalities on a global scale. It won’t be long till every IOT device is operating on the Helium network as its low cost of data transmission has proven to be best in the game. May 11th marks a special day in Helium’s existence as the day light hotspots go online, which is possibly the largest update to the Helium network since the introduction of validators last July. All this being said, Helium has shown to be the most viable real world use case for crypto currency incentive-based models. Smart devices, rural 5g cell connection, water monitoring and agriculture tracking is just touching the surface on the range Helium can have for future development. In a Market downturn like this, it’s important not to lose faith in projects that have only built a stronger thesis and have continued to show the true power of cryptocurrency.”

 

Jonathan Cagle, Portfolio Manager

 

 

 

 

 

 

 

“My take on the LUNA/UST:  With algorithmic stablecoins, there are always risks of exploitation and this is magnified in inefficient marketplaces.  In volatile markets such as these, M1 asset-backed stablecoins (such as USDC) will be preferable, as the coin has a much higher probability of maintaining a 1:1 tethering to the USD.  The cryptocurrency space as a whole is still in its infancy when compared to the traditional financial system.  Because of this, fewer dollars are needed to move markets significantly in either direction.  And with leverage trading now becoming more prevalent, buy/sell pressures and movements can be logarithmically amplified by orders of magnitude.

Irrespective of inflation pressures, the utmost important factor is being able to maintain the value of $1 (stablecoin) being equal to $1 USD of fiat.  For the time being, I’m willing to sacrifice decentralization for security of the peg.  USDC is the stablecoin play for the time being until Terra and UST can work their way back to $1, if they can at all.

 

Jenny Mongan, Research Analyst

 

 

 

 

 

 

 

“While the market today continues to stay bloody, I have found some green. At current time of writing, Maker (MKR), a governance token for the decentralized lending platform, MakerDAO, is up 18%. The Maker tokens unique quality is its ability to act as a voting share for its holders to make direct decisions to the Maker Protocol. Although only partially backed by USDC, MakerDAO is currently one of the most popular DeFi applications on Ethereum, opposed to the late Terra Luna token. Makers main task and focus is to maintain and operate soft-pegged stablecoin, DAI. DAI has successfully maintained its stability through these trying times unlike its cousin UST which can be used in conjuction with Terras native token, Luna, and while being supposedly the most scalable stablecoin, it has proven to not be indestructible. Terra UST is currently trading at .54 cents below the US dollar despite its main purpose to stay pegged to it.”

 

David Gamble, Portfolio Manager

 

 

 

 

 

 

 

“The Terra ecosystem which is comprised of Luna and UST has been one of the leading projects within the decentralized finance niche. In the last several days the instability of a flawed algorithmic stablecoin and questionable tokenomics led to this historic event of nearly 28 billion dollars exiting the terra ecosystem causing some distrust in defi. That flow of capital is now finding its way into over collateralized stables like DAI and USDC also forcing a spotlight on more seasoned projects such as AAVE & Maker. As the decentralized finance space takes a couple of steps back, I believe this creates an amazing opportunity for derivative specific projects to be what will continue to create true value in defi. One of those projects that aids in shedding light in my opinion is OPYN, a defi-native derivatives and options infrastructure project, I believe the path forward are projects such as this that are derivatives based and able to show the power of what defi can do for this space. 

 

 

 

 

Digital Assets React to Elon

Elon Musk

Twitter (NYSE: TWTR) announced on Monday that it has accepted Elon Musk’s $44 billion offer to take the company private. That means that Tesla’s CEO and world’s richest person will soon hold the keys to a platform used by more than 200 million people daily and is arguably at the center of the conversation over cryptocurrency.

How might Musk’s Twitter ownership affect the digital asset landscape?

