BlockBay Capital portfolio update December 2022

BlockBay Capital portfolio update December 2022

The BlockWealth portfolios achieved a negative return of around the -10% in December. The return over 2022 for the portfolios are negative and between the -60% and -70%.

The year 2022 started off badly for cryptocurrencies as a result of negative sentiment in the financial markets, which was caused by rising interest rates and high inflation. In the macroeconomic field, the Russia-Ukraine war started in the first quarter. The turmoil in the crypto markets increased even further due to the implosion of the Luna ecosystem, which vaped out $50 billion in direct value and indirectly evaporated many hundreds of billions in market value. After this, the first major crypto companies started to crack. Cryptobank Celsius (with $16 billion in client assets) was the first to fall. Large investors in cryptocurrencies suffered from realized losses and filed for bankruptcy. After a brief summer recovery, crypto markets once again suffered from renewed inflation and interest rate fears. Finally, the collapse of the large trading platform FTX happened in November, completing the disaster year 2022.

2023 will be an extremely important year for cryptocurrency. There have now been three bad years in Bitcoin’s history (2014, 2018 and 2022). In 2014 and 2018, these bad years were followed by three good years in which the price of Bitcoin again showed all-time highs. This four-year cycle cannot be seen as inseparable from Bitcoin’s halving mechanism in which the reward in new Bitcoin to miners is halved every four years. This mechanism ensures that there will eventually be a maximum supply of 21 million Bitcoin of which currently is 19.25 million Bitcoin in circulation. The amount of new Bitcoin that is added to the existing stock is relatively scarce. The next halving is scheduled for March 2024, which may be a driver for positive returns.

If crypto has proven anything in history, it is that it can survive adverse times. The industry is therefore entering 2023 with the strength and survival drive that has been built up in 2022. There are a number of developments that are expected to develop and that will benefit crypto, such as further growth of DeFi (at the expense of central crypto providers), increasing use of the blockchain through the tokenization of assets, better availability of tools for developers and further adoption and interest of large internet companies (such as Google, Meta, Amazon, Microsoft, etc.) in crypto.

A number of things are important to make 2023 a good year. Macroeconomic conditions should improve through slowing and lowering short-term interest rates. This immediately allows for the availability of capital available which may be invested in cryptocurrencies. The fact remains that speculative capital has dried up in recent months as a result of central bank interest rate hikes. Historically, speculative capital has easily found its way into crypto markets. The speculative capital will initially not come from new investors in the cryptocurrency space. New investors are currently skeptical about the potential of crypto and the investment potential of crypto. An imminent increase should therefore come from existing investors who find the current prices and patterns interesting and decide again to allocate capital to crypto markets. After all, crypto offers unlimited upside potential to investors who are not afraid of volatility.