BlockBay Capital portfolio update July 2023

BlockBay Capital portfolio update July 2023

The BlockWealth portfolios achieved a negative return of around -1% in July.

Positive outlier over the past month was XRP. The US regulator SEC had accused XRP’s parent company (Ripple) of an unauthorized sale of securities by offering the cryptocurrency XRP. Ripple won a partial victory in court because only the sale to institutional parties was a violation of financial law, as opposed to selling the cryptocurrency through regular exchanges. XRP rose +75% on this positive news to end the month up +47%.

Other important news in the past month was the official launch of Worldcoin. Worldcoin is an ambitious project co-founded by Sam Altman (CEO of Open AI, the company behind the popular AI tool ChatGPT). Worldcoin aims to create a global digital currency that will be provided to users who verify their identity. This is done by issuing biometric data to one of the Orbs. An orb is a kind of ball where it is possible to have the iris of your eye scanned. Users must physically visit one of the locations to have the scan performed after which the cryptocurrency is received. The launch of Worldcoin has led to questions regarding privacy concerns, particularly in Europe.

Furthermore, cryptocurrency has not been able to benefit from the improved sentiment in financial markets over the past month. The US S&P 500 was up +3% in July, the Nasdaq did slightly better at +4%. Falling inflation in combination with the expected imminent end of interest rate hikes is boosting confidence among traditional investors. In addition, the relatively strong economy (low unemployment and good company results) is ensuring a further increase in investor confidence. Looking over the past 90 days, with a return of 0% Bitcoin doing a lot less than global stock markets (approximately +10%). Despite Bitcoin’s good performance in the first quarter of 2023, this does show that the willingness to take risk currently lies with the stock market. This picture is reinforced by the fact that the market capitalization of stablecoins has been declining over the past year and a half, a sign that no significant new money has entered the crypto markets. The positive news of BlackRock’s Bitcoin ETF filing has not caused Bitcoin to structurally break the $30,000 mark. The price of Bitcoin is currently at about 45% of the value it had at its peak ($68,800), Ethereum is even doing slightly less than Bitcoin ($4,890) at 40% of the value. This is in contrast to US stock markets, which almost all have new all-time highs in sight. Bitcoin, on the other hand, shows maturity as the correlation has been neutral and the volatility has been low over the last period, but the price is lagging expectations.

Looking ahead, the SEC’s decision regarding the BlackRock Bitcoin ETF is something to look forward to. BlackRock has a very strong track record of 576 ETF filings with the SEC, of which only one has been rejected. The SEC has the option to delay the decision a number of times, at the earliest there will be a decision by the end of August and at the latest early 2024. The Bitcoin ETF will ensure that access to Bitcoin for a large number of investors is simplified a lot, this is an important point, especially given the pressure from global regulators on crypto exchanges.