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June 2022: One Click Crypto Report

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Deep analysis of the cryptocurrency market in June 2022.

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One Button Capital
July 6, 2022
Jul 6

Welcome, to the second issue of the monthly report by One Button Capital. There, we will discuss the recent market updates, the performance and highlights of OBC Fund and trading AI, and visit relevant research topics: investing in bear markets, crypto inflation, and the importance of timing the market in crypto.

June was an extremely volatile month for crypto. The effects of Terra's meltdown spread to other organizations, causing a domino-like effect on the whole market. The prices fell, investors lost money, and skeptics had something to talk about.

In addition to crypto, rising interest rates and fears about the U.S. economy have prompted other risk assets, including technology and growth stocks.

As the Federal Reserve aggressively tightens monetary policy to combat persistently high inflation, people are concerned that it will be unable to prevent a worldwide recession starting with the United States.

Part 1: Market Summary

Crypto finished its worst month on record, with Bitcoin losing more than 34% of its value in June. Ether, the world’s second-biggest cryptocurrency by market capitalization, ended the same period down by about 41%.

A table from messari.io of the overall cryptocurrency performance for Jun 2022.

Global cryptocurrency market capitalization:

At the end of June, the total market capitalization of the global cryptocurrency market was $869B, which is $2T less than the peak in November 2021. This made the last quarter the worst in Crypto’s history.

Table from CoinGecko


Bitcoin’s price action

Bitcoin (BTC) fell by more than 37.3% in June – the largest monthly price decline since 2011 – in an epic market sell-off that prompted layoffs across the cryptocurrency industry and compelled many lenders, including Celsius, to halt withdrawals and scramble to secure financial lifelines.

Live table from TradingView


1.1 Crypto Domino Effect

In May, the popular U.S. dollar-pegged stablecoin project UST and its sister token LUNA completely collapsed with a total loss of $60 billion. That began the domino effect that took June by storm.


Source: Coindesk

Celsius Freezes Withdrawals

Celsius is a centralized cryptocurrency lending organization. Their business model is as follows: you deposit USDC, ETH, or some other form of cryptocurrency, and they guarantee a return.

In the end, they invested the majority of these assets in either extremely risky projects or things with a lengthy liquidity horizon. A classic model of leveraged lending: borrow short-term and lend long-term and risky.

The liquidity mismatch occurs when customers expect to withdraw their funds within 24 hours but you have assets that may be locked up for months. In the end, Celsius froze withdrawals and was forced to sell a massive amount of cryptocurrency over the past week, which contributed to the price crash.

Three Arrows Capital Is Insolvent

Three Arrows Capital (3AC), a highly regarded crypto hedge fund reportedly managing $18 billion at its peak, appears to be insolvent after taking on too much leverage.

3AC was heavily exposed to the Terra ecosystem and to an arbitrage play associated with GBTC. Both trades turned against it. Seemingly, 3AC took on excess leverage to try and recover the losses.

Its creditors included major players in the industry like Genesis, BlockFi, Voyager, and FTX. 3AC also managed the treasuries of several portfolio investments, perhaps putting them at risk.


Industry-wide Layoffs at Major Crypto Firms

The crypto winter has forced several companies to freeze hiring or lay off workers, including:

In total, crypto exchanges laid off about 1,700 workers in June. Brandon Neal, chief operating officer of Euler XYZ, says layoffs are a normal and healthy part of the crypto business cycle.

1.2 Have We Hit The Bottom Of This Bear Market?

With the price of cryptocurrency dumping to new lows, the number of analysts trying to provide a fresh take on the matter has skyrocketed. Somewhat expectedly, most are carrying bearish perspectives now.

Fundstrat strategists, generally bullish on BTC, have reversed their price predictions for the short-term future of the asset. As such, they noted that bitcoin could drop to $12,500. With a similar forecast, the author of Rich Dad Poor Dad – Robert Kiyosaki – said he will buy more BTC if it drops to $11,000.

In the opposite corner, Bitfury’s CEO, Brian Brooks, thinks the asset will shoot up soon as its network continues to be highly utilized. JPM analysts also share a similar view, indicating that the bottom could have been set in already.

Bitcoin's actual value may be unknown. But while nearly $70,000 per coin was probably too high a value, $20,000 is likely too low, says Chris Brendler, senior equity analyst at D.A. Davidson Companies, a capital market company.

It's very unlikely the price of bitcoin — the largest and most popular cryptocurrency — will go to $0 per coin, according to Madeline Hume. That's because use cases have been established, including for the aforementioned collateral. She adds that Bitcoin has also, for better or worse, become a gateway cryptocurrency for a lot of traditional finance.

1.3 BONUS: Investing During A Bear Market: How To Not Lose Your Money In Crypto.

If you are reading this piece, then you most likely hold some kind of digital currency in some form. The question that concerns every crypto investor, especially in the current market conditions, is the topic of investing during bear markets and what to do and not do during this period.

  • How not to lose money when everything is bleeding?
  • What can I do to prevent my portfolio from being down more than -80%?
  • I bought my Bitcoin at $60k what should I do?

These are just a couple of the everyday questions that an investor has on his mind. The reality is that it takes guts to stay true to your strategy when the market is dropping every day. But more importantly than that, you need to have a strategy, to begin with. And many people who are new to crypto do not have one.

Let’s analyze the most popular investing strategies during bear markets and see what works.

Things That Don’t Work Well

Stablecoins (some of them)

A common idea during bear markets is to keep your portfolio in so-called stablecoins. While a very good strategy on the surface, 2022 has thought that nothing can be 100% reliable. While many stablecoin projects look very solid and even promise annual interest if you stake them, the two big algorithmic stablecoin crashes of the last two years prove otherwise.

