May 2023 – Investor Update

Welcome to our May 2023 – Investor Update by our CEO and Co-Founder, Raoul Pal.

Dear EXPAAM Friends and Partners,

I wanted to put out an update for you all as there is a lot exciting going on in the digital asset world and within EXPAAM itself.

Let’s first update you on why I am incredibly bullish on crypto markets going forwards…

I strongly believe that crypto winter has ended in 2022 and we are now in crypto spring, moving into crypto summer late in 2023 and for all of 2024 and 2025. Let me explain…

In October 2022 the total market cap of crypto bounced off its long-run trend. This was something I wrote to you all about back then, suggesting when the cyclical trend meets the secular trend, it was time to buy!

If the uptrend continues (and I strongly think it does) then at the peak of the next cycle in 2025 or 2026, the market cap will have reached at least $10trn, but probably much more. Have you ever seen an entire asset class rise in market cap 10x? In the last two bull markets, the market cap rose 350x and 30x respectively. Welcome to digital assets! There is nothing like it…

At this juncture, it becomes important to shift our focus to the cyclical trend as it will drive the next leg of the secular bull market.

And, in order to understand the cyclical trend, we need to understand liquidity. Take a look at the chart below. The liquidity cycle bottomed in June when ETH hit its low…

Based on current economic weakness, liquidity will continue to increase well into 2024 and our work suggests it should extend into late 2025, which is consistent with previous cycles.

Liquidity is a vital driver of crypto assets. It explains 86% of Bitcoin’s performance (the rest being network adoption around Metcalfe’s Law). As I have explained in previous missives, liquidity in the form of increases in central bank balance sheets is a form of monetary debasement; during times of debasement, crypto outperforms all other assets and that outperformance compounds over time, even with the large downcycles. This, along with Metcalfe’s Law, is why crypto is and remains the best performing asset in all history.

The other confirmation of the liquidity cycle is Global M2 YoY%, which is also highly correlated to Bitcoin’s YoY performance. The cycle has clearly turned and much, much higher prices are expected (note the percentage increases at the top of the cycle usually exceed 700% YoY!).

You can see the same relationship with ETH… it is all about liquidity (and network adoption).

Bull markets in crypto however are much more than just a Bitcoin or ETH story. There is usually massive outperformance that comes from smaller tokens, earlier in their adoption curve. Even though just owning ETH or Bitcoin is a good investment strategy, it leaves a lot of potential alpha on the table, which is hard to capture for less experienced investors.

Capturing this potential alpha in the bull market phase of crypto is why we created EXPAAM, allowing us to build a portfolio of expert hedge funds which can capture different components of that alpha – in other words to outperform the broader crypto market.

Changes at Expaam

Our work on the liquidity cycle and the secular cycle uniquely identified the turning points in 2022; as we did our work, we were busy building out our portfolio, processes and team for the bull market and beyond.

We have been positioning our fund towards much more risk-seeking, higher-beta funds that focus on the deep opportunities in the space. We have different managers who focus on valuation models, momentum models, other systematic strategies, thematic strategies, smaller tokens and more; allowing us to cover as much ground as possible in a diversified manner to remove the more esoteric risk from the space.

As we build out the portfolio to capture the big opportunity, I am excited to announce that Paulo Baia will be joining EXPAAM in the new role of Head of Manager Research.

Paulo comes with decades of deep experience in manager selection for fund of funds. He was Head of Research and part of the key team that built Société Générale’s $12bn fund of funds platform, Principal/Head of Research and Investments at $3bn Nexar Capital and Head of Research and Investments for UBP’s world-renowned fund of funds platform; Paulo more recently managed the digital asset investment and hedge fund portfolio for a single family office.

Paulo is one of the world’s most experienced experts in manager selection, has tremendous knowledge of crypto hedge funds and is truly passionate about the digital asset ecosystem.

We are honored to have attracted such incredible talent to EXPAAM and we very much look forward to you all meeting Paulo and communicating with him frequently.

However, we are sad to say goodbye to Moritz Seibert, who served as the CIO of EXPAAM. Moritz has moved on to focus on building his own systematic hedge fund in traditional markets. We wish him well in his new endeavor.

Matthias and Scott, rockstars on the EXPAAM team, have spent the last 5 months working on deepening our asset allocation process … from intensive manager due diligence and robust risk analytics with portfolio look-throughs, to new database systems with individual multi-factor risk weightings for each manager (which in turn tie into the top-down asset allocation of the secular and cyclical factors based around my decade of experience in investing in crypto and my 30+ years in macro allocation).

We believe that we are building the most robust asset allocation process for digital asset hedge funds that exists. It will be systematic to a large degree and very transparent.

Other big news at EXPAAM is that Pierre Henry is joining us as Chief Commercial Officer to lead our revenue, distribution and product capabilities to suit the growing market demand and facilitate the needs of large institutional investors and family offices.

Previously Pierre was CEO of Trine Acquisition Corp, a publicly traded investment fund focused on disruptive technology, where he raised over $1bn from some of the world’s most important investors and successfully launched a public company focused on 3D printing. Prior to Trine, Pierre was VP of Corporate Development and Investor Relations at Hemisphere Media Group, a media company with a $500m portfolio of film & TV IP/cable assets in the US and LATAM. Pierre’s academic achievements are equally impressive, with degrees from The University of Chicago (A.B), Cambridge University (MPhil) and Stanford (MBA).

I’m sure Pierre will reach out to many of you in the coming months and will also be working closely with Tyler Purviance, who runs EXPAAM Australia, along with our key global distribution partners. Again, we are flattered that Pierre believes in our mission and vision and chose to join the Executive team at EXPAAM.

As if that is not enough, we have some other milestones coming too… We are finalizing our fabulous new branding and website which will launch in the coming weeks, along with our EXPAAM Club community NFT, which will unlock our special situations investment opportunities along with the incredible network within our EXPAAM community. We are also working hard on our first very special investment opportunity… more to come soon.

Crypto winter is always the time to build. We have built what we hope and believe to be the very best, institutional digital asset management firm in the world and are now perfectly positioned as crypto spring blossoms and morphs into crypto summer. Things are about to get exciting and now is the time to fully allocate to crypto before prices rise even further. Significant new all-time highs are likely coming in 2024/25/26.

I very much look forward to what lies ahead…


Raoul Pal

CEO & Co-Founder

This communication does not constitute an offer to sell or a solicitation of an offer to buy an interest in any fund or investment vehicle. Any such offer, sale or solicitation may be made only pursuant to a confidential private placement memorandum, limited partnership agreement, and subscription documents. An investment in digital assets, or any fund relating to digital assets, involves significant risks and investors should have the financial ability to accept the risk of loss of their entire investment. Hypothetical returns are presented for illustrative purposes only, and past investment performance is not indicative of future results.