ZCash – better late than never…or not!

After observing a swift turnaround in all the cryptocurrencies over the weekend, ZCash finally joined the party early this morning – only to see the price slump from our entry price of 119.54 to the current price (at writing) of 116.5.

Still, the models are showing a current return of 95.8% so far, still way over the bounds of normal and we’re still waiting for a correction at some stage to see how the models fare in a downturn (I know I’m starting to sound like a stuck record on this point but the current market performance simply isn’t sustainable).

As an illustration of why this isn’t sustainable both in terms of model performance and, just as importantly, cryptocurrency performance here are 2 facts which I hope will raise a cautious tone for anyone trading these markets:

  1. The models have achieved a 95,8% return since we started trading less than 2 months ago…without leverage. If this were continued for 1 year then our starting capital of £24,000 would be $2,393,671 in 1 year and over $239m in 2 years…Please please take that in the way it’s intended, an illustration of how one sided this market has been in the past 2 months, not a suggestion that this is expected in the long term.
  2. Over the same period, cryptocurrency market capitalisation has grown from $23.3bn to $76.9Bn…following the same trajectory we would see a market cap of $83.2tn after a year of growth, 5 times the size of the US economy!!! Simply not going to happen.

Please don’t take this to mean I’m pessimistic about the marketplace long term – I believe cryptocurrencies have huge potential to unfold in coming years… I just wouldn’t bet the ranch on this continuing without a setback at some stage. But that’s my opinion which we’ve seen be wrong on numerous occaisions …  meanwhile the models are heavily committed 🙂

CurrencyStarting BalanceUSDCryptoRateUSD EquivTOTALGain/loss
Ether Classic$203.00$487.3965.232403938.468$552.39$1,039.78412.21%
Hold BTC$23,938.00$0.0022.907177032055$47,074.25$47,074.2596.65%


— Wintermute —

Well what a busy weekend …

Just when we thought we would get a period of consolidation … bang, another rally in BTC, this time leading the charge of the other cryptocurrencies.

Talking of BTC … just as well I have models to make the trade decisions, not me. When the models repurchased BTC at 1878.45 I was convinced they were buying at the top – over $150 higher and the models are looking good with their decision.

Other trades we’ve seen today…the models have purchased ETH at 123.559, purchased ETC at 7.472, purchased XMR at 31.47, and purchased DASH at 99.128.

The surprise of the day was the models decision to finally sell out of it’s ripple (XRP) holding at 0.349 – that’s an astonishing gain of 961% on the trade.

Overall results still looking good at an overall +85.74%

CurrencyStarting BalanceUSDCryptoRateUSD EquivTOTALGain/loss
Ether Classic$203.00$487.3965.232403936.94$452.71$940.10363.10%
Hold BTC$23,938.00$0.0022.907177032014.29$46,141.70$46,141.7092.76%

— Wintermute —

And the rally continues…

Last night the model decided to re-enter the BTC market. The entry point of 1878.45 was significantly higher than when it exited the market – personally I’m not sure this is a good move but it’s executed and we’ll wait and see. XRP is still long, all other cryptocurrencies are flat. The models are still maintaining a respectable 75% return but still with the caveat that we haven’t seen them trade in a serious downturn.

CurrencyStarting BalanceUSDCryptoRateUSD EquivTOTALGain/loss
Ether Classic$203.00$487.390$0.00$487.39140.09%
Hold BTC$23,938.00$0.0022.907177031925$44,096.32$44,096.3284.21%

— Wintermute —


AI Model Update

No trades of late so I thought I would post a brief update and a review of the exits made last week. The single remaining position, Ripple (XRP) has been going great guns and is showing a gain of over 1000%, all the more astounding considering the other alt coins monitored seem to have entered a consolidation phase – we’re impressed with the models identification of the different behaviour which resulted in continuing to hold XRP while divesting of the other coins. Of all the exit trades, BTC is currently the most disappointing. The model exited at close to $1700 and we are now seeing trades up at $1800. All the other coins are at either their exit levels or lower.

Overall performance is now standing at +75.63%, this compares to a BTC buy and hold performance of +72.25% over the same period. We still need to see the performance of the model over a significant cryptocurrency pullback, something we have still not seen and as I have emphasised previously the importance of this diary is really to review the decisions made by the AI Bot. The performance should not be considered as in any way indicative of it’s long term expected performance which I would expect to be significantly lower.

CurrencyStarting BalanceUSDCryptoRateUSD EquivTOTALGain/loss
Ether Classic$203.00$487.3906.338$0.00$487.39140.09%
Hold BTC$23,938.00$0.0022.907177031800$41,232.92$41,232.9272.25%

— Wintermute —



And then there was just Ripple

Today our models divested of their long-standing bitcoin position at an average price of 1701.5 after commission; an after costs profit of 48.4%.