The infamous de-pegging of Terra’s stablecoin UST. Source: Coinmarketcap

Imagine if you took a two-day vacation with no internet connection. Boom, 90-99% of your portfolio is gone just like that. Reddit is full of real life examples of people that lost all of their savings during the Terra downfall. Some people may have forgetten but in 2021, something similar happened with a project name Titan, that also had its own algorithmic stablecoin - Iron (see next page for referrence).

The de-pegging of algorithmic stablecoin Iron. Source: Tradingview


A well-known entrepreneur Mark Cuban was exposed to the Titan crash, which made headlines across all crypto news websites and proved that no one is safe from rug pulls.


Shifting to Stocks or Bonds

Some investors might think that while crypto is not looking good at a given moment, it may be a good idea to convert it into stocks and bonds. But they are in for a big surprise when they look at the reality.

S&P500 and NASDAQ indices are down -23.04% and -31.81% respectively since the beginning of 2022.

Stocks:

S&P500 (-23.04%)
NASDAQ (-31.81%)

                                                                                                          

Some individual stocks like Netflix are down more than -70%, so even in this market Bitcoin might seem like safe heaven in contrast to the stock market.

NFLX (-71.23%)

 Additionally, as we analyzed in our May Report, then you recall our research on the lost power of money, which shows the depreciation of money and its impact on the true value of stocks. While an asset may be up by +250% in the last 20 years, the real purchasing power would result in a much lesser gain.

Looking at the adjusted graph with the M3 (total money supply) taken in mind, we can see that the recovery in 2008 was twice less impactful as we thought, and we are just reaching those levels now. 


Bonds:

The U.S. treasury rate went down by over 90% between the 1980s and 2020s.


Investors clamored into the safety of U.S. government bonds, sending the 30-year Treasury bond yield below 2% for the first time ever and the 10-year Treasury note yield below 1.5%, a three-year low. Additionally, some experts have analyzed that the Bonds market is directly manipulated by the FED, making it an unreliable investment for regular people.

Investing in Funds

Another idea that you might think of as an investor: “Why don’t I just give my money to professionals to manage? They would for sure do better than I would in investing.” Sounds like a good idea right? But there is another surprise: most of the funds and professional institutions fail to outperform Bitcoin. 

“While different strategies have yielded different levels of performance, neither was able to outperform BTC itself.”
Source:
PWC 3rd Annual Crypto Hedge Fund Report


Money managers can come in many different forms, like mutual funds, hedge funds, or very niched down-crypto funds, but according to the latest research, crypto hedge funds didn’t beat the Bitcoin returns over the last few years. What is more, during bear markets they are almost fully correlated to the performance of the asset, meaning that you gain less during bull runs, but you lose the full amount when the markets are going down.

Going Short

This is a more advanced strategy that people with a trading background will be familiar with. Shorting the market has you betting against the market performance, or in other words, you make money when the market price drops. A strategy that, once successful, can make headlines in Hollywood (See: The Big Short), but in reality, it is a very risky investment approach.

Timing is very crucial when shorting the market, and that is almost impossible for a human to do. Many people that formerly waited for crypto to drop have observed their targeted assets increase by 10-20-30% a day. Imagine the same scenario, but with you shorting the market. Apply leverage to trading, and you are easily liquidated in several hours of a bullish day.

It is impossible to know when crypto will crash, even during a bear market like this. A big percentage of short traders lose their money because of their unlucky entries because of the news that pumps different assets.

Things That Work

Here is a list of things that we at One Button Capital see working well in the bear market. Note that this is not financial advice.


Dollar-Cost-Averaging (DCA)

DCA is a favorite investing strategy for several household names, including Warren Buffet. It is a proven method to generate profits over the long run for people who want to accumulate large sums of a given asset. The good thing about dollar-cost-averaging is that it is also a great tool for value investors during bear markets.

Dollar-cost averaging (DCA) is an investment strategy in which an investor divides up the total amount to be invested across periodic purchases of a target asset in an effort to reduce the impact of volatility on the overall purchase. The purchases occur regardless of the asset's price and at regular intervals.

For example, if I gave you $100,000 and told you that crypto is currently in a recession but the next all-time high will be in 10 months, what would you do?

Your reply would probably be: “I will wait to buy the biggest dip during this recession, or just straight invest everything right now.” A brilliant strategy indeed, but only if you could time the perfect moment, and from experience, you and I know that it rarely happens.

A DCA investor, on the other hand, would tackle the challenge in the following manner:

Instead of investing $100,000 all at once or waiting for the big dip to happen, he would spread out his investments over a long period of time. He could easily invest $10,000 monthly for the next 10 months, regardless of price. Below is an example scenario if the example happened at the beginning of the year.

An investor that bought BTC for $100,000 on Jan 1, 2022, would be down by -58.88% of his portfolio by June 2022, while the DCA investor would have lost -27.03% and have $44,080 in cash to invest further. Source: DCACryptoCalculator


Of course, it is impossible to know when the next ATH will be, but DCA ensures you smoothen up your entry price - taking advantage of the market swings, and ultimately buying more of a given asset with the same capital.

Stop-loss

Stop-loss is such a powerful tool in markets like these that it is a shame it is not talked enough about. It may be a basic instrument, that even the biggest rookie has heard of, but using it properly can save you from tons of losses.

Stop-loss or take-profit is a programmed command to sell your cryptocurrency once the asset hits a certain price level. You can say, “If Bitcoin goes below $50,000, I will sell.” Or, “If my position goes lower than -10%, sell everything.”

Not only can investors protect their portfolios from devastating losses of over -50%, but they can also do something that many people neglect - lock in some of their gains.

Of course, if you believe that an asset will be worth over 20x in ten years from the current ATH, it makes sense to hold it, even during a bear market. But if you’ve locked in some of your profits from the last bull run, you will have more to invest in the following swing.