We asked the Sarson Funds cryptocurrency analyst team for their take on which digital assets might benefit from Twitter’s ownership change. Here’s what they said:

 

Zachary Profeta, Portfolio Manager

 

 

 

 

 

 

 

Arweave (AR)

“When asked why he made an offer to purchase Twitter and take the company private, Elon Musk states, ‘It’s very important to have an inclusive arena for free speech. Twitter has become the default town square. It’s really important for people to have the reality and perception they can speak freely in the boundaries of the law. They should open source the algorithm and when any changes to people’s tweets are made, that action should be made apparent to keep those actions public.’ Elon’s description of the changes Twitter needs to take are quite similar to the utility of a blockchain. Arweave (AR) has the unique opportunity in leveraging a platform’s need for increased censor-proof mechanics and assurance of longevity for the information stored. Arweave allows users to make a one-time payment in the form of AR tokens to host whatever data they have on the Arweave Permaweb. Arweave offers permanent storage of both public and private data that can be accessed at any time all while being validated by miners supporting the network. We have seen a major increase in the number of accounts being “shadow banned” and deleted from Twitter. Everyone has seen how detrimental censorship and loss of data and history can be for all communities involved. Throughout the entirety of human existence, there’s history that is lost and no way to go back in time and see what really happened at a given moment besides reading what people of those times recorded. Arweave is the solution to permanent storage and censor proofed platforms the world needs to be able to tell our story in years or centuries to come. At the end of the day, don’t you want your contributions to the Town Hall protected forever?”

 

Jonathan Cagle, Portfolio Manager

 

 

 

 

 

 

 

Dogecoin (DOGE)

“Love him or hate him.  Elon, DOGE, and Twitter go together like peanut butter and jelly.  In the past few years, DOGE (and Elon) have proven how impactful the community backing a crypto project can be for its price potential.  TSLA and DOGE have two of the most polarizing, but incredibly loyal fanbases in both the TradFi and Crypto markets.  And both have made waves on Twitter over the years with their price movements in the wake of Elon’s tweets.  Now Elon owns the platform.

As of this writing, DOGE is already up 14% and the daily trading volume is up ~429% in the last 12 hours.”

 

Jenny Mongan, Research Analyst

 

 

 

 

 

 

 

Ethereum Name Service (ENS)

“Under Elon I believe Twitter will start to leverage the technology offered by the Ethereum Name Service (ENS). ENS is an Ethereum-based naming system for web page routing and digital identity/NFTs that specifically focuses on making the decentralized web – web3 – easier for users. Simply put, ENS gives the opportunity of having a single Ethereum-based username for all wallets/addresses of a holder, providing scaling solutions for the Ethereum network that enable security and censorship protection better than any traditional source. In the near future, ENS identities stored in your Ethereum wallet will connect you to Twitter and all other decentralized applications. Sign-in functionality with ENS will help the Ethereum network achieve its vision for a decentralized internet through ENS’ parallel internet that will connect blockchain technology to the open world.”

 

David Gamble, Portfolio Manager

 

 

 

 

 

 

 

Decentralized Social (DESO)

“Putting more power back into users and the creator, DESO is the first and only Layer 1 blockchain purposely built from the ground up to scale decentralized social apps to billions of users worldwide. DESO provides great mechanics for decentralized social media because of the strength of its blockchain solutions compared to traditional social media frameworks, especially with its hypersync scaling solution.

With news breaking that Elon Musk will be acquiring Twitter for $44 billion, the possibilities are endless for where he could lead Twitter. One likely change is that twitter may be moving towards web3 consensus mechanisms. Elon recently tweeted “I hope that even my worst critics remain on Twitter, because that is what free speech means,” potentially implying Twitter’s new direction to be a more decentralized ecosystem that does not incentivize gate keepers to “mistakenly” ban certain targeted users or coincidentally remove tweets.

Storing content on-chain is the key performance metric indicator that will allow Elon Musk and Twitter to do exactly what they are potentially seeking to do with becoming more decentralized. DESO blockchain provides this solution with its ability to store users’ on-chain data and it is already equipped to handle billions of users.”

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Note: As of publication date, Sarson Funds’ products have allocations to Arweave, Dogecoin, Ethereum Name Service, and Decentralized Social.

Did this NFT Artist Outrun VC’s with Wallet-Based Messaging?

Tango, developed by NFT artist and venture investor Yohei Nakajima, is the first viable Ethereum wallet-based open-source messaging application for NFT communities.

