In this article about what's going on in the markets and our Probinex portfolio, we will start off a little unconventional and look at one of the more well-known altcoins.

In early September, Cardano, the blockchain launched by Ethereum co-founder Charles Hoskinson, underwent the long-awaited "Chang" update.

This significantly changes the ecosystem management process. Specifically, the upgrade allows ADA token holders to vote on proposals to change the network and participate in the election of representatives. In essence, this has made the Cardano blockchain and especially its governance more decentralized and democratic. But if you were expecting this to have any significant impact on the token price, it hasn't. From my point of view, Cardano looks a bit like a so-called "legacy" coin, think of it like yesterday's news. It's kind of uninteresting to many new investors, it's not as new and "shiny" as the new tokens. On the other hand, Cardano has a very large community and fan base, and such cryptocurrencies are not to be underestimated.

An interesting metric I've mentioned a few times is the amount of stablecoins in circulation. Stablecoins are cryptocurrencies pegged to a national currency, typically the dollar, and they maintain a stable value of just one dollar.
If the volume of these cryptocurrencies in circulation is large and growing, it means that there is a very large supply of liquidity that can be used to buy other cryptocurrencies. Conversely, if the supply of stablecoins is decreasing, it may mean that crypto traders are leaving crypto for fiat. The supply of stablecoins stands at $163 billion as of today, following a $4.7 billion increase in August, a 3% monthly increase. This is according to data from Artemis. This movement represents various trends in the market, which may just be that more and more institutions are entering the market, but it can also be seen as a search for some stability and liquidity and an overall growth in confidence in the safety of these instruments.
Notably, the growth in stablecoin supply during August came in the same month that Bitcoin (BTC) fell in price by almost 9%.

The stablecoin market is dominated by Tether USD (USDT), which has a market capitalization of USD 123 billion, a significant lead over Circle's USDC offering of USD 35 billion, the second largest issuer of stablecoins.

So if you are asking why, for example, Earnio is not using the most widely used stablecoin USDT, it is because so far only USDC is compliant with European MICa regulations.

This topic of stablecoin compliance with the MICa regulation was also addressed at our conference. You can find more information related to the topics we have discussed on our website.

The most anticipated event during September, however, was the US Fed cutting interest rates. (The Fed is defacto the US central bank). I've already written about how the outcome of this cut may determine the direction of the market for some time in my article about Earnio.

So now we have finally learned how it turned out. The Fed announced on Wednesday that it is cutting the benchmark interest rate by half a percentage point (50 basis points). This is the first interest rate cut in more than four years and signals that the Fed is ready to ease its fight against inflation.

The move marked the first time the Federal Reserve has cut interest rates by 50 basis points in a single meeting since 2008. Many analysts had expected a quarter percentage point cut, but cooling inflation and a soft labor market allowed Federal Reserve Chairman Jerome Powell to be more aggressive.

The long-awaited move sparked a rally across markets and cryptocurrency prices also rose, with bitcoin moving to about $63,500 and ether rising to about $2,350.

Total3, an index that tracks the market capitalization of the top 125 cryptocurrencies excluding bitcoin and ether (ETH), has traded 5.68% higher since the Fed's announcement that it would cut interest rates, as shown in the accompanying chart. In contrast, bitcoin's market capitalization has only risen 4.4%. This is mainly because altcoins are typically a sort of beta to bitcoin and can capture sudden increases often more strongly than bitcoin itself. That's also why it's in our portfolio.

At the end of the month, the rise in cryptocurrency prices continued, with the decline only starting to happen on the first day of October when cryptocurrencies actually gave back the gains they had made to the market.

One interesting fact from October is a study by Blackrock, the world's largest asset manager, on Bitcoin and its position in an investor's portfolio, see my article for more on this topic.

I also mention in that article that in relation to the US election, price movements may still be a bit problematic. If you want to learn more about the US voters' relationship with cryptocurrencies I definitely recommend this study. However, we can already say that we can expect relatively high volatility ahead of the election due to trader nervousness. You can actually see this on the chart already. What the actual outcome of the election may bring is hard to predict. But in short, I mostly think that in the long run, the election will bring some resolution and finally provide clarity on what is going on in the market, and even that may ultimately be encouraging for the markets.

Well, how did our portfolio cope with this month?

The price drop in early September presented a solid trading opportunity.

In our portfolio, we managed to trade this decline on futures quite nicely.

This instrument is more suitable for faster trades, using leverage you can open a larger position, but you increase the risk. The price moved back up after the fall and we were already 2% in the black on futures at the middle of the month in relation to the total capital.

We entered spot positions on ether around September 16th, when it already looked like a 50 basis point rate cut was expected, according to analysts and prediction markets. But we were also entering them based on our technical analysis. This is based on the chart and price movements, it doesn't so much look at reasons like "why did/will something happen?" but rather evaluates in a "if something happens on the chart, then this situation usually follows" way. 

We entered a trade on ether at the $2,276 price level and after a surge in the third week of October, we closed this trade around the $2,600 price level when the market looked like it didn't have much more upside momentum. That turned out to be the right decision, with the ETH price briefly exceeding $2,700, but then heading sharply lower towards the end of the month. We traded bitcoin based on a similar setup ("setup" refers to specific market conditions or signals that a trader identifies as an opportunity to enter a trade).

As I'm sure you guessed from the paragraph about the Total3 index, our altcoin portfolio also saw an increase. We therefore sold a small portion of our positions, but not all of them in profit. As we can see the gradual cooling of the market, this decision proved to be the right one. In addition, this freed up capital in the portfolio, liquidity that will allow us to step into positions in the event of another downturn.

When the market can be expected to be volatile, as it is now ahead of the election, it is good to be prepared for all scenarios, and a stock of stablecoins not only stabilizes the portfolio but also frees traders' hands to look for new market opportunities. Our current portfolio allocation is thus 15% altcoins (cryptocurrencies other than bitcoin and ether) and 85% stablecoins, a large portion of which we hold on our hardware wallets. 

In September we have been fairly successful in this regard, distributing 812 432 PBX among our clients.