Transparency is core to what we do at Atomic.Finance.
To that end, beginning this past June, we began to share publicly our monthly updates that we send to our investors and advisors. As always, if any of you have a new thought for us (it could be ideas, feedback), please give us a shout @AtomicFinance on Twitter! Thank you being on this journey with us to build #SoundFinance together. 💪
- Tony (CEO @ Atomic)
Email to Atomic Finance investors and advisors sent March 7, 2022
Recap from November / December:
In the last update, I discussed our jam-packed November and December where we:
- launched the closed beta of our launching our closed beta early November, and getting early feedback from customers on the "activation" flow in terms of getting started with the product,
- saw some concrete early evidence (*both quantitative and qualitative*) that we're tackling a problem space people care about and our product is on the path to solving that problem.
- saw an impressive number of users roll over from their first cycle to the next, and a significant number of users either increasing their BTC investment sizes from their first cycle to the next (TVL went from 5 BTC to 9 BTC amongst 25 users)
- observed a subset of our users encountering their first downside protection due to the capitulation event in early December.
From all this, our main takeaway was that there does exist concrete early evidence that we're tackling a problem space people care about and our product is on the path to solving that problem.
This month’s TLDR
Updates on recurring strategy performance:
In Jan / Feb, there have been just 2 two-week cycles for the Conservative Short Put recurring strategy found:
- Dec 31st - Jan 14th: +0.7% gain
- Jan 21st - Feb 4th: -4.5% loss. Hit downside protection after BTC dipped to the 32K range on Jan 22nd.
Note that due to the tight entry rules of the recurring strategy - no cycles have been found since Feb 4th.
- Saw a continued increase in BTC invested amongst 25 users from 9 to 15 BTC in most recent cycle, with 2 users maxing out their individual allocations at 2 BTC.
- Conducted Superhuman-style PMF survey - to encouraging early results. More details below.
- More customer conversations which helped us identify key areas of improvement for the strategy moving forward.
- Unable to diversify risk: The most significant issue stemming from the fact that our current iteration does not allow users much ability to diversify their risk (since we’re only offering one recurring strategy).
- High levels of downtime: Additionally, we also heard a lot of users mention that the high degree of downtime in the strategy as being a negative as it makes them feel that their Bitcoin was just sitting there not doing anything.
Overall takeaway: Our team’s overall takeaway from the customer interviews is that their concerns and criticisms around the experience centre primarily on the strategy and its performance itself as opposed to the product concept. It became clear that strategy development from our customer feedback is our largest bottleneck before being able to scale and grow.
Upcoming product focus - need to develop additional + robust strategies that users can enter into and diversify risk across
- The need to rapidly develop additional backtested recurring strategies moving forward so that we can offer a menu of strategies for different risk tolerances / market sentiments / drawdown potential moving forward. This approach will also help users to diversify risk across different strategies.
- I strongly believe that we need to be offering more than just the 1 strategy we have currently to feel comfortable scaling up our user-base.
- This kind of diversification of risk across multiple uncorrelated strategies is considered best practice in systems trading as it improves the risk:reward of the entire portfolio
- Once you employ diversification in systems trading, it’s not as important to make sure you’ve invested in one single holy grail strategy, as long as you’ve invested in a basket of good ones - since the risk:reward profile of the basket should be significantly better than any one single strategy you can produce.
- For each strategy, we’ll simply describe what market characteristics it performs well, and where it performs poorly in. User then can allocate accordingly - this mean the onus is still on the user to decide where and how to allocate.
R+D on breakthrough DLC improvements that will greatly improve UI/UX: This is a breakthrough idea that can potentially allow us to:
- greatly reduce the frequency at which users have to return to the app to roll over to the next cycle
- greatly improve the flexibility of the types of backtested strategies we can explore (rather than just one cycle/position every 2 weeks, strategy can now consist of much more frequent and shorter cycles)
- smooth out the P/L over time so that users won’t be faced with a rollover decision after a significant loss
- Overall, it allows the user experience to feel more like a ETH smart contract, while still keeping everything natively on the BTC chain.
- Other details below.
🚨 IMPORTANT: Quantitative analyst/developer hire. This upcoming week, we’ll be beginning our hiring process for an quantitative analyst/developer to assist with the expansion of strategy offerings that users can choose from
- If you have any promising engineering candidates (preferably around Toronto region) - then we’d love to chat with em!
Note: Numbers DO NOT include app usage activity from team / advisors
- Total value locked at peak: 15.5 BTC across 24 users (Up from 5.7 BTC across 26 users last update at Dec)
- Average value locked per user: 0.646 BTC (up from 0.23 BTC last update at Dec)
- Cumulative volumes: 41.1 BTC contracts and over 5 two-week cycles
- Cumulative premiums earned by users: 0.128 BTC (US$6465)
- (Key Activation KPI): No. of users onboarded to recurring strategies: 43 onboarded, with 31 of them having entered their first recurring strategy cycle: 72%
- Currently matching expectations: our pass/fail metric was 75% users that we onboard to recurring actually kicking off the recurring strategy
- (Key Retention KPI): No. of users rolled over from first cycle to second cycle: 29/31 (93%)
- Currently above expectations: our pass/fail metric was 80% users returning for 2nd cycle after the 1st
- (Key Retention KPI): No. of users increased investment amounts from first cycle to second cycle: More than 50%
- Currently above expectations: our pass/fail metric was 50% of returning users ramping up within first three cycles
- (Key Retention KPI): No. of users continued with recurring strategy following downside protection trigger: 6/10 users
- Our expectation is that 50% users come back to engage in the subsequent cycle (cycle right after)
- This will be tested this coming Friday
Waitlist Signups - Now at 8.1K (+600 growth)
- Growth of the waitlist continues happen at a healthy clip, but slower than when we rolled out the landing page initially. Likely a result of reduced word of mouth and shoutouts than usual (many of our existing users waiting for recurring to launch at the moment). Also, our social media activity was less frequent this past month as a result of heads down focus on product currently.
🎨 Product / Design - Additional Updates
These updates expand upon the details in the TLDR above.
Customer Learnings - Survey + Customer Feedback Calls
We sent our users a Superhuman-inspired to try and get a quantitative baseline of how close we are to PMF with our current users. Out of the 24 users we sent this to, 13 users responded. I’ve bunched in the feedback from our customer feedback calls as we heard very similar feedback across the two mediums
A fairly high number of “very disappointed” and “somewhat disappointed” responses. Typically, you want to target at least 40% of users responding with “very disappointed”
When asked to describe the value proposition / job to be done they’re doing with the app, common themes emerged. Users who like our product appreciate us for the fact that we offer yield on BTC, and they’re able to access yield in a manner that is transparent, and non-custodial.
When asked to describe their least favourite aspects of the product, some common themes emerged there too. Two common themes:
Inability to diversify risk: The most common was the fact that many users disliked that we removed manual strategies (from 5 out of the 13 respondents). This meant that the only way to invest via the app was the one bullish recurring strategy we currently have on offer, without any other way to diversify their risk.
Downside protection being hit: Unsurprisingly, a number of users also commented on the fact that two downside protection has already been hit within a short time-span - leading to BTC-denominated losses so far.
High levels of downtime: Later on, during feedback calls - we also heard a lot of users mention that the high degree of downtime in the strategy as being a negative as it makes them feel that their
3 out of 13 users mentioned they won’t be rolling over. So we asked them what was stopping them from rolling over to the next cycle. Many cited:
- Uncertainty about the market: These users cited market uncertainty (especially with what’s happening on a macro scale) - leading them to approach rollovers moving forward with more caution. Perhaps conduct some TA themselves before rolling over.
- Consideration for the future - changes to in-app education: We need to place greater emphasis on the importance of “sticking to the system” as part of our in-app education moving forward. When users begin deviating from the system and begin picking and choosing which signals to follow, the returns they receive will no longer be representative of backtested results and they are in essence gambling. A quote from Kevin Davey, a well-known systems trader: “When you don’t take the entries and exits exactly as your system says, you should not rely on historical results at all. What you’ve created is a new strategy, with no real historical basis.”
Strategy Development Priorities / Guiding Principles
In the TLDR above, I mentioned the need to build up a menu of different backtested strategies moving forward. As mentioned earlier, the way we envision it, we want to be able to offer a menu of strategies for different risk tolerances / market sentiments / drawdown potential moving forward.
This approach will also help users to diversify risk across different strategies.There are a couple guiding principles in our minds as we explore and test additional and improved strategies moving forward:
- Is there a way to incorporate bi-directionality / maintain market neutrality into future strategies?
Could the strategy monitor market conditions to decide on the optimal position between a short call vs a short put?
- Can we reduce the risk relative to the reward?
Currently the losses incurred following a stop loss seems large relative to the gain of a green cycle. Can we shift that balance a bit and reduce the losses that could be incurred even if downside protection is triggered?
- Is there a way to reduce downtime?
One of the most frequently received feedback was that there’s quite a bit of downtime in the strategy! We believe that loosening the requirements on strategy rollover day (not just Friday mornings anymore) may be able to significantly improve this limitation.
⚙️ Engineering - Additional Updates
These updates expand upon the details in the TLDR above.
An exciting breakthrough DLC improvement that will greatly improve UI/UX
Last week, we came to an idea that can improve DLC’s where users no longer have to roll over after every cycle (imagine if you press the button once, and it’ll roll you over / pre-authorize you for the next 4 cycles for example).
Potentially huge benefits:
- Auto roll over - users don’t have to come back until a month or two months later
- Less constraints for the types of strategies we develop - imagine strategy is actually entering you into 20-30 positions in a two week span, not just one cycle
- User’s funds can pretty much always be in a DLC, making wallet security less of an issue
- Potentially be able to reduce minimum investment size below 0.1 BTC since number of on-chain tx’s is greatly reduced
- Greatly simplified onboarding flow, need not wait for a notification on Friday to come back and authorize first cycle.
🔮 So what next?
Our primary focus in the next month:
Product and Design:
- Self-serve onboarding flow and in-app education as we begin the scaling process and detach ourselves from needing to be on every onboarding call (Streamline user's initial activation path as much as possible)
- Small UI/UX enhancements following qualitative feedback from customers (eg. enabling visibility and transparency into
- FAQ: We've collected tons of FAQ's that users have been asking us over the past 4 weeks! Since we're big on transparency, we've set aside some time over the next few weeks to write some of them up.
- Improving testing and reliability: Increasing test coverage on all projects and reducing technical debt in the app and several of our services
- Continued development and testing of market-making bot
- Development of POC for breakthrough DLC improvement
- Start fleshing out a plan for growth and expanding the beta user base.
- Hope to finalize quantitative analyst/developer hire by April so we can continue to improve on the existing strategy and conduct research on additional strategies for different market conditions (eg. a hedging strategy for a bear market - if that is to come)