Collectors, artists, and gamers in the non-fungible token (NFT) community are about to experience a new level of connectivity with Tango, the first viable Ethereum wallet-based open-source messaging application for NFT communities developed by venture investor and NFT artist Yohei Nakajima. The move stands to leave venture-funded companies like XMTP scratching their heads as to how a single developer accomplished something that they have yet to be able to materialize, despite $20 million dollars of VC funding from industry heavyweights like a16z and others.

Tango, an open-source application, gives NFT collection holders access to private wallet messaging, allowing them to privately and securely send messages to each other to build their exclusive NFT communities.

Want to chat with other holders of CryptoPunks or Cool Cats in a secure and verified way? Tango. Want to share info on exclusive events? Tango. Share confidential information about upcoming projects? Tango. Organize and collaborate on community activities? Tango. Tango has also released a private access drawing wall for members of NFT collections to collaborate on pixel art. NFT enthusiasts view the potential applications as limitless.

With Tango, owners of NFT collections like Bored Ape Yacht Club can curate an even more exclusive (and potentially very valuable) club, where only collection holders are allowed entry. The open-source nature of the Tango application ensures that communities will drive the platform’s evolution in a way that will continue to benefit NFT holders and issuers.

According to Yohei Nakajima, the Tango application drew inspiration from its soon to launch sister project, PixelBeasts. According to their Medium article, “PixelBeasts are 10k unique and randomly computer-generated 24×24 pixel pieces of art, from 2 million combinations. 41 base beasts, both real and mythical, adorning cute outfits, ready to party.” In addition to the popular generative attributes approach, each PixelBeast has novel “invisible attributes,” including a best friend and nemesis, unique D&D character attributes, one of four elements, one of five habitats, distribution attributes, and dice rolls. The intangible benefit of owning a PixelBeast NFT will include access to Beastopia (a token-gated social community) that will be utilizing the Tango platform.

Tango, along with PixelBeasts, represents how community-focused developers like Nakajima are outpacing many venture-funded entities in the explosively expanding metaverse – a trend which is likely to continue.

Crypto & ESG: 2021 White Paper

Crypto & ESG 2021 White Paper - Sarson Funds Research Report

Crypto & ESG 2021 White Paper - Sarson Funds Research Report

The future of finance and investments leans toward sustainability and social responsibility. ESG investing, or Environmental, Social, and Governance-focused investing, aims to facilitate the marriage between corporations and a more sustainable, equitable world.

Otherwise known as Responsible Investing, ESG assets under management (AUM) made up one third of the total US-domiciled AUM by the end of 2020, and this measure is only growing. Rising in parallel, cryptocurrencies were the best performing asset class of the last decade and are strongly aligned with the ESG mission of sustainability, social-benefit, and community governance efforts.

Through the decentralized nature of cryptocurrencies and blockchain technology, the crypto ecosystem is taking cutting edge approaches to sustainability in order to achieve its mission of unifying the global economy with universally sovereign financial access. Together, ESG strategies and cryptocurrencies are equipped to build a more sustainable and equitable world.

Crafted by Portfolio Manager Blake Richman, Partner Marketing Manager Liam McDonald, and Blockchain Analyst Nathan Frankovitz, the Sarson Funds Crypto & ESG White Paper presents an in-depth overview of ESG, its impact on investment decisions, and its applicability in the cryptocurrency and digital asset market. Our aim is to provide the financial advising community with a credible source to better understand the power of crypto from both Wall Street and crypto experts.

Crypto ESG White Paper Sarson Funds Cryptocurrency Financial Advisor

DOWNLOAD THE REPORT HERE

Sarson Funds Launches Cryptocurrency Education and Certification Program for Financial Advisors

Sarson Funds announced the launch of its cryptocurrency financial advisor certification program today, with the aim of making advisors “crypto heroes” to millions of American investor clients who have otherwise been dormant from the accelerated growth of digital assets. The eight-part webinar series will be comprised of live bi-weekly webinars hosted on the Digital Wealth News education portal, beginning on September 14th, 2021, and running to December 19th, 2021.