This leaves us with just a ripple long position – the models have divested of their other positions over the past week.

At time of writing the bitcoin buy and hold model was showing a PnL of 63.25%, almost exactly matching the 63.92% return from the models. We now wait to see how the market unfolds.

CurrencyStarting BalanceUSDCryptoRateUSD EquivTOTALGain/loss
Ether Classic$203.00$487.3906.338$0.00$487.39140.09%
Hold BTC$23,938.00$0.0022.907177031706$39,079.64$39,079.6463.25%

— Wintermute —

Hard to Believe…

…that just 3 days ago we were fully invested across all cryptocurrencies. The models have now liquidated their positions in ZCash (ZEC) and DASH (DASH). Our only long positions are now Bitcoin (BTC) and Ripple (XRP).

Our model is now sitting on a performance of 62.45% vs a bitcoin buy and hold performance of 63.92%. We’re now in wait and see mode. The models are designed to only trade from the long side or switch back to USD so will largely sit on the sidelines until they identify a new opportunity to enter the market.

CurrencyStarting BalanceUSDCryptoRateUSD EquivTOTALGain/loss
Ether Classic$203.00$487.3906.046$0.00$487.39140.09%
Hold BTC$23,938.00$0.0022.907177031713$39,239.99$39,239.9963.92%


— Wintermute —

Is ETC the canary in the mine?

Well, after a couple of weeks where the models have just held on to all cryptocurrencies we have today our first sale. ETC was sold for USD at a rate of 6.458 after commissions; a gain of 140% from the purchase price of 2.69.

This is probably a good intro into discussing a few questions we’ve been fielding from  our backers of late – first, and most important, are these results realistic?  Well if the question is are these results real? then the answer is yes – we will be publishing the brokerage statements from Bitstamp and Poloniex shortly which is where all the trades have been executed to date. Is the performance what we expect over the time period – absolutely not. In many ways it would have been better if we had started our live funds trial at a more “normal” period as showing a 59% gain over a 6 week period without leverage is a complete outlier. We wait with anticipation to see how much of this profit the model keeps when we get a market setback.

Still, in terms of model behaviour, we are encouraged by the way the AI model has performed – even in a flat out bull run there is always the risk that the models would have tried to pick a top too early – instead they have held their positions seeing some spectacular gains over the 6 week period. The real stand-out now is Ripple, the last market for the model to buy. We are now seeing an astounding 448% gain on this market – remarkable even by cryptocurrency standards.

The other question is are we taking excessive risk? As discussed in the intro we are using zero leverage on these trades. That’s not to say we’re running a conservative portfolio – cryptocurrencies by their very nature exhibit extreme volatility but our strategy does not aim to increase that volatility any further.

The third question is selection of cryptocurrencies. Well we did do some pre-screening to ensure there was a relatively liquid market in each of the coins we allow the models to trade. We also wanted to ensure that the coins were tradable on at least 2 of the leading exchanges that we selected to trade on. Finally, we weighted the initial investment by the market capitalisation of the various coins we allow the models to trade in. This is a one off balancing of the capital; moving forward profits made by trading a particular coin will be re-invested in trading that same coin. This should see the portfolio change composition to a larger percentage being held in the more volatile currencies (providing that the trading is profitable).

So with those caveats and explanations what are the scores on the doors after liquidating our ETC position.

We are now showing a gain of 59.09% on the overall portfolio; our comparison strategy (buying and holding BTC) is showing a gain of 52.73% so we are now outperforming the naïve buy and hold strategy by 6.36%, even in a raging bull market. Best performer, as mentioned earlier, is Ripple, showing a gain of +458%, worst performer is Monero showing a gain of “just” 28.3%. Full results below.

CurrencyStarting BalanceUSDCryptoRateUSD EquivTOTALGain/loss
Ether Classic$203.00$487.3906.55$0.00$487.39140.09%
Hold BTC$16,900.00$0.0016.172248801596$25,810.91$25,810.9152.73%

— Wintermute —



Comparison to Buy and Hold …

A few days back one of our readers suggested that a useful comparison would be to compare the performance of our AI models to the performance of just holding Bitcoin (Thanks for the idea Slayer). The suggestion, quite rightly, was that with cryptocurrencies on a roar a user could get good gains just from sitting in Bitcoin so it would be good to see the added value from the models. I liked the suggestion immediately because, as was suggested by the poster, it provides a comparison against simply buying and holding Bitcoin in it’s own right – largely seen as the Gold Standard for Cryptocurrencies.