Trading Automation

Trading automation, or trading bots, or robo-advisors, is software that is pre-programmed to take specific action on autopilot when certain market conditions are met. Imagine having a professional trader in your pocket that can manage your portfolio 24/7 with the best strategies available - that is the concept of trading automation.

An example of how a trading bot may operate is by having the algorithm buy into an asset when the 50-day moving average is above the 200-day moving average of the same crypto and sell it when it moves below it.

This strategy outperformed BTC in 2022 by 47.6%. While Bitcoin fell by -58.88%, the MA Crossover strategy is down by -11.28%.

Of course, your robo-advisor can be set up to do a lot more sophisticated analysis and trade in various conditions. It all depends on the software, and how well it is able to tackle the volatility in crypto.

DCA, stop-loss, and trading automation are just a few of the strategies that profitable investors use to keep their portfolios more robust during bear markets. The list of successful tactics goes on and includes things like diversification, shorting (requires high precision), arbitrage, and portfolio rebalancing. But what if we could put everything together?


Summary

For many crypto investors, this is their first big bear market. A big percentage of them do not have a strategic plan on how to handle the situation. While many of the common investing methods work when the markets are trending up, the quote “Everyone is a genius during bull markets” holds ground when things are not so green.

No investment strategy is 100% bullet-proof, during crypto recessions. Our list compared several methods that stood the test of time in other markets before crypto. The examples we gave used the most recent data, but still, there is no telling how long the bear market will last, and what the true impact will be.

Part 2: Research

In our May report, our research time introduced you to the history of money and how excessive money-printing in recent years has depreciated the value of the once-greatest medium of exchange. All we already know is that the impact is already here with record-high inflation across the whole globe.

Today, our analysts challenge two popular beliefs about crypto, more particularly - Bitcoin, the world’s leading digital asset. Let us dive deep into economic theory, statistics, and on-chain analysis to see how crypto stands during these frustrating times, and what it means for investors.

 

2.1 Time In The Market Vs. Timing The Market: Why Even Long-Term Holders Lose Money In Crypto

The volatility in the global markets over the last 12 months has made a lot of traders and investors feel skittish. The cryptocurrency market, something that has been historically volatile, is experiencing a massive crash. Even Bitcoin and Ethereum, which are considered safer bets by many experts, are hitting their lowest values in this bear market trend.

On-chain metric is part of the on-chain analysis - an emerging field aiming at extracting and scrutinizing the plethora of available data about public Blockchain transactions to facilitate a better decision making

Unrealized gains/losses or also known as “paper” gains/losses are the amounts you are either up or down on the securities you've purchased but not yet sold.

Profit and Loss Supply

The supply in profit/loss is an on-chain metric that indicates how much of the entire crypto supply is now profitable or losing money. The price of Bitcoin dropped below the $20,000 level on June 18, 2022, and the selling pressure is on causing a further increase in selling pressure. Many investors are losing money, and a massive amount of Bitcoin supply is at a loss as things stand. 

Here's a graph that indicates the profit trend in Bitcoin supply from 2011 to June 2022:

Chart, histogramDescription automatically generated
Data Source: Glassnode


The percentage of Bitcoin supply in profit has decreased in recent months, and more and more investors are losing money, as shown in the graph above. As of June 2022, the indicator's value is about 49 percent. Historical bear market floors have bottomed between 40 percent and 45 percent of supply in profit.

Following a drop from the peak in 2018/2020, the metric's value approached comparable levels of approximately 45-55 percent. If the trend continues, the losses may reach up to 70 percent, which is comparable to 2015 data as shown in the graph below:

Chart, histogramDescription automatically generated
Data Source: Glassnode


When we evaluate the net unrealized profit/losses (NUPL), we find that nearly all wallet groups—from shrimps to whales—hold enormous unrealized losses that are worse than those of March 2020.

The least profitable wallet group has unrealized losses of 30% of the Market Cap and holds 1–100 $BTC.

Data Source: Glassnode

Bear market extremes have historically been reached with Bitcoin downturns of between -75 and -84 percent from the all-time high (ATH), lasting between 260 and 410 days in 2019–20 and 2015, respectively.

Data Source: Glassnode

This bear market is now well within historical norms and severity, with the current fall hitting -73.3 percent below the Nov-2021 ATH and lasting between 227 and 435 days. So this is a bear market of historic proportions, with new records of accumulated losses for all wallet cohorts.

All the graphs essentially show that (most) short-term traders and long-term investors are losing a lot of money in crypto.

Key Statistics

Crypto trading has seen people turn into overnight millionaires, but that is an extremely small minority. The majority, rather than earning consistent profits over a long period of time, wind up losing money. 

However, statistics and evidence are essential to back up this claim. Here we look at some key statistics that are carefully picked from different research studies, reports, and market data that will give you an idea of its difficulty. 

Traders Lose Money

  • Within the first 2 years, 80 percent of day traders quit. For nearly 40 percent of traders, a month or less.
  • Only 13 percent of traders continue to do so after three years. Only 7 percent of those who started five years ago are still actively trading. (Research Gate)
  • The typical individual investor loses 1.5 percent per year when compared to the market index. Annually, active traders underperform by 6.5 percent. (The Journal of Finance)
  • Between 1995 and 2006, another study of day traders in Taiwan revealed that just 5 percent of them were profitable. (Berkeley)
  • According to research on Brazilian day traders, 97 percent of those who traded for more than 300 days lost money, while only 1.1 percent made money. (SSRN)

Bitcoin Losing Value

  • Bitcoin has lost more than 50% of its value this year and is down 70% from its all-time high. (CNBC)
  • Over 158,000 crypto traders have lost all their funds. (Nairametrics)
  • Realized losses ballooned to a record of over $7 billion at the beginning of June 2022. (Glassnode)
Graphical user interfaceDescription automatically generated with medium confidence

Some cryptocurrency investors believe prices may decline much more given the current macroeconomic climate, which includes the Federal Reserve raising interest rates to combat excessive inflation. I’d say, it is a good opportunity to review your asset allocation right now, especially if you are a long-term investor. 

eToro Study

Research of eToro day traders revealed that roughly 80 percent of them lost money over the course of a year, with a median loss of 36 percent. (eToro)

Emotions can lead to expensive errors and poor judgment. It's challenging to avoid letting emotions influence your decisions because of the news, market volatility, other people telling you what to do, and your affinity to certain assets. Do not let your feelings of excitement or concern regarding the market control how you behave. Instead, exercise patience and faith in your strategy.


