BlockBay Capital portfolio update January 2024

BlockBay Capital portfolio update January 2024

The portfolios achieved a return of around 0% in January.

January was the first month in which the US Bitcoin ETFs were available after approval by the SEC. The ETF launch ultimately turned out to be a neutral event for the price of Bitcoin (+3% over January). However, in recent months the price of Bitcoin has already risen sharply in the run-up to the (long-awaited) launch of the Bitcoin ETFs.

Grayscale’s Bitcoin fund was ultimately the big loser. In the past, investors were ‘stuck’ in the fund for several years because it traded at a discount to the underlying assets. The ETF launch marked the moment where no less than $5.6 billion was withdrawn from the Grayscale fund in 9 trading days. The outflow is partly because (the trustee of the bankrupt) FTX has sold $1 billion worth of Grayscsale assets. Of the new 9 new Bitcoin ETFs, Blackrock and Fidelity are the largest after about two weeks of trading with $2.8 billion and $2.5 billion under management respectively. After the first 9 trading days, approximately $1.5 billion in new capital had flowed into the Bitcoin ETFs. Grayscale’s outflow has now slowed from around $500 million daily to below $100 million. About 30% of the outflow will be reinvested in the other (cheaper) Bitcoin ETFs, which means that approximately $1.5 to $2 billion in new capital is expected to flow into the Bitcoin ETF throughout February.

It can now be concluded that the ETF launch (after a long start-up period) has been a success. Bitcoin’s volatility has declined as major price drops have remained relatively limited. The key point is that Bitcoin’s legitimacy as digital gold has increased in recent times. The relative scarcity of Bitcoin means that the additional demand for Bitcoin through the ETFs gradually led to further price increases at the beginning of February. The coming months will be dominated by the next upgrade of Ethereum (March 2023), Bitcoin halving (April 2023) and the final deadline for possible approval for the Ethereum ETF (May 2023). 2024 has started well so far, there are high expectations partly due to Bitcoin’s historical four-year cycles.