Fully backed Crypto ETP Project

So this is it. The announcement for a fully backed Crypto ETP.

For the Last Year, I have been working on my company Kryptomine_CH.

Building my own mining rigs, expanding my office, overcoming stones in the path and challanges.

Then, the crypto Winter started. And to be honest, the loan was a mistake of mine.

I want to be honest with you. It has been tough times. But here I am. Keeping afloat and mining. Expanding my business. I have reached the Limitations of my office (power consumption-wise) and there is only so much I can do to expand with my financial strength. I buy 3 * 18TB harddisks a month (my rig can’t plot more anyways) and it’s pretty much set it and forget it. The harddrives get initialized and filled automatically and are automatically submitted to the pool once full.

In the meantime, I started working on my next project. Called arbitrader. It started out as an arbitrage trading bot and over the last half year evolved into a portfolio managing software, using arbitrage opportunities to rebalance at 0 cost. Every Month, I devote a small amount of money into it to grow. Right now my test-environment is at ~800 CHF of cash.

As I anticipated, it was also kind of a rough start as I had to test out what works and what not, fight with the API connections (still some work to do), stability and work out bugs.

This can be seen in the 6 months chart vs the btc benchmark:

In the recent times (the prevalent down turn) I made a big change there. I moved from 20% cash, to 5% cash. Exposing more risk to my portfolio. Of course shortly after, there was a major hit in the crypto market, but I’m confident, that the portfolio will be able to regain momentum.

I am working on mitigating risks but obviously, this is a work in progress.
Keep in mind, this is a proof of concept portfolio. For instance I have one coin included which I’d never include in the final Product (APE). More on the final coin selection will.

So this is a big part, on what I have been working on for the last Year. And then, there is one last aspect:

I came to the realization, that chia needs more useful, exciting projects and adoption. Upon seeing that my portfolio manager could have potential, I started thinking about how to get it into the Public and how to raise funds for it.

I came to the conclusion that an NFT on the chia blockchain might open the opportunity to gain publicity for my project and to raise Funds. I worked on creating set images. This consumes a lot of my time right now. Friends are helping with inspiration though and I involved my girlfriend in creating the artwork now so that I can focus my time on the software part of my Project.

I do not want to put some images yet as I am a little afraid of Idea theft but be assured I will post updates and you will see some Images and you will be able to participate in a giveaway.

More details to follow here.

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A few personal thoughts:

I love your optimism
You should not be afraid of your idea being stolen.
Puting your idea into the wild is a test: if no one copy it, then your idea isn’t that good
That’s a general rule of thumb that I’ve learn at university, but if you are not comfortable with it, it’s understandable. Maybe you need more time to refine some aspects
3*18Tb per month is quite a lot, and would certainly be better spent on XCH directly especialy if your rig isn’t profitable anymore
Arbitrage in crypto isn’t that great.

It might be misaligned with what you’ve been thinking so far, consider it food for thought

I think you are right in one way or another. Right now 10% of my monthly mining income goes into my fund.

My Idea is to create Coat of Arms (Wappen) in several relatable variations. They could be used to represent family crests, or as a Guild or Group Icon in online-Content such as Games, chat rooms, …

A few of them are already reserved with friends.
I can show a few samples here:





Right now the collection consists of 700 all-unique images.
I still need to condense them down and want to expand to other topics. Within the “Area” of Emblems.

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This is some beautiful artwork. Do you take custom orders ?
Are you the one making them or is it someone else ?

I do them myself and I would Take custom orders.

Weekly Update #1

almost a week has passed and after the Project introduction, I want to start some weekly updates.
This weekly update will give some insights into the portfolio rebalancing mechanism.

Shortly about the time aspect:
My plan is to release the fund by latest in 6 Months.

Portfolio performance
First of all, I would like to shortly share the performance chart as an update to the introduction. The market had some rebound which also helped my portfolio a lot. Ethereum had some retract again but the Portfolio was unaffected by that.

I think I will not include a weekly chart of the portfolio in every update. Maybe once a Month or on special ocurrences.