Conclusion

The bulk of traders and investors are unaware that the actual number of individuals who lose money in crypto is definitely greater than those who make money. Most traders give up after suffering financial losses, particularly novice traders who struggle to advance in the market.

Researching the reality of how crypto trading works may be the most effective instructional tool for novice traders and those looking to turn a profit from cryptocurrency, especially in light of all the hype merchants who guarantee you can trade your way to riches.

2.2 The Impact Of Inflation On The Cryptocurrency Market


Cryptocurrencies have been historically regarded as a hedge against inflation. Their susceptibility to external market factors and non-correlation to traditional assets were solid case points in the last decade. The recent widespread bear market, record-high inflation rates, and correlation between crypto and tech stocks have made many investors question if the traditional thesis is true.

In the following study, we will analyze the impact of inflation on the cryptocurrency market and answer the question of whether the FED’s policy to reduce the money supply will cause the death of decentralized currencies.

Inflation is the decrease in the purchasing power of money through increased prices.

Deflation happens when prices decline across a sector of the economy or throughout the entire economy.

Image Source: Investopedia

What is inflation?

Inflation occurs when there is an increase in the supply of money and credit relative to available goods and services. In the US, it is measured by the Consumer Price Index (CPI), Producer Price Index (PPI), and Personal Consumption Expenditures Price Index (PCE).

Other countries measure inflation with similar metrics, but all of them track the change in prices consumers pay and producers receive across the economy. 

Most economists consider a small amount of inflation a sign of a healthy economy. A moderate inflation rate encourages you to spend or invest your money today rather than pile it up (a problem of deflation).

Hyperinflation

  • Hyperinflation occurs when an economy experiences a rapid and uncontrollable rise in prices. 
  • Economists define hyperinflation as a sustained monthly inflation rate of 50% or more.

Stagflation

  • Stagflation occurs during a long period of very high unemployment, slow economic growth, and high-interest rates. 
  • As unemployment rises, consumers spend less. This decline in demand reduces prices, readjusting your purchasing power.

What Causes Inflation?

There are two primary causes of inflation's gradually rising prices: demand-pull inflation and cost-push inflation. Both are rooted in the economic fundamentals of supply and demand.

  • Demand-Pull Inflation

Demand-pull Inflation is the inflationary condition that occurs when there is an excess demand for goods and services in relation to the supply of them.

At the onset of the coronavirus pandemic, for instance, the increase in demand for indoor, socially distant activities caused companies to fall short on production supplies. This resulted in steadily increasing prices.

  • Cost-Push Inflation

Cost-push inflation is when companies increase their prices because the cost of raw materials and wages have risen. Typically, this is due to an external factor that hinders a company's ability to produce sufficient quantities of a certain good.

Image Source: Investopedia


Quantitative easing vs. quantitative tightening:

Quantitative Easing (QE) is a monetary policy strategy used by central banks like the FED in an attempt to reduce interest rates, increase the supply of money, and drive more lending to consumers and businesses.

Quantitative Tightening (QT) is a monetary policy strategy used by central banks to decrease the amount of liquidity or money supply in the economy. It is the reverse of QE.

Both quantitative easing (QE) and quantitative tightening (QT) are used by a central bank to manage the money supply and interest rates, although they're employed in completely opposite ways.

QE was widely used during the 2008 financial crisis to prevent the collapse of big banks and other businesses. In more recent years, it has also been used to stimulate the economy, particularly when interest rates are already at historic lows.

The drawback of this strategy is that it requires the central bank to print more money, which can have the opposite effect and contribute to inflation.

The FED said “NO” to money printing.

Beginning in June 2022, a number of online news sources reported that the Federal Reserve would begin quantitative tightening, the process of reducing its $9 trillion balance sheet, which had grown in recent years).

The news led many crypto analysts to believe that it would negatively impact the prices of the decentralized currency market. The main argument is: "If QE or money-printing increased the price of Bitcoin (BTC) and other cryptocurrencies, then QT would have the opposite effect."

What will be the effect on the markets?

Analysts from crypto exchanges and investment organizations disagree on whether QT will terminate a decade of crypto market expansion. Other financial markets have the same debate on the effects of this new measurement.

UBS Group AG, a seven-time World’s Best Wealth Management Bank, forecasted QT won’t be as significant as QE, indicating that it is far less likely to reach pre-crisis levels.

Going more in-depth 

  •  QT will be much smaller than QE.

The Fed’s balance sheet will not fall back to pre-crisis levels. It is impossible to erase several trillion dollars from the economy. Printing more of it, on the other hand, has been shown to be an easy task.

  •  QT won't reverse QE's impact on long-term rates.

By buying long-term bonds and mortgage-backed securities, the Fed expected quantitative easing to push money into areas such as corporate bonds, thereby lowering corporations’ borrowing costs and, it was hoped, sparking the productive use of capital. But recent results indicate that this strategy does not work.

  • QT should not significantly impact liquidity or inflation.

