SIFT

Smart Investment Fund Token

Smart Blockchain Trading and Managed Investment Portfolio

BTC Fork Cancellation Trading Update


November 8th 2017

The news of the upcoming Bitcoin fork caused significant turbulence in the markets today. Whilst we do not usually comment on in-progress trades we felt that this situation was significant enough to make an interim trading update.

We had announced on Telegram a risk-mitigating strategy that we were using to trade in relation to the upcoming fork. We were purchasing Bitcoin whenever we received valid long signals to dollar-cost-average the purchase leading up to the fork. We planned to sell the Bitcoin approximately 48 hours prior to the fork or if the market were to move before that point. Rather than purchasing in a lump sum at the start of the period the gradual purchases were to hedge against any moves up or down – reducing profit but also risk for the trade. The plan was to start purchasing coins other than Bitcoin with valid longs 18-6 hours prior to the fork and sell them at support levels or within 8 hours of the fork.

With the announcement of the fork cancellation this afternoon there were sudden market changes that we had to respond to. We always had options to respond to such a situation should it occur. These were:

  1. Sell the BTC holding at an exchange that currently held the coins
  2. Sell the BTC via an OTC partner
  3. Short at an exchange, transfer the Bitcoins from elsewhere and then cover the short with them giving a guaranteed price

At the time of the announcement we held 15.32 Bitcoin at an average purchase price of $7,427.71. The coins were held in a hardware wallet in preparation for the fork to reduce any unnecessary risk of holding at exchanges when not required.

As the coins were not immediately at an exchange we attempted to secure an OTC deal but the price levels quoted had factored in upcoming drops and were not in line with the VSR levels we had in mind. The subsequent plan was to short at the Kraken exchange where we could cover the trade with Bitcoin once a transfer had completed. This was not possible as Kraken was down all day – even before the news. Eventually we moved the Bitcoin to other exchanges. By the time the transfer was complete the price was bouncing between two VSR levels below the average purchase price.

SIFT has not yet sold the 15.32 Bitcoin. This has been held whilst we wait for a clear move up or down from support levels or see further confirmation signals indicating a change in direction. The price remains stable. Rather than selling at the prices we were offered earlier the pricing has settled within our VSR predictions and remains there. The trade will now remain open subject to our usual closure policies. This means waiting for valid signals or significant departures from VSR levels.

At the point of the news we had additional open trading positions. These were:

  1. A buy of XRP as part of LTS’ transfer out of USDT
  2. A buy of ETH as part of LTS’ transfer out of USDT
  3. A buy of XRP entered on 7th November
  4. A buy of ETH entered on 7th November

Pre-determined exit prices for the November 7th trades for ETH and XRP were reached and the orders were closed for profits of 5.14% and 5.61% respectively (which are reported in the daily spreadsheet). As the XRP trade with SIFT funds (which was only $970 of XRP) added to the profit this was attributed to the fund. SIFT itself also closed out its own ETH trade from the USDT transfer meaning that no funds (client or LTS) are left from the USDT exposure. This trade was closed at a slight loss with LTS funds and, as discussed in the month-end report, has not been attributed to the fund.

Whilst ETH and XRP markets rose slightly above the close levels, the exit points were pre-determined and met. We believed that the uncertain market conditions twinned with the lack of any further signals meant that there was no merit in keeping the trades open longer.

The only position SIFT still holds open (apart from CFDs and forex) is the holding of BTC with a dollar average of $7427.71. The ETH and XRP closed trades have been reported on the spreadsheet early due to the release of this additional trading report. All further trade reporting will now continue as normal.

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