It also allows us to split our performance into Beta (how well we track the return on the designated market) and Alpha (how well we outperform the return on the designated market). So before publishing the regular results plus the bitcoin comparison I should clarify what this is and what this isn’t.

First what it is. We have taken the bitcoin price at start of the experiment (our first post) and assumed that the comparison is to fully invest in Bitcoin at that point in time. We then hold onto the bitcoins for the full duration of the experiment. This model incurs no commission (we assumed zero commission on the initial trade). This forms the basis of our comparison.

Now what it isn’t. This is not a comparison of how the models would have done if trading against bitcoin (flattening back into bitcoin rather than USD). To do that would require a retraining of the model as the relative strengths and relationships would be very different.

So with that said, current overall performance has continued to be way over long term expectations, we are now showing a gain of 54.61% since inception which is far from expected returns.

CurrencyStarting BalanceUSDCryptoRateUSD EquivTOTALGain/loss
Ether Classic$203.00$0.0075.471698117.3$550.94$550.94171.40%
Bitcoin Hold$23,938.00$0.0022.907177031573$36,032.99$36,032.9950.53%

As can be seen buying and holding also returned exceptional performance, 50.53%, giving us a modest outperformance of 4.08% in little over a month. The closeness of the two models shouldn’t be any surprise as it has been a period where the models have been long for much of the month. The other factor which results in similar performance, at least at first, is the fact that 70% of our starting funds were committed into bitcoin. In fact, the surprising thing is that we have been able to outperform at all. The real test of the value of the models will come when we eventually get a downturn and, although it feels like this will never happen at the moment, it will and we should watch the relative performances as the model actually needs to start actively trading the markets.

Thanks for reading,


— Wintermute —


Month Trade Summary

Well – what a month to kick off our AI Bot experiment. Our Bots trading performance in month 1 is +25.15%, exceptional even by the standards of cryptocurrency where volatility is a matter of course.

The downside, from a research perspective; the Bot hasn’t had much of a challenging market to deal in. The saying that “there are a lot of geniuses in a bull market” has never been truer than in the cryptocurrency market. The challenge will be to see how the bots perform in the next setback (which will inevitably follow at some point).

Some early signs that give us encouragement are the tentative way the bot traded the markets – exiting a couple of losing positions quickly before re-entering when the position stabilised. While those trades could be looked at as “bad” decisions; the bot re-entered at a higher price. From a trading perspective it is often correct to exit a losing position until the situation becomes clearer.

The other standout decision was Ripple. The bot successfully avoided holding a position while Ripple underperformed the general rally in cryptocurrencies then, just before a significant rally, entered into a long position. Almost perfect timing – again, time will tell if this was a fluke or the model identified something in the market behaviour that gave it optimal timing for this trade.

So final positions at the end of the month:

CurrencyStarting BalanceUSDCryptoRateUSD EquivTOTALGain/loss
Ether Classic$203.00$0.0075.471698115.45$411.32$411.32102.62%

— Wintermute —


And finally …. we’re long Ripple

Well, Ripple has clearly been lagging in terms of performance but yesterday we bought our long position in XRP. This makes a clean sweep in terms of long positions. We have also taken the opportunity to rebase the valuation figures and our trading exchanges.
As discussed in an earlier post Bitfinex is suffering from an inability to send fiat currencies to their customers. This has caused a serious distortion in their price compared to other exchnages.
This problem also impacts Tether which is owned by Bitfinex and is suffering from the same restriction as a result of this tetherUSD is now being traded as approximately $0.92, distorting the price of the cryptocurrencies priced vs USDT (Tether).
We have elected to switch our trading to a combination of First Global Credit, Bitstamp, and Kraken – all exchanges that allow transactions vs USD (not tether). The prices we revalue our positions against will also reflect this change.

Even with this change, our performance figures have been impressive in the first month of trading. We are currently up 15.3% in USD terms. The largest % gainer by a long way this month is Etherium Classic; this is showing a gain of 92.21% from our purchase price of 2.696. In $ terms the largest gainer has been Bitcoin. While only showing a  13.54% gain this is by far our largest position.

CurrencyStarting BalanceUSDCryptoRateUSD EquivTOTALGain/loss
Ether Classic$203.00$0.0075.471698115.17$390.19$390.1992.21%

The lagging currency is Monero. It appears to have completely missed out on this recent rally and is languishing at a value of 19.7 (a 13.36% loss on funds invested). The model is still staying with Monero so maybe sees something that the rest of the market doesn’t (or is just plain wrong).