Key Takeaways:

  • Sarson Funds announced the launch of its cryptocurrency financial advisor certification program, hosted in partnership with the Investments and Wealth Institute and Digital Wealth News.
  • The eight-part webinar series will be comprised of live bi-weekly webinars hosted on the Digital Wealth News portal, from September 14th, 2021 to December 19th, 2021.
  • Advisors who complete the series will earn CE credits, plus certification as a crypto advisor from Sarson Funds, awarded as a non-fungible token (NFT) – an industry first.

To view the full announcement, including downloadable images, bios, and more, click here.

Summer Greetings from Sarson Funds

Summer greetings from Sarson Funds,

We hope this letter finds you healthy, happy, and enjoying the last beautiful days of summer.

Cryptocurrency prices have kept us on our toes at Sarson Funds this summer, living up to their reputation for volatility. Announcements about China seeking to curtail the growth of Bitcoin within its borders coupled with the sharp about-face from Tesla’s astronaut-in-Chief, Elon Musk, on accepting Bitcoin temporarily seized the public narrative and contributed to selling pressures in May and June.

As we start the month of August, Bitcoin and other cryptocurrencies continue in a choppy sideways trading pattern, with most assets showing a high correlation to Bitcoin. Meanwhile Bitcoin is still searching for its equilibrium price in the $40,000 – $50,000 range. There are many reasons to be excited about what has been happening in the market. We would like to share a few of our observations with you.

Over the course of this year, the United States has become a top destination for cryptocurrency companies to reside. The SEC, under the thoughtful leadership of Gary Gensler, has shown its acute awareness of the durable value propositions digital currencies are able to offer for both the financial sector and for the consumer. Gary and his team have been working to educate Congress, the CFTC, the Federal Reserve, and the Executive Branch on the inevitability of the world’s evolving financial architecture. Thankfully, American-led innovation in digital assets has been keeping the future of finance located in the United States. Digital asset companies, including our partner firm lending giant Celsius Network Ltd, are moving their operations to the United States from other countries. This is quite a sharp contrast from two years ago, when Facebook’s Libra project received such a hostile reception from lawmakers that Libra promptly moved their entire operation out of the United States.

There have been signs all around us which show financial institutions are rushing into the cryptocurrency markets. Traditional Wall Street firms that were once anti-cryptocurrency such as Wells Fargo, Goldman Sachs, and CitiBank have recently built crypto brokerage divisions into their corporate strategies. BlackRock, Fidelity, and Bank of America have invested in Stablecoin companies (ex: Circle and Paxos). StateStreet and JP Morgan currently have hundreds of job postings seeking employees to fill their expanding digital currency and tokenization initiatives.  Institutions are moving with remarkable speed to establish their crypto-capabilities.

With all the excitement circling around cryptocurrency, we continue to invite and welcome the opportunity to help service your digital asset investment and educational needs.  Please reach out to us any time so we can show you how we are helping other advisors and their clients with this new asset class.

Warm regards,

John Sarson, CEO & Cofounder

Jahon Jamali, CMO & Cofounder

Accessing the Token Economy: How TokenMaker is Democratizing Access to the Token Economy

Non-fungible tokens, or NFT’s, have surged in popularity recently amongst cryptocurrency enthusiasts and investors alike. With tokenized digital art from creators like Beeple selling for millions, and big brands like Nike, Louis Vuitton, and more racing to develop tokenized solutions for their brand and products, the market demand for customizable token solutions stands to increase. To meet that demand, Sarson Funds believes that rapid no-code tokenization platforms like TokenMaker stand to benefit from this emergent trend in enterprise blockchain applications.

Please read our latest report, Accessing the Token Economy: How TokenMaker Democratizes Access to NFTs and Tokenization, which highlights how user-friendly do-it-yourself (DIY) tokenization platforms like TokenMaker can quickly meet enterprise demand for no-code business and user-oriented tokenization solutions.

