BlockBay Capital portfolio update June 2023

BlockBay Capital portfolio update June 2023

The BlockWealth portfolios achieved a positive return of +1% in June.

The positive return is largely due to a good month for Bitcoin (+10%). The cryptocurrency benefited from renewed requests for an ETF with the US financial regulator (SEC). BlackRock was the first to file a new application, followed by other traditional larger investors such as Invesco and WisdomTree. Following this, three major US financial institutions (Citadel, Fidelity and Schwab) announced the launch of a new crypto exchange aimed at institutional investors. Traditional institutional investors seem to be getting renewed interest in Bitcoin specifically as a result. Ultimately rejected, but resubmitted with adjustments, which indicates that the supervisor is thinking along with you this time.

Smaller cryptos had a rough month. After the announcement of various lawsuits from the US regulator SEC against Binance and Coinbase, most smaller cryptocurrencies fell between 20% and 30%. The new requests for a Bitcoin ETF also caused capital to flow from smaller cryptocurrencies to Bitcoin, reinforcing Bitcoin’s positive return and dominance. Bitcoin’s dominance (expressed in Bitcoin’s market capitalization over all other cryptocurrencies) is on an upward trend. At the end of 2022 it was still 40%, in May 46% and at the end of June even 50%.

Bitcoin eventually achieved a positive return of +81% in the first half of 2023, Ethereum did slightly less with a return of +59%. The Nasdaq 100 (+38%) also had a good first half of the year, as did the American stock market (S&P 500, +16%). Both indices are heading towards the all-time high that was achieved at the end of 2021. The main difference is that the Fed’s policy rate was 0% at the time and is currently 5%. Central banks have so far been reluctant with regard to issuing signals that indicate future interest rate cuts, something that the market does expect to happen. The growing government debts and high interest rates mean that central banks will have a hard time, with the risk of errors and thus economic hardship being high. Unlike other investments (stocks, bonds and real estate), there is no direct link between interest rates and cryptocurrencies. Bitcoin (just like gold and commodities) can largely trade freely and independent, so that the impact of a failing central bank policy will theoretically be limited for Bitcoin. Various scandals (e.g. the collapse of FTX and Celsius) have caused cryptocurrencies to fall sharply in the same period that interest rates have risen sharply. Partly because of this, the correlