Sigil - Q2 2021 letter to investors

Sigil - Q2 2021 letter to investors

Dear investors,

We are glad to approach you with our Q2 2021 letter. We skipped the last two letters for which we'd like to apologise to start out with - these letters are important to keep you in the loop of the developments in the markets and we will strive to deliver them regularly now again. We were forced to skip the last two updates due to these (mainly positive) external forces:

  • The crypto bull market came with a roar. With crypto markets moving at such a crazy pace we had to fully focus on the execution of our investment strategies.

  • The positive investor sentiment led to an extremely busy period in investor relations. New investors wanted in as soon as possible - which we happily accommodated in Q4 2020 and wholly accepted in Q1 2021. In Q2 2021 we accepted some new investors but also saw some investors not depositing after they had engaged us in the tricky “timing” conversation and had received an unconvincing reply from us along the lines of “it can grow much higher but the prices are already very high so be careful in the short-term”.

  •  Sigil upgraded to a fully regulated Experienced Investor Fund and the related legal, regulatory and communication topics occupied our small team to the fullest. You can check out our blog section for more updates on this topic.

  • We launched the new fund Sigil Stable with a view to offer a market neutral strategy that allows investors to pick up the yields from DeFi space while seeking to eliminate price volatility of crypto markets. Sigil Stable fund has launched successfully with great interest from investors and you can find more details about it on our (brand new) website.  

With all these topics successfully delivered, we can finally take a breath and catch up with you to the fullest. The goal of this letter is to recap the Sigil Core fund performance in 2020 and comment on the performance of Q1 2021 + Q2 2021. Please note that in the below text the word “Sigil” refers to our core and first fund “Sigil Core”.

Sigil performance in 2020

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Even though DeFi summer abruptly ended with a strong blow off in Q3 2020, we were able to generate a solid +286% net return against EUR for the overall 2020.

However, by the end of the year we saw a strong Bitcoin rally propelled by institutional buying pressure. BTC outperformed DeFi in Q4 2020, which also meant Sigil didn't perform very well over the BTC benchmark in this period, gaining only +3.72% vs BTC in 2020 overall. Interestingly, according to PwC global survey on crypto funds for 2020, global crypto funds on average underperformed BTC in 2020 due to this “BTC season” in Q4 2020.  It was positive to see Sigil overperforming the global benchmark of crypto funds in 2020 as measured by PwC. 

Sigil performance in Q1 2021

In the first quarter of 2021 we have enjoyed a bullish price action across the board with majors BTC, ETH leading and some alternative layer one assets such as Solana (SOL) and Terra (LUNA) massively overperforming. Sigil was up +247% vs EUR and has beaten the BTC benchmark by a healthy +67% vs BTC.

Sigil performance in Q2 2021

Second quarter of 2021 brought us a major market correction, together with some bearish news. The top was marked by Elon Musk turning into a public critic of Bitcoin's “environmental impact”. This was followed by China once again sharpening their rhetoric around crypto regulation. More significantly, China heavily regulated Bitcoin mining in some regions, which caused an unprecedented outflow of Bitcoin miners out of China. While short term bearish, we believe breaking the concentration of BTC miners in China is net positive for decentralization and future outlook of Bitcoin as an independent and politically neutral asset. Sigil ended up -17.78% vs EUR, while maintaining its edge against the BTC benchmark, over-performing it by +40.26% vs BTC.

Around the market tops in May 2021, we have seen a couple of you, new investors, join Sigil fund and experience a -50% loss over the ensuing 2 months. The volatility of crypto markets and the short-term price swings may be painful especially for the new investors depositing around the all-time highs. If history is taken as a guide on what to do after bad timing of the entry (on the weekly horizon), it is usually good to use it as an opportunity to learn about the technology, keep up the long-term conviction and keep observing the trends. One should invest a small portion of his investment capital in the crypto markets to start with and stay alert for a potential buy opportunity on the lower price levels. 

Looking back

In our Q3 letter 2020 we said we expect Bitcoin to overperform DeFi in the near future. This ended up being true for Q4 2020, when we saw renewed interest in the BTC Store of Value narrative as publicly listed companies Tesla and Microstrategy announced their treasury allocations into BTC. We have also seen endorsements from multiple financial leaders - Paul Tudor Jones, Stanley Druckenmiller, George Soros and Steve Cohen. It seems to us that Bitcoin is quickly closing the mainstream gap and becoming one of the major financial assets. With that being said, it also means Bitcoin will become more reliant on global macro. Its increased institutionalization may also pose a threat to some of the values on which Bitcoin is based. If it becomes a toy for Wall Street boys, it may invite excess regulation and large parts of supply may end up in hands of regulated custodians, such as Grayscale Trust. 

