BitCapita Month Ending March 2017 Report

BITCAPITA.COM

Summary
It was a successful month for our strategies grossing 23.2% in only three trading weeks and with the
relative volatility of Brexit Article 50 being triggered, the wake of the Fed rate rise and the pulling of the
American Health Care Act.

Overview

Brexit Article 50
The British parliament agreed to allow the triggering of Article 50, with Theresa May the UK Prime
Minister triggering the event on 29 March 2017. What happens now, the EU want a 50bn settlement
figure, the UK disagree however one simple factor comes from this event, stopping other countries from
following. Greece is now slowly coming back to the forefront given their completely unsustainable debt
loads, which have been placed on them by themselves, by the EU allowing Greece to enter the Eurozone
under manipulated figures, and the simple fact that the German banks own so much of the Greek debt
that any default would trigger a country wide banking collapse, likely spilling globally.

The politicians of the EU therefore need to send a clear message to the other EU members leaving is
going to be a costly and painful exercise, otherwise it may trigger many more defections. We have seen
research that shows the world economy never left the 2008 recession, it is being propped up by the
continual generation of new money to flood the markets, the UK balance sheet has increased from
35bn to 400bn in just 10years, the question is how long can this continue as most households are

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seeing the effect of higher living costs with static incomes. The hedge fund strategists we speak with
identified that the immigration being allowed in Europe is to keep a form of growth by pushing from the
bottom up, the main issue with this rather than coming from the top down is that it eventual ly collapses
under its own weight.

Where does this leave the UK, in limbo, being one of the primary financial centers in the world London
had access to the EU free movement rules, if this is lost cities such as Zurich, Paris and Frankfurt will try
and take back banking operations. In reality this will be to strengthen their own local economies rather
than in the best interests of the EU and London will fight it all the way. Other research indicates that
there are just as many countries willing to create peer to peer agreements with the UK instead of the
more cumbersome negotiations with the EU. Ultimately it really comes down to does the UK have
something the rest of the world needs, supply and demand, given its geographic location, English
language and vibrant economy, in the short term yes, however the uncertainty may dampen capital
investment for the next two years while the details are being fought over.

Currency Markets
Our primary trading currencies for March 2017 were GBPUSD and EURUSD, providing balanced volatility
given the various geopolitical events unfolding around the world. Since the flash crash of the GBPUSD
in September 2017 down to the 1.18 level it has stabilized in a range between 1.21 an 1.28. This has
provided a good level of intermediate movement however we are advised that may be about to change,
there are technical levels between 1.10 and 1.14 that could be used as demarcation zones. A research
report was issued a few years back quoting the GBPUSD down to parity, and recently El -Erian has also
stated the same. Given we use HFT strategies we are not concerned with the overall direction however
these factors always need to be considered given the move experience only a few months back.

For the EURUSD this has been in a determined decline the past nine month from 1.16 down to 1.04
levels and is no experiencing a pullback. Many observers believe the EURUSD will drop to parity given
the unfolding turmoil in Europe, our analysts believe that is quite likely however never discount the
ability of politicians to do something very unorthodox to keep everything moving. One of the deciding
factors will be Greece whose debt is now starting to become a visible problem, should this spill over to
the rest of Europe it will cause substantially increased volatility which we are structured to absorb.

Futures Markets
The futures markets has been quite indifferent these past months, Gold is bouncing f rom a bear run last
year and currently is trading is a very narrow range. We have found the opportunities in Gold are
unpredictable, with very random $billion dumps of Gold holdings in matters of minutes, causing the
markets to go in to disarray. We did however come across a very nice infographic from Visual Capitalist
http://money.visualcapitalist.com/11-visualizations-gold-cubes/ showing the minute amount of Gold
that has been produced. There are analysts who feel people are liquidating Gold to pay for other costs
causing sudden moves out of character with institutions hence our limited exposure in March.

The Oil market for the past few months has been in consolidation, however this past month the oil price
dropped $8 in a fast downmove, this type of thing is becoming prevalent in the markets with static price
action and then sudden price moves. Based on current events there is limited upside potential so are
concentrating on the downside moves, however it appears that speculators have been controlling the
markets as institutional rebalancing on which are strategies are based, has been limited hence our lack

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of exposure in March. The main issue going forward is research has identified severe downside risks of a
sudden market move as seen last month over the course of just three days, we are looking to capitalize
on the intermediate whipsaws should this materialize.

Conclusion
Going forward we aim to increase our return for April however with the Easter break volatility usually
dries up so will likely have to be back loaded in to the month. We also have Non Farm Payrolls in the first
week of April with an expected 180k increase, given the weakness in the equity markets we may see a
sharp move with a semi-material beat or miss. We are also looking to increase our futures exposure in
April to capitalize on research that Oil from a long term point of view the $50s are viewed as an upper
price limit baring any unusual events, meaning the downside risk should open up new trading options.
Given the ongoing volatility with Brexit, the new US Presidential issues, and the European crisis
currencies are proving to be a core success area for our returns.

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