The portfolios achieved a negative return of -7% in June.
The positive return of the past period is due to the good returns of the top three positions in the portfolio (Bitcoin, Ethereum and Solana). These positions have achieved a return of approximately +50% this year. With a few exceptions, the other smaller crypto coins show a negative return. It is appropriate to consider reasons why most cryptocurrencies have performed poorly.
Selling pressure from Venture Capital investors in combination with token unlocks
Venture Capital investors are investors who invest money in young, promising projects. Every month, a number of projects come up with their own token with which these investors can make their investments liquid. In the past period, Venture Capital investors have sold tokens to cash in on profits from the past period. Larger investors also often buy tokens that become available little by little in the years after the investment (so-called token unlocks). In this way, a crypto project ensures that the token supply is controlled. The supply of tokens available for sale is gradually increasing, which has ultimately created the necessary price pressure in the recent period.
Little new money flows into the crypto market (which is becoming increasingly competitive)
As in other financial markets, supply and demand plays an important role in crypto. In crypto markets, the supply of stablecoins is an indicator of new money, the market capitalization of Tether and USD Coin has been stagnant since April, which is an indicator of limited demand. Thousands of new crypto coins are also added every day. Most cryptocurrencies are launched as a joke, but there are a number of interesting projects every month with a relatively high market capitalization, so that the competition for investors’ money only increases.
Outlook for the upcoming period
The past six months have largely been dominated by the launch of the Bitcoin ETF. It is expected that the Ethereum ETF will also become available in the United States in the next six months, and applications have also recently been made for a Solana ETF. In the longer term, the ETFs will provide simplified access for investors and therefore likely an inflow of new capital.
Bitcoin and cryptocurrencies remain volatile assets, so short-term declines can still occur. There is currently some unrest due to Bitcoin sales by the German government. The German government had access to 50,000 Bitcoin (approx. $3 billion), after previously confiscating them from an illegal streaming website. Also Mt. Gox, the first cryptocurrency exchange that lost around 950,000 Bitcoin more than 10 years ago, will pay out around 140,000 Bitcoin (approx. $8.4 billion) to victims in the coming months. Such developments cause volatility, and it is striking that the market often recovers.