September 2023 – Quarterly Update

Download the full Q3 2023 Report as PDF Here


Commentary On Our Portfolio And The Market

The third quarter began where the second quarter left off as we continued to re-position EADAF’s portfolio towards higher beta managers that we expect to outperform during the next crypto bull market. We are excited about these changes which will be discussed farther down.

The environment for crypto investments remained very challenging during the quarter, with significant drawdowns in token prices across the space. For the quarter, BTC was down -11.5%, ETH –13.6% and the CCI-30 by -8.9%.

We saw two reasons for what happened in the market:

(1) regulatory pressure continues to weigh on crypto tokens, particularly on Alts. Despite some victories for the space stemming from recent court rulings, bi-partisan legislation moving through Congress, and presidential candidates adopting pro-crypto stances, the regulatory environment remains uncertain in the U.S. This keeps new capital on hold, especially from large institutional investors and it depresses trading volumes, exacerbating price moves;

(2) domestic and global liquidity remain flat, as has been the case since late 2022. Global liquidity in particular has been on a downward trend throughout the past year. Despite this, we have been forecasting an imminent turn in the global liquidity cycle as shown in the below chart: 

Our work suggests that the G5 Central Banks will soon expand their balance sheets as they monetize excess debt. This loosening of monetary conditions and corresponding resurgence in global liquidity remain key drivers of asset prices, especially digital asset prices.

We anticipate this dynamic to run well into 2024-2025, and we have positioned our portfolio accordingly.

We also believe that viable regulatory frameworks for digital assets are being adopted globally, and The United States will follow suit.

During the quarter, we placed redemptions at four funds, all of which should be completed by year-end. At the same time, we held meetings and calls with over 60 new managers.

We are excited by the funds we continue to meet. In general, these are smaller funds managed by talented, crypto-native individuals who have made a commitment to the space and are devoting the best years of their careers to building a successful business. This feels familiar to those who were around during the early days of hedge funds when numerous talented professionals left their very well-paid jobs at top investment banks and devoted their lives to building something entirely from scratch.

Our portfolio construction discipline allows us to add a new fund only if we replace an existing one. This forces our team to develop high conviction regarding the reasons for redeeming from a fund and similar conviction regarding the reasons for investing in a new one. This discipline also allows us to keep the funds we cover to a number we feel we can comfortably monitor on a regular basis.

Thus far, we have completed a full due diligence and have approved one fund for investment, which took place on October 1st. We have shortlisted five other funds for review during the next few months. All managers selected have solid investment backgrounds, extensive knowledge of the blockchain space and are very disciplined in their risk management. Some have set up robust operational infrastructures, while for others we are discussing setting up Separate Managed Accounts at Coinbase to increase transparency and control. Two managers pursue a more fundamental analysis/value-based approach to investing, while the others are mid- frequency traders who dynamically shift their net exposures.

We expect to have two or three new names added to the portfolio by the end of the year, replacing those funds from which we are redeeming. We believe
these changes will better position EADAF to take advantage of the next crypto bull cycle…

For more details, download the full Q3 2023 Investor letter, including “The Big Picture – Macro Analysis informed by The Everything Code”


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.

Moritz Heiden01 08 23

Key Takeaways from Today’s Letter How We Are Positioning Ourselves Ahead Of The Coming Bull Market Despite A Tumultuous…

Key Takeaways from Today’s Letter How We Are Positioning Ourselves Ahead Of The Coming Bull Market Despite A Tumultuous 2022, Crypto Adoption And Institutional Participation Are Rising, And We Are Positioning EXPAAM To Best Capture…

Moritz Heiden09 06 23

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

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…