QT is also unlikely to have a significant impact on liquidity or inflation. Changes in liquidity or inflation conditions occur when there is a mismatch between supply and demand for cash. In the financial crisis, liquidity preferences rose, and so central banks "printed money" in response. In fact, if the Fed were not reducing liquidity supply now, cash supply would exceed demand and inflation could become a serious problem.

Crypto Correlation to the Stock Market

Bitcoin is famous for being the digital gold of cryptocurrencies. The vision of Bitcoin evangelists is that within 15 years the asset will be the world's main reserve currency.

The similarities between BTC and gold suggest that such a scenario is possible. And in a world where Bitcoin has that kind of dominance, it is safe to assume that the asset would be a great hedge against inflation.

But at the time of conducting this research, the market capitalization is still too small to have a meaningful impact on the global money supply and inflation. The mass adoption percentage as of Jun 2022 is <10%, which is not enough yet for Bitcoin to be treated as a commodity at the level of gold.

The current market cap of Bitcoin is 3.4% of that of Gold, and at its peak, it was close to 10%. Source: 8marketcap


In reality, Bitcoin is a speculative asset, just like every other cryptocurrency or risky investment. And until BTC has significant mass adoption and market cap, it will be treated as a risky asset or investment to be traded with the purpose of profit.


BONUS:
Even though the case study of gold being a hedge against inflation has 70 years of data, in certain times when everything is going down, the precious metal value is also suffering.

Chart of 2020 by SunShine Profits, showing the performance of Gold (yellow) and SP500 (green).


Conclusion

Inflation is the invisible villain who devalues your money. It is caused by a variety of economic factors, the most significant of which is the massive amount of printed money over the last 50 years.

Governments have begun the practice of quantitative tightening in order to reduce the impact of inflation, but this has its own set of consequences. All markets are currently suffering and in a slump. Crypto, with Bitcoin at the forefront, is no exception.


2.3 More Research

Can Bitcoin Solve The Money Problem? Why Money Is Dead.
DeFi Trends In 2022 Web3. Is The Future Of Finance On The Blockchain?
Should You Invest In Funds? Real State Of Wealth Management Market in 2022.
Making Money In Crypto: 10 Proven Tactics For Effective Cryptocurrency Investing.
AI/ML In 2022. Why investing in tech projects will set you apart for a lifetime.
AI In Cryptocurrency Trading: The Big Picture



Part 3: OBC Performance

June put our AI technology to the test. The high volatility of the market saw the top two cryptocurrencies, Bitcoin (BTC) and Ethereum (ETH), drop by -40.84% and -47.61% respectively. At the same time, the aggregate returns of all One Button Capital strategies traded on our platform is -16.47%, performing better than both digital assets.

Data from Jun 1 to Jun 30. Source: OBC app


Between Jun 1 and Jun 11, the aggregated performance of One Button Capital was aligned with that of Bitcoin and Ethereum. Around Jun 12-13 when the large selloff in crypto began, the difference in the class started showing.

Holders of BTC and ETH went on to lose close to 50% of their portfolios, while the AI strategies got to keep the majority of the funds across the whole month.

3.1 Best-Performing AI Strategies

Below are the best performing AI strategies in Jun. The table includes the net returns of the bot (how much ROI it made), plus the percentage difference to the market (showing if it outperformed it.)

Table 1 Source: OBC app

Net Return Of The Other Strategies

  • Endeavour = -7.29
  • Clipper = -7.55%
  • Solar = -7.56%
  • Astral v2 = -11.86%

3.2 Best-Performing Market Pairs

The top market pairs in Jun were LTC: USDT +28.99% (Horizon AI), MATIC: USDT +11.82% (Endeavour AI), and UNI: USDT +8.18% (Performer v2 AI). 

Jun 2022 return of the top traded market pairs at OBC Source: OBC app


Outperforming The Market

Four of the AI strategies accomplished 100% outperformance of the market, while the two bot types with the highest trading volume achieved above 90%. The worst strategy outperformed the market by 75%.

The AI  trading strategies outperformed the market by an average of 92.27% Source: OBC app

3.3 Horizon AI: Perfect From Start to Finish

Going more in-depth to the performance of the Horizon AI strategy, that was in a sense completely perfect from start to finish of the month.

Source: OBC app


During the worst month for crypto, Horizon made 244 trades, with each of the AI bots created under this strategy beating the market by 100%. The average ROI per trade was +0.22%.

The Horizon started this month by catching the fall of Bitcoin from June 11 until June 17, trading it all the way down. The market is -27%, and Horizon is at a profit of +4% for the same time period. 

The chart on the left indicates the Buy/Sell traders, while the right one compares the performance of the strategy with that of the underlying asset. Source: OBC app

The most interesting insight is that Horizon has been trading very actively throughout the time period. Below, you can see the snapshot of the trading history of the bot from June 16 to June 17, 2022.

The bot made nine trades alone on Jun, 16 Source: OBC app

On June 18, Bitcoin was down by -42.67% over the last 30 days, but Horizon succeeded in keeping the portfolio safe.

Source: OBC app

We can attribute Horizon’s success to its unique ability to place limit orders (compared to other AI strategies that mostly trade by market trades). Throughout the entire fallout, the AI had been placing orders 2-5% below the market waiting for the price to fall. After the buy orders were filled, Horizon immediately placed sell orders 2-4% above the market price, which were subsequently filled within a short timeframe, realizing volatility gains. 

3.4 Catching Knives: AI Trading Performance In Bear Market

The excellent ability of the AI to sell their positions during the initiation of downtrends has saved our investors from devastating losses during crypto’s worst month.

