BlockBay Capital portfolio update December 2023

BlockBay Capital portfolio update December 2023

The portfolios achieved a positive return of between the +12% and +16% in December. The return for the whole of 2023 is between the +80% and +110%.

Review 2023
Bitcoin’s return for 2023 was +147%, thereby almost erasing the bad year of 2022 (with a return of -62%). Ethereum was somewhat disappointing compared to Bitcoin in 2023 with an annual return of +85%. In comparison, Solana did extremely well with a return of +887%. For the crypto market, the past year was all about recovery from the bad year of 2022. Riskier investments (such as cryptocurrencies and tech companies) were hit hard last year by increased interest rates and higher inflation. This year was a good year for riskier investments.

At the beginning of 2023, there was an American banking crisis, during which several banks had to be rescued. As a result, confidence in the traditional financial system decreased, Bitcoin benefited from this. In the summer months it was announced that BlackRock had applied for a Bitcoin ETF, as an established name this was a further step in the legitimacy of Bitcoin for (institutional) investors. After the summer months, the total crypto market has further increased from around $1,000 billion to $1,700 billion on improved prospects.

Outlook 2024
2024 will be dominated by the following two events:
– The approval of the US Bitcoin ETF, this could happen in early 2024. A possible rejection by the American regulator means that any approval will be delayed by a few months
– The Bitcoin halving in April

In addition, the macroeconomy continues to influence cryptocurrencies and investors’ allocation to cryptocurrencies. Interest rates, inflation and government debt will all be watched with caution and cause volatility in the markets.

In terms of technology, there are also many themes within blockchain that will develop. The most important of these are real world assets (tangible assets/assets that are tokenized on the blockchain so that trading is possible), gaming and artificial intelligence (AI). The crypto infrastructure will also further develop towards modular solutions (where some functions can be performed elsewhere).

The increasing involvement of large (American) investors means that cryptocurrencies are increasingly being seen as an investment category, specifically Bitcoin for the time being. In that respect, comments from Jamie Dimon (CEO of JPMorgan) are interesting. He recently said the following at a hearing in the American Congress about Bitcoin: ‘If I was the government, I’d close it down’. Jamie Dimon has been up in arms about Bitcoin since 2014, regularly citing the use of cryptocurrencies by criminals and money launderers. The accepted situation is now that every financial system (including the traditional monetary system) is and will be used by criminals. However, the interesting thing about this comment is the reason why Bitcoin is interesting to many, the government cannot stop Bitcoin and large investors cannot afford not to start offering Bitcoin. JPMorgan will also sooner or later offer Bitcoin products to its clients.

The prospects for the coming year are excellent, but it is important to also identify the risks. The price of Bitcoin in particular has already risen sharply in anticipation of, for example, the expectation that a Bitcoin ETF will be launched. Any postponement or adjustment will cause a price drop. Further setbacks in the field of legislation, fraud and/or lawsuits and adoption can also cause price drops, although it remains likely that the unique properties of Bitcoin in particular will ensure further growth in the longer term.