Earnio results for April 2024

April was one of the most volatile months in recent history. The market itself moved in a range of more than 22%, with individual movements being significant but without prolonged duration. When you look at the price chart from a distance, it is more of a sideways movement than the market having a significant upward or downward direction. 

Thus, the price of bitcoin ranged from $72,000 per bitcoin to 57,000 USD per bitcoin. However, it was noticeable that the chart was trending downwards a little bit, plotting a lower low but also a lower high. Suggesting at least a temporary price correction. 

Crypto Fear & Greed Index

This situation in the chart corresponds nicely to the current state of the Fear and Greed index. This is an index that shows the relative state of the market in relation to these two "emotions" based on an analysis of the technical aspects of price, market sentiment, and also social media and Google trends. 

So in the chart for the last year, we can see that we are relatively high, but also a gradual downward trend and high volatility of results. 

Against the backdrop of these graphs, events that reflect these graphs then take place. This is because global macroeconomic factors are playing off each other against pure cryptocurrency aspects. 

Some economic indicators in the US are less favorable than expected, and inflation is still not 100% under control. This has the effect of making interest rate cuts by the Fed (Federal Reserve, essentially the national bank in the US) less and less likely.

Thus, more cautious investors are partially shedding riskier assets and pushing the price down. 

Bitcoin ETF flow

This can be seen, for example, in US bitcoin ETFs, exchange-traded funds that have bitcoin as an underlying asset. These have slowed down in April and some days even outflows, i.e. sell-offs by ETF funds, are becoming significantly more prevalent.

But a small change happened in early May when GBTC, an ETF fund from Grayscale, saw its first inflows instead of outflows.

This is because Grayscale ETF was created by transformation from a trust, and so at the start of the ETF's launch, it already had a large stock of BTC that it regularly sold into the market. In early May, briefly but at least somewhat, purchases finally prevailed for Grayscale.

Bitcoin halving

Despite the more challenging macro market backdrop, there were a number of positive events in the cryptocurrency markets in April, which we will not name all due to the shortness of time. The most important of these, however, was that on April 20, the rate of new bitcoin issuance to the network was reduced from the previous rate of around 900 coins per day to around 450 coins per day.

After the halving, the network's inflation rate - the annualized rate of new issuance relative to existing supply - fell from about 1.7% to about 0.8%. 

Assuming a constant flow of demand for bitcoins, a reduction in the flow of bitcoin supply should theoretically lead to a higher equilibrium price of bitcoins - prices must adjust to the higher flow of supply. 

Traditional investors are usually confused by the strong post-halving performance in the past and tend to think that the upcoming halving is already priced in. 

This is because the dominant efficient market hypothesis assumes that any public information should be immediately reflected in the price. Since the date of the halving and its effect are publicly known, logically this and subsequent halving events should already be reflected in the price in advance. 

However, it seems that in the past this was not the case. It can be assumed that the situation may repeat itself, but it has to be said that the market is much more efficient and its participants more experienced, so it will probably not have as big an impact as in the past. 

Our strategy

And what has been the impact of this admittedly volatile but crabby, sideways period? 

The current market structure is not so conducive to our strategies. As we mentioned in a previous article, our strategies are set up quite pro-trend. 

In particular, they try to open long positions when the market is going into a correction, but since there is not much continuation of that rise afterwards, the position is usually closed at a small profit or a small loss, usually somewhere around zero. 

An example of two trades where you can see that the market is really going rather sideways most of the time.

However, we still see mostly positive fundamentals in the current market situation, although there has been some cooling of the initial euphoria from ETFs. Halving, the upcoming US election, where crypto is also becoming a topic of election debates, Hong Kong's approval of bitcoin ETFs, the ever smaller amount of btc on bitcoin exchanges etc. all suggest we could be in for an interesting year ahead. 

Given the fundamentals and the way the market is currently set up (summer is coming, and people are expecting rather calmer markets with lower participation), we wouldn't be surprised if bitcoin does something that again most don't expect, e.g. it goes up sharply (starts its super cycle) and catches most "off guard" again. 

Thus, this month, despite the volatile market situation, Earnio managed to produce a quality result of 0.94%. 

Rewards for Earnio FIX program participants and the affiliate rewards will be fully paid from the project funds.