One of the biggest sell-offs happened on Jun 22, when 99.12% of the trades that day were for SELL. Source: OBC app


Performer v2 AI vs. BNB: USDT

A look into the interface of the OBC app, showing the performance of a trading AI.


Over the last 8 months, the performance of Performer v2 AI on the BNB: USDT market pair has been just phenomenal, and June 2022 is not an exception. 

We can see the example of a trading bot backed by the Performer v2 strategy active since​​ November 2021, which is at -8.31% ROI since the beginning. In contrast, BNB was down more than -62.74% over the same time period. On the chart, you can see how AI manages to hold performance when the market keeps falling. 

Source: OBC app

In June, the AI made a few spot-on trades, saving investors from losses and even securing some profit on the way down (keep in mind that this AI currently trades only spot). 

Performer v2 AI Bot vs. ETH: USDC.

The Performer v2 also shined this month on the Ethereum market, being spot-on to place a buy trade at almost the lowest low of $922.62. Since then, the bot has been making a profit consistently. 

AI buying Ethereum when the asset fell below $1,000 for a brief time Source: OBC app

3.5 The most impressive week for One Button Capital?

June 13 - 20 had been an extremely successful time period for One Button Capital AI, where it had managed to secure a small gain of +0.3% while Bitcoin and Ethereum fell by -20% and -12.4% respectively.

The OB strategies had a maximum drawdown of -6% when the markets experienced a much more severe drawback of almost -35%. 

During that week, we also had two AI strategies trading at a net profit!

Source: Crypto Domino Effect: OB Capital Weekly Newsletter #005


Two trading pairs even made an average of +20.48% ROI while the market was mostly bleeding..

Source: Crypto Domino Effect: OB Capital Weekly Newsletter #005

3.6 Community Feedback Section

Here are highlights from the One Button Capital community chat where our members discuss the state of the market, and banter about their AI bot’s performance.

June 13, 2022, Username: Hubhub

Earlier this month, one of the most active community members Hubhub shared his approach when investing through the One Button Capital app. 

Even we at the One Button Capital team were surprised by the depth of his investment process and analysis. 

There is one line, in particular, that sums up it all: “Let the bots run, let them run long term. Really long term even if at times it looks like you're only losing against the market. Some bots started well, and suddenly the market outperformed them, and I was wondering what was going on. But in the end, the market turned and the bots were right

Indeed, some of the best-performing bots at One Button Capital are the ones that are running for more than 3 or 6 months. Therefore even while using AI trading tools in investing, we should keep in mind the long-term investment horizon. There is no free lunch anywhere. 

Source: One Button Capital Discord.

June 13, 2022, Username: Noidea

Source: One Button Capital Discord.

Six of the AI trading bots on the accounts of our investors sold their positions on June 13, successfully predicting that the market wouldn’t find a bottom, but actually break through and go into an even bigger downfall.

Source: TradingView


Analytical investors would predict that after June 13 Bitcoin would have rebounced from the $26,000 level, or they would wait out a couple of days to see if BTC breaks below the strategic level, and retest $26,000 later as a top.

The AI did not wait but immediately sold, alongside other bots on other cryptocurrency pairs.

June 16, 2022, Username: Noidea

Another comment by our VIP investor and holder of several prestigious titles on the OB Hub. This time it is a screenshot of the performance of the Horizon v5 BTC & ETH AI bots, hosted as a copy-trading strategy on Bots.io.


June 20, 2022, Discussion

Above is an interesting discussion on choosing the best market pairs for your trading bot based on the volatility of the coin compared to other assets.

June 23, 2022, Username: Noidea

Phenomenal trading performance over 140 days period. Source: One Button Capital Discord.

June 30, 2022, Username: Ezza, TiagoPSantos

At the very end of the month, our investors noticed that the Performer v2 strategy is starting to gain steam.

The overall performance of this P2 bot is remarkable. +18.63%, while the market is down -63.27% for the same time period.


Another Performer v2 strategy that took off towards the end of June.


June 30, 2022, Username Hubhub:

Source: One Button Capital Discord.
Buys and sells and of the AI strategy. Source: OBC app.


To join the discussion on the One Button Capital Discord server, click here.

3.7 How Our AI Technology Works? 

Practical evidence stands higher than theoretical theses, and the results we shared do the talking by themselves. At the same time, we think that it is valuable for our investors to learn how an AI-driven asset management machine works, as this is an innovative way of investing.

Our technology performs two vital tasks in portfolio management:

Portfolio distribution and asset management. 

Portfolio distribution

For portfolio management, we use neural networks—a form of narrow AI that can learn to do specific tasks designed by a human.

Portfolio distribution and asset allocation are vital tasks of every portfolio manager. The question here is:

How to allocate capital effectively between various cryptocurrencies?

Our answer:

We use neural networks trained on various baskets of portfolios to optimize the allocation process. The data used to train these models includes billions of combinations of asset buckets tested against billions of different market timeframes.

Using the real-time data received from the market, the models dynamically adjust the portfolio to optimize for better returns.

Additionally, the data from the performance of asset management models is used to optimize allocations.

Asset management

Ongoing management of a portfolio is another critical task done by a portfolio manager. The question here is:

How to optimize holding the asset to generate returns better than the market?

Our answer:

We use neural networks to trade market pairs on spot and futures to generate returns better than the market. The neural networks are trained on various market pairs using historical market data.

A model can trade a single market pair. The models utilize real-time market data to make decisions to buy, sell, or hold a position.

Optimizes investments into specific coins

In essence, the neural networks allow a more optimized investment in specific markets and pairs in terms of risk and reward. For example, you want to invest in Ethereum. You buy ETH on March 25, 2021, for about $1,650. You decide to lock in your profits on July 24, 2021—4 months since entry.