Bitcoin and the “Pain Trade” Revisited

As an investor, when searching for direction in a volatile market, a useful heuristic to use is what traders lovingly referred to as “The Pain Trade” indicator. This indicator was described to me originally in 2007 by a New York Wall Street stockbroker this way, “The market will move in the direction to hurt the maximum number of people.” While everyone’s definition of the “Pain Trade” varies, they all address the tendency of markets to deliver the maximum amount of punishment to the larger consensus.  This is especially true when the underlying asset is a high profile asset such as shares of Apple, or in this case, Bitcoin. High profile public “pain” is especially more painful than low profile private “pain” and the market reacts accordingly.

At Sarson Funds, Bitcoin’s current rally and its refusal to settle is a great example of the “Pain Trade” principle in action. Thanks to the continuing and sustained efforts of industry leaders like Fidelity, Goldman Sachs, BlackRock, Intercontinental Group, CME, JP Morgan and others, Bitcoin is being normalized into existing financial frameworks and investors are getting caught flat-footed.  When will the rally stop? According to the “Pain Trade” indicator, not until a drop in price delivers an aggregate punishment that is greater in total pain than what those uninvested in Bitcoin are currently experiencing.

Our investment products are built by advisors and sold through advisors. We bring Wall Street standards for research, risk management, and transparency to digital asset investing so that you can safely incorporate cryptocurrency allocations into your clients’ investment portfolios. We offer white-labeled portfolios, client-focused educational pieces, and cryptocurrency regulatory insights. Our product lineup (fact cards enclosed) currently includes large and small coin cryptocurrency strategies and a large-cap “covered call” cryptocurrency portfolio that offers floating monthly income in excess of 20% annualized at today’s implied volatility levels.

John Sarson

Managing Partner & CEO

 

PS: If you would like to join our mailing list, please sign up at www.sarsonfunds.com or look for our LinkedIn in group, “Cryptocurrency Financial Advisors”.

Encryption Will Drive Cryptocurrency’s Next Innovation Wave

Encryption will drive cryptocurrency's next wave of innovation

Encryption will drive cryptocurrency's next wave of innovation

Securing a Blockchain-Built Future: How Cryptography will Drive the Next Cryptocurrency Innovation Wave

With world financial system begins to embrace the wave of blockchain-powered digital assets and cryptocurrencies entering the vocabulary of Wall Street and Main Street investors alike, we look ahead to the next big wave of crypto innovation – securing a blockchain-built future.

Cryptocurrencies and digital assets rely on secure, encrypted consensus to validate transactions and empower the mechanics of decentralized finance. Advances in computing processing power, and developments in quantum computing, mean the market for digital assets will need to respond with quantum resistant encryption solutions in order to propel blockchain technology to the next level of global adoption.

To educate digital asset investors, cryptocurrency financial advisors, and blockchain technology market analysts on the issues and opportunities in digital asset encryption advances, Sarson Funds is pleased to provide the first in a series of investor guides to understanding encryption and the market opportunities poised to emerge as the world’s blockchain infrastructure grows.

This first release includes two overview pieces designed specifically for digital asset investors interested in the market dynamics and investment opportunities in cryptocurrency encryption advances (available for download below):

First, is a white paper from the Sarson Funds analyst team:

Sarson Funds Blockchain Cryptography White Paper

The white paper is accompanied by an easy to digest compendium overview of digital asset cryptography:

Cryptography Investor Guide Sarson Funds

We trust digital asset investors and cryptocurrency financial advisors find these resources useful as the world transitions to a new era of democratized financial, personal data sovereignty, and a secure future built on blockchain.

By Liam McDonald

BarclayHedge Names 2 Sarson Funds Strategies in Top 5 Crypto Fund List

In the September 1st, 2020 BarclayHedge list of top performing crypto funds, both the Sarson Funds’ Large Coin and Small Coin strategies earned spots in the top five performing cryptocurrency hedge funds for July 2020.

Sarson Funds’ flagship Large Coin strategy, Blockchain Momentum LP, earned the number two spot on the list, up 35.25% MTD with the Small Coin strategy, Fifth Khagan LP, at number four, up 31.68% MTD.

Both Pantera Capital Management’s ICO Fund and Digital Asset Fund, as well Altana‘s Digital Currency Fund also made the top five.

See full listing below:

Click here for the full listing.