I do have plans to provide way improved reporting. I’m using the open source tool PortfolioPerformance for that. A prototype for the data connection exists but it is not in the priority right now.

State of Portfolio management

The Portfolio management part is finished for the most part.

As Potatom rightfully stated, it is very hard to earn money with arbitrage. I say hard and not impossible because it is largely affected by portfolio size (=trading fees). Even with my tiny test portfolio, opportunities arise, specifically during times of high market volatility (=greater risk).

Due to these circumstances I moved away from pure arbitrage and incorporated rebalancing of the portfolio.

The rebalancing uses “desire” and “greed” metrics in order to rebalance the portfolio. I do not want to go into great detail but the principle is quite simple:

The target balance represents the desire to rebalance.
Example: Current Chia balance is 10 chia but target balance is 20 chia → The desire is to buy 10 chia.

The current market Situation affects the greed to rebalance in a specific direction.
This is currently affected by the arbitrage bot.
Example: Chia is cheaper on exchange 1 than on exchange 2. This effectively reduces spread/trade cost by buying chia on exchange 1 or selling it on exchange 2.
A visualization can be found here: By pure coincidence, Chia is roughly 50 cents cheaper on gate_IO vs okx.com right now as of me writing this. This is what is called an arbitrage opportunity.

Desire and greed are finally added together and represent a plan of action

In the above example, where the desire is to buy chia and the greed is high, a rebalance might occur.

Outlook of portfolio management
As stated, the rebalancing part is mostly finished. There is one major part which I want to implement to reduce risk and increase reward. This is to incorporate some trend following.
For instance, one might choose to not buy assets right into a falling market (a big risk for percentage based rebalancing) but instead wait until the market calmed down a little before rebalancing.
The same is true for a rising market. If the trend is upward, one might hold off rebalancing until the trend slows down.
To implement that, I have worked on my Statistics Library the last week.

If you are interested, the repository is on github:

Challenges
One major challenge is Legal stuff and hot to get a coin listed on exchanges or how to use offerings to buy/sell the ETP Coin. If you are experienced in these areas, feel free to an open discussion

Farther outlook

Further down the line, it will be required to implement wallet management to not have all the assets on exchanges all the time.

And then, way in the distant Future, still hidden under the mist of the unknown, there are some project ideas to build on top of this ETP. These will only flesh out once the etp is fully running. The goal is to provide some utility coins such as backed stablys to the chia network.

The next weekly update will target availability (how the ETP is offered/tradable) and price finding of the ETP. Specifically price oracle and how to prevent speculative price fluctuations.

Weekly Update #2

Todays weekly update will be about financing, and running cost of the project. But first a few words on the current Market situation.
Bot Updates
A lot has happened during the Week. Right now, my test-portfolio is suspended for security reasons, until emergency bugfix is in place. Some Drastic words. So what has happened?
As most of you know, ethereum recently moved to proof of stake. During this time, some sidecoins (ETHW & ETHF) ended in my gateIO wallets. This was a major problem for me. I intended utmost automation and the bot will automatically include new coins into rebalancing if it finds them in my wallet. This was intended so that I could just purchase some coin and it would be automatically included into the portfolio (or sell it and it would be excluded)
Long story short:
The feature worked great and the bot happily incorporated ETHW and ETHF into the rebalancing strategy (5+2 coins = 28%). Too bad, I did not want these coins and of course they performed less than poorly until I noticed what was going on.
I tried to sell them off but apparently, some satoshis remain in the wallet so the bot wanted to rebuy them right away. As emergency update, I incorporated a buttn to switch trading on and off, so that I can have the bot running but not executing trades.
As a final fix, I will add a good old whitelist, so that the bot will not incorporate coins, for example when I get some shiba inu from some random event.

This threw me back quite a lot. I am full on transparency so I will put every major problem or risk I encounter here.
I have worked hard on my statistics library and finished the functions which I need (Time-Based average and exponential average).
Once the whitelist is implemented (should not be to complicated), I will be back on track to implement Trend-biased rebalancing to reduce risk and let profits run.