​​​​​​​Bitcoin is not the only crypto that attracts attention of traditional finance.

There is no reason to fret though. While Bitcoin is clearly winning in terms of institutional adoption and the Store of Value narrative, the crypto frontier is moving forward. DeFi and alternative blockchain platforms provide more flexibility thanks to smart contracts which can replace big parts of the current centralized financial infrastructure.

On cyclicality of crypto

Many crypto investors expected that 2017-2018 was the “last bubble” and after that we will see a “Supercycle” - slower adoption and growth, analogous to growth of internet companies after the dotcom bubble.

Some crypto investors were drawing analogies between crypto, the dotcom bubble and subsequent slow 20 year stock bull market. However, we can see that the crypto market is a very different beast than stocks.

However as many times before, crypto once again proved to be extremely reflexive and cyclical in nature. While the new (or alternative) financial system is being built from scratch, the crypto narratives keep shifting and attracting a lot of short term attention from retail investors.


Bitcoin itself has been through multiple of these bubbles, or waves of adoption as we like to call them, each one order of magnitude bigger than the last. Zooming out we can see the growth clearly and previous bubbles become small blips on the chart.

We are using Bitcoin as the proxy for the whole crypto market, since it is the oldest and biggest crypto asset and also Sigil benchmark. However, we can also see other assets creating their own bubbles, as we saw for example with ICOs in 2017 or DeFi tokens during DeFi Summer 2020. Even this year we have seen a lot of nonsensical crypto assets stealing the attention of retail investors. Once again, like Tolkien's dwarves, people were too greedy and dug too deep. No new technology can change human nature.

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However, we have also seen many crypto protocols earning significant revenues, sometimes distributing it among token holders. We have seen amazing progress in scalability and UX as alternative blockchains such as Solana and Terra gained traction. We have seen Decentralized exchanges such as Uniswap on Ethereum beating many of their centralized counterparts in volume.

So, whilst the price action is cyclical, technological progress is not. The development activity across major crypto projects keeps steadily growing, especially on Ethereum, Polkadot, Cosmos and Solana ecosystems, and also Bitcoin which is less programmable by design but still gets a growth in development activity over time, mainly to make it more scalable while keeping its robustness: 

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Circling back to the dotcom analogy - we think crypto adoption is inevitable, but it won't happen as smoothly as it did with the internet. Crypto is disrupting the financial system itself, it is more global and much less regulated than any stock market, with very different market structure.

What to expect next

We don't think that the “Supercycle” adoption thesis is disproven per se. We just expect this process to be much more volatile than anything we have seen in other markets. What we do not expect is another 3 year long crypto winter. We sense the increased pace of DeFi innovation, the rate of institutional adoption and the change of market structure of major crypto assets, that will probably cause this drawdown to be shorter. We are thus structuring our portfolio in a way that doesn't catch us out of position in case of a rapid recovery, while also letting us harvest the volatility of sideways price action via liquidity mining and yield farming. We are also ready for a further price decline scenario because we booked profits into our USD reserves in the past months. In case of further price declines we are ready to deploy these USD reserves into assets we will deem undervalued.

As we have told you in these letters and re-emphasized to many of you in private conversations, it is not our plan to predict the future or time the markets in the short-term, but to be in the best possible position to capitalize on inevitable growth of crypto, DeFi and blockchain adoption over the long-term, while minimizing systemic risks of our portfolio. As a food for thought to end with, consider this datapoint - our original investors joined on 1 October 2018 and were down -47% at the bottom of the bear market. It was a good moment to invest more at that stage (bankroll and responsible investing rules permitting) as our lead series is nowadays 11,27x (or +1,027%) up from inception.

Right now it is for sure risky to invest more into the crypto market as the markets corrected strongly and the strong bull trend was halted. It is rarely a good strategy to “catch the falling knife” when the trends are changing in an attempt to catch the exact bottom before the rebound. However, we are quite comfortable accepting new investments now because the risk-reward has significantly improved since May and with a long term horizon the price levels with BTC around $30k and ETH around $2,000 levels are relatively attractive now.

On behalf of Sigil Team we would like to thank our investors for trusting Sigil with their investments. We are committed to keep providing the best exposure to high quality crypto opportunities and maximising our return on investment.

With best wishes,


​​​​​​​​​​​​​​Pavel Stehno, CEO of Sigil PCC Limited

Fiskantes, CIO of Sigil PCC Limited


This content piece is performed by Sigil PCC Limited for information and entertainment purposes only and is not to be taken as an investment or financial advice.


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