Holding the coin (gray) vs. AI actively manages your coins (yellow):
ETH: USDT vs Clipper AI performance 25.03.2021–24.07.2021. Source: OBC App


The results are the following:

  • Market Returns: +17.55%. AI Returns: +72.84%.
  • Difference: +55.29%
  • Market MDD: -58.34%. AI MDD: -35.72%

Another example: is if you want to invest in Litecoin (LTC) on January 13, 2022, at the beginning of the 2022 bear cycle. Gray — LTC, yellow — AI that trades on LTC.

LTC: BUSD vs Performer v2 AI performance. 13.01.2022–04.07.2022. Source: OBC App


  • Market Returns: -64.51%. AI Returns: +12.29%.
  • Difference: +76.80%
  • Market MDD: -70.15%. AI MDD: -29.92%

The difference between the net returns and the drawdown experienced during the time period is phenomenal, showcasing the use case of how neural networks can make better investments.

So, what is a neural network, and how exactly does it work?

To explain what One Button Capital trading neural networks are, first we need to understand what they are not.

Neural networks are NOT:

  • Rule-based algorithm
  • Arbitrage strategy
  • Trend-following strategy

Then what are the characteristics of neural networks?

  • Has a specific goal — to make a profit by trading in the cryptocurrency market
  • Was trained using historical market data
  • Can make its own decisions autonomously—simulates a human brain
  • Uses new market data as an input to make decisions
  • Runs 24/7

Neural networks are dynamic, adaptive, and self-learning. They possess the quality of expressivity, which gives an edge to OBC trading AI compared to rule-based algos. In machine learning terms, expressivity is the capacity of a neural network to perform different kinds of computations, therefore, be ready for changes in the environment.

Playing the game of the market

Imagine neural networks as players and the market as a game. The goal of the players is to win the game. And winning the game means scoring the most profit with the least possible drawdown.

That makes it easier to explain the advantages of this technology compared to the alternatives. Since the goal of the models is not necessarily to predict the future price but to actually win the game, the decisions they make might seem unconventional in a moment but give an edge in the long run.

… The chapter continues for six more pages.

The complete in-depth analysis of “AI-Based Portfolio Management Technology” will be released later this week. I will send you a link to the Blog post for you to read in the next weekly newsletter.

3.8 More Case Studies

Part 4: Company News

It was a significant month for One Button Capital. Not only did our software prove itself against the severe market crash, but our company as a whole made a big leap to new markets.

As we move further along in our journey to become the #1 provider of AI-driven investments, we thought it makes sense to get back to the fundamentals and elaborate more on our investment philosophy. 

4.1 One Button Capital Investment Thesis

Impermanence

Nothing is permanent. Nothing stays the same. Everything in nature changes with the passage of time.

Financial markets are not an exception but rather the most relevant example of this principle.

The market a year ago was not the same as it is now. Markets are kin to living organisms—dynamic, constantly evolving creatures, transforming and adapting every minute. In technical terms, markets are complex adaptive systems.

Such an environment is prone to surprises. Any changes in the system change the long-term dynamics and influence other parts of the system in a feedback loop. The behavior of agents in the system collectively influences the system, which in turn makes the agents adapt, which changes the system again.

The whole system is chaos.

Whatever worked yesterday is not a guarantee to work today. Strategies are bound for obsolescence.

If you’re looking for an edge, you must accept the dynamics of the system. You must be willing to grow and adjust. You must embrace chaos.

Change is the only thing you can consistently bet on. And whoever can make bets effectively in an environment of chaos, noise, and uncertainty will ultimately win.

Science-driven

We use data, technology, and modern science to navigate in this environment. The conventional “best investment practices” and “rules of thumb” are something that we laugh at.

We research, test, prototype, validate, and then implement. One Button Capital is a lab where we run hundreds of experiments simultaneously. We don’t use something that doesn’t work.

Our team consists of technologists, scientists, and product managers, instead of traders and “investment advisors.” We believe in the scientific approach to cracking the market code.

Humans are predisposed to errors and biases; that’s why we don’t trust them to make investment decisions.

Machines over humans

Computerized technology is at the core of One Button Capital’s investment practices.

We don’t have human traders. We prefer machines to do all the work.

Why?

  • Machines can process terabytes of data in seconds. Humans cannot.
  • Machines are flawless in execution. Humans are prone to errors.
  • Machines are systematic and goal-driven. Humans are emotional and biased.
  • Humans need to sleep and eat. Machines are working 24/7.

Therefore, we trust machines to make better judgments and investment decisions than humans, which has been proven by the track record of One Button Capital.

And with the use of artificial intelligence (AI) and machine learning (ML) technology, it is possible to elevate the machine’s investment capabilities to the next level.

AI and machine learning

AI and big data technology capture financial markets. The economic revolution is happening right in front of our noses — AI is changing how you, your neighbors, and institutions make investments. The world of investing is never going to be the same.

Initially, AI was designed to simulate human thinking, but it ended up doing much better. AI shows immense problem-cracking capabilities when deployed to solve specific tasks (e.g., making money by trading Bitcoin). And AI can process vast amounts of data like no human can and solve problems in seconds that would take a hundred men months to accomplish.

With constantly rising computing power levels, AI will become even more influential. The technology is becoming more widespread, accessible, and easily implementable.

In the investment world, AI overcomes rule-based algorithms by utilizing a more creative and dynamic approach to solving problems.

The use of self-learning, deep learning, and neural networks adds a whole different level to AI.

“Train a machine how to fish, and you’ll never be hungry.”

With machine learning, you can develop a model, assign it a task, give it a dataset, and let it find the most effective way of achieving a goal. After some time, the machine will give you the output with the most optimal solution. Not only that, but the machine will also be able to adjust when given new data and constantly learn how to solve even more complex problems.

Combined with millions of datasets available, there are no limits on how you can apply this technology, especially in the financial world that contains zettabytes of market data.