Financing & Oracle
I plan to offer the ETP in form of a coin on the chia blockchain. You will be able to buy this coin and it will rise/fall in value according to the crypto market.

How will the Price be specified?

The price will consist of the value of held assets divided by the amount of coins out there. The coins will not be diluted.
So as an easy example, wil small numbers so the mind can grasp it :slight_smile:
The Portfolio value is 10000.
There are 1000 coins in circulation.
The value of one coin will be 10000/1000=10

Wont the coins be diluted when I buy some from you?

No. Let’s extend the example of above. Portfolio is at 10k, 1k coins and price of 10.
Ramon now buys 100 coins for 1000. The 1000 will go into the portfolio.
New value calculation:
The Portfolio value is 11000.
There are 1100 coins in circulation.
The value of one coin will be 11000/1100=10

How do you prevent price fluctuations caused by speculants and evilmen?

As the etp is fully backed, it will not suffer from the risk of a whale all of a sudden selling of a majority or buying a majority. The Oracle has the full market power. In other words, if someone were to buy a lot of coins, the value will be corrected by buying assets accordingly. If someone sells a lot of coins, liquidity will be preocided by selling assets.

Sounds too good to be true. How do you intent to make profit and finance the coin?

As you all know, there is nothing such as a free lunch. I will take fees. But how will the fees be affecting you?
I do not intend to implement running fees. I intend to implement a market spread. As the coin is fully backed, I do have full market power and can hold the coin on its portfolio value.
Right now, the plan is to have a fee of 0.5% (Time will show what is apropriate). So with the Example from above:
John wants to buy the coin. The current market price is 10. According to the fee, john can buy one coin for 10.05 (10 + 5%)
Angelica wants to sell the coin. According to the fee, angelica will receive 9.95 (10 - 0.5%)

This will hit short term investors more. Hodlers will buy the coin and pay the fee one time and then if they were to sell the coin after a while.
I do not plan to buy out offerings within that corridor so you might be able to get a better price from other holders.

After all the ETP is intended to provide a store of value while reducing the risk of the market. I plan on implementing a range of other coins which build ontop of that. But lets put one stone after another. Cant build the house before the foundation is finished. So i wont put too much thought into that right now.

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Are you compliant to launch a seciurity? If so to sell to which countries? Because thats what your coin would be.
The devils in the detail, does anyone actually know who you are that will be investing.
Im gonna sit this out

This is confusing…

Who are they selling the coins to?
Are you offering guarenteed buybacks?
If theyre traded on the open market, selling them on it shouldnt affect the fund, or else its not a free mkt that can move up and down in price as ppl speculate on it.

Are you compliant to launch a seciurity? If so to sell to which countries? Because thats what your coin would be.

you are correct. I brifly mentioned regulatory challanges in a previous post. Right now I am not too concerned with it as my first priority is the technical part for now. If need be in the future, I can let more experienced persons in that regard handle the regulatory and law stuff.

The devils in the detail, does anyone actually know who you are that will be investing.}

I do have a company registered to my name (Kryptomine_CH inh. Julian Bechtold).

Who are they selling the coins to?

Any market participant ( I dont know the name of the buying person)

Are you offering guarenteed buybacks?

I do offer limited buybacks.
There are two limitations:

  • I can only buy back the coins to the given market value of the unterlying assets. Lets say the crypto market crashes 50% as a whole. It will not be possible to buy back the coins at your original buing price.
  • There is no such thing as a full warranty in real life.
    Lets say for example, you buy a car from a car manufacturer and the car is still on warranty. The car manufacturer gets suspended / shut down. Eventhough you have a warranty by law, good luck to get your car replaced if something breaks down.
    To put it simple: There are certain risks that an investor needs to be aware of. For example in a internet outage, I might be unable to buy back the coins. The buyback would be reinitiated as soon as the service is back.

If theyre traded on the open market, selling them on it shouldnt affect the fund, or else its not a free mkt that can move up and down in price as ppl speculate on it.

