Investor’s Letter | Q4 2023

Brief analysis of the current state of the cryptocurrency market

After a period of summer stagnation, the cryptocurrency market entered the new quarter with a bullish mood. The changing narrative influenced the behavior of market participants, stimulating their activity.

From the beginning of October until the new year 2024, the cryptocurrency market has seen impressive growth. This quarter was packed with significant events that will continue to influence the digital asset market in the long term.

Market capitalization increased from $1.089T in October to $1.605T at the end of the quarter. Trading volumes in the cryptocurrency market increased from $43.78B to $78.267B, reflecting the growing interest in digital assets. The growing market capitalization and trading volumes are not only an indicator of the growing confidence in the cryptocurrency market and indicate a return of confidence among market participants, but also underscore the growing importance of the cryptocurrency market in the global financial ecosystem.

BTC dominance is holding at a high level relative to current market conditions — 49.82-55.04%. In this phase of the market, while bitcoin dominance remains high, it is too early to talk about the onset of the alt season. Market participants continue to pay close attention to bitcoin, viewing it as a more conservative and reliable investment in the context of changing market conditions.

The market was also directly influenced by macroeconomic data, namely the interest rate of the U.S. Federal Reserve System. As we expected, there was no increase, and the rate remained at the same level and amounted to 5.5%, which had a positive impact on the financial markets, in particular cryptocurrency markets.

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Bitcoin ETF & Ethereum ETF

The movement of the cryptocurrency market is closely tied to the narratives that are forming within the cryptocurrency ecosystem. The main narrative for Q4 2023 was the adoption of the Ethereum futures ETF and the pending adoption of the spot Bitcoin ETF.

It is the pending adoption of the Bitcoin ETF that has become the epicenter of interest in the cryptocurrency space, and its implementation will have a strong positive impact on the digital asset sphere globally.

Adoption of a spot Bitcoin ETF would mean:

1. Institutional Capital Inflow:
   The adoption of ETFs will attract a large number of institutional investors, significantly increasing the overall investment in the market.
2. Increasing Legitimacy:
   Bitcoin ETF will give the cryptocurrency space more legitimacy in the eyes of traditional investors and financial institutions, which in turn will boost market capitalization.
3. Accessibility for Investors:
   The ETF will provide retail investors with an easier and more convenient way to invest in bitcoin, opening the door to cryptocurrencies to a wider audience.
4. Global Attention and Recognition:
   The adoption of ETFs will bring global attention to the cryptocurrency market as a whole, engaging new users and investors and accelerating mass adoption of cryptocurrency assets.

The adoption of a spot Bitcoin ETF, which the market is waiting for, will be a turning point that has the potential to rewrite the rules of the game in the world of cryptocurrencies and bring notable changes to its structure and dynamics.

Key events and news affecting the market during the quarter

OCTOBER:
The first Ethereum futures ETF has been launched.

NOVEMBER:
BlackRock is applying for a spot Ethereum ETF.

The head of the world's largest exchange Binance Changpeng Zhao has stepped down. The new CEO, Richard Teng, says he will do a global job to ensure the exchange meets regulatory requirements.

DECEMBER:
Major investment firms make final changes to spot Bitcoin ETF bids.

Bitcoin breaks through the $40'000 mark for the first time since April 2022.

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Forecasts and outlook for Q1 2024

The end of Q4 proved to be an inspiring moment for the cryptocurrency market, emphasizing its bullish nature and creating favorable conditions for the continuation of the uptrend.

In light of this development, in the coming months we expect the onset of the alt season - the phase of the cryptocurrency market when alternative cryptocurrencies (altcoins) to bitcoin show active and massive growth.

This period provides a unique opportunity for Quantum Strategy to generate alpha for our clients.

The alt-season is characterized by an increased interest of players in a variety of digital assets, which will significantly expand our investment universe, allowing us to effectively profit from the market.

Together with our professional approach to asset management and neural network algorithms, we are targeting substantial returns in the upcoming quarter.

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Comparison with Market Indices