Effective diversification

Let’s be honest. By this point, it should be clear to everyone that markets are not efficient.

Not all assets are created equal. And not all assets are priced fairly given the risk-reward-liquidity parameters. Subsequently, not everyone has the tools and resources to assess the risk and reward of all assets available and give them a fair valuation.

Do you think a 60–40 portfolio is a good choice? Or perhaps you think that Bitcoin and Ethereum are the only two cryptos worth holding? Our AI knows the answer.

With the use of AI technology, One Button Capital aims to include only the best-performing assets in one’s basket and diversify the portfolio for minimum risk exposure.

Dynamic allocation

Not all assets are created equal, and not all of them perform equally well over the course of time.

As time goes by, some assets are worth adding, some are worth reducing positions, and some are worth removing altogether. The goal is to do it fast and effectively.

Dynamic allocation and ongoing portfolio management are vital tools in constantly changing markets. Machine learning models deployed at One Button Capital monitor the markets 24/7 and help adjust the positions based on the new data.

Summary: The only constant is Change

In short:

  • We’re getting smarter
  • Technology is getting better
  • Markets and portfolios adapt to changing conditions

We at One Button Capital employ a scientific and data-driven approach to investment and portfolio management by leveraging AI and machine learning technology.

Markets are chaotic structures where the only constant is Change. Let the machines solve it.

4.2 Crypto Expo Asia

This year, Crypto Expo Asia took place on June 22–23, 2022, at the Raffles City Convention Centre, Singapore.

In front of the OB Capital’s Booth at the Crypto Expo

The event featured market-leading content and updates on the crypto and blockchain industries, allowing users to smartly and securely explore the different investment opportunities.

Over 10,000+ traders and investors from around the world attended the event. Sixty industry leaders from different parts of the industry held speeches on stage during the two days of the event.

One Button Capital was one of the premium partners of the event, and our CEO Max was giving a keynote speech on the panel.               


The Role Of One Button Capital

The primary goals of One Button Capital at Crypto Expo were to gain more exposure to the Asian markets, connect with crypto enthusiasts and investors from around the world, and establish partnerships with potential partners in Blockchain and DeFi, such as crypto exchanges.

The team at One Button Capital did an excellent job both at the booth and during the presentation on stage—they managed to connect with the hundreds of crypto enthusiasts that were interested in the company's products.

Inside The Event
During the event, the One Button Capital team connected with people at the booth and around the event location, collecting signups, and handing out printed brochures and monthly reports.

Day one of the event.

Keynote Speech

One Button Capital co-founder and CEO Max Yampolsky were giving a speech during the show to the audience of hundreds of crypto enthusiasts from all over the world.

The topic of the talk was Investing During Bear Markets, which gave pressing insights into some of the techniques for effective money management during severe market downturns.                                

Speech on the second day

Those who could not make it to the event could watch the live stream of all the panel talks on YouTube. The support was unparalleled. Team members and investors kept our online presence on a high level as well.                  


Results

The appearance of One Button turned out to be very fruitful. We attracted hundreds of new investors and established several key partnerships.

Investors
During the two days of Crytpo Expo Asia, we got:

  • 250+ registrations for the One Button Capital retail investment app
  • 30+ signups for One Button Capital asset management fund for institutional investors with a projected AUM of $35–40m

Exchanges
In a mission to deliver One Button Capital services to a broader market, we established connections with several local and global exchanges to potentially integrate into the One Button Capital app.

Here are some of the potential partners One Button Capital connected with:

In the meantime, the integration of Crypto.com, Huobi, and FTX is planned for the next 1–2 months.

Partners
Over 50 other partnerships were discussed and are currently being negotiated. The potential partners specialize in marketing, VCs, liquidity provision, and other valuable fields for our business.

Moving Forward

The Crypto Expo in Singapore was one of the best for One Button Capital this year. We believe that the expansion of the business in the Asian market will bring many benefits for both existing and future investors.

Moving forward, we will focus on the tasks we have set for Q3 and Q4 of 2022, with the addition of the new projects that came from our new partnerships.


4.3 Product Updates

Here are the recent features implemented on the One Button Capital online app in June:

Trades Chart

We have introduced a chart that allows you to visualize the trades of AI bots directly on the candlestick chart.

New AI: Explorer

We just recently introduced a new AI called “Explorer”  to our “Lifetime Plus” investors. Explorer is a new generation of AI that combines the powers of Astral, Clipper, and Solar.


Other Updates

  • Changed colors for “buys” and “sells” on the public statistics’ performance chart
  • Resolved issue with back navigation on the public statistics
  • Changed error handling on exchange connection form to toasts and more comprehensive error messages
  • Resolved issue with missing latest candlestick on the “trades” chart of a bot 
  • Added support for removing a payment method after a subscription is canceled
  • New email reminder functionality for account activation expiration

Final Word

The first half of the year is over and it already feels like it was yesterday when everyone was questioning how long it would take for Bitcoin to hit $100,000. Well, I guess that the bears were right this time, but only for the short term. The previous market winters have taught us that crypto always finds its way to the top no matter what.

The important thing for us at One Button Capital is to always stay alert to the latest news and regulations that affect how crypto is used worldwide in order to continuously operate effectively and efficiently.

We use tested investment management frameworks from traditional finance and combine them with big data, artificial intelligence, and machine learning technology to gain an edge in cryptocurrency investing.

This month, we are also opening registrations for our AI-managed fund. The details are available below.

Apply to join the fund here.

According to experts, July could be the most volatile month of the year, so buckle up and let the AI trade for you. And we will see you again in the next One Button Capital monthly report.


Best regards,
Max Yampolsky, CEO at One Button Capital
ir@onebutton.capital


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