I do not know if I understand your question fully.
→ If theyre traded on the open market, selling them on it shouldnt affect the fund
Selling (new) coins on the market does not affect the supply out there as the same amount of backing assets is beeing bought.
→ Its not a free mkt that can move up and down in price as ppl speculate on it
The coins will move up and down in correlation with the crypto market (kind of like an ETF).
The coins will not move up and down relative to the underlying assets.
It is fixed to the underlying assets. (kind of like USDT is tied to 1 USD). In that regard it is not a free market.
Although it is not the purpose of the vehicle, you can buy the coin to speculate on an uptrend or sell it to speculate on a downtrend of the cryptomarket. Nontheless, from my perspective, that defeats the purpose of an etf. You could just as well trade the individual assets.

Im gonna sit this out

Im a fan of the following verse:
“Not by their words but by their deeds shall you know them”
so yes, I fully support “sitting this out”
:smiley:

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Friedcat lost me alot running an unregulsted security, alot more cautious now.
Good luck with your venture.

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very brief update regarding Weekly Update #2

A lot has happened during the Week. Right now, my test-portfolio is suspended for security reasons, until emergency bugfix is in place.

A rudimentary whitelist is in place. bot is up and running. Back on track.
A little more extended aftermath will follow next week

Update #2 all the work I put into the average library seems to have been worth it. I have been able to implemet the trend-bias.
Its running smooth, no additional effect on the CPU. That old 4 core i5 from 2015 handles everything great :slight_smile:
image

So now, for comparison, this is how the rebalancing trades look before trend biased averaging (i really have high hopes for this)

I hope, next update it will be less messy.

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Weekly Update #3

Today is the day for the aftermath of the ETH Proof of stake update.

Aftermath ETH POS Update
As mentioned, some side coins ended up in my portfolio on gate IO.
This caused a huge loss in that givien portfolio. (~20%, so 10% in total - ouch).
Back last week, it was not yet clear to me why these coins ended up in my portfolio.
I was wondering if some code on my end failed and purchased wrong coins (would be terrible),
if something with the gate io api failed and it did not recognize the correct coins (would be fatal to gate io)
or if somehow i was awarded these coins (my suspicion but I did not know why at that time)

Today, there is more clarity as gate automatically claims these coins which you are “eglible” to and add them to your wallet. You are eglible to these coins if you held ethereum because these minor coins forked ethereum, keeping all balance records to that date.
And a few days Later, I was very glad I implemented the whitelist feature because okx did the same. This time without any impact :slight_smile:

On this screenshot, you can also see some interesting things as well:

  • I am back to 20% Cash rate, as this stabilizes downward trends more (although it limits up side potential as well)
  • the portfolio is not balanced equally. Trend biased rebalancing is in action.

Trend biased rebalancing
Trend biased rebalancing looks really beautiful (with these moving average lines)
Unfortunately, beauty does not win a pot but it looks promising for now. I could not test it for too long yet. There were some bugs to be caught, changes, optimisations, the usual.
So the newest iteration is running for about a day now. (kind of unrepresentative if one moving average is 10 days :smiley: )

Last week I shared a picture with the trades on the current state. This will also not be something, I post too frequently. But here it is. Looks a lot less messy now. (this time on btc/usdt, as there was a nice trend this night)

Also I implemented a new view in my software to see whats going on and debug that thing. Not exactly the most beautiful piece of engineering but form follows function…

Upcoming goals and outlook
with the implementation of trend biased rebalancing, I consider the bot, oracle or whatever you want to call it feature complete (at least the portfolio management aspect of it).

In the process, the application became somewhat littered.
The next steps are to clean up the code, consolidate and document everything.
There is also some error handling to do in the api connection.
Next I have two possibilities to choose from:
a) i start working on offline wallet management to not be forced to have the whole balance on exchanges (would improve security of the project)
b) i start working on a test coin on the chia blockchain to start working on the oracle / offering part (would prepare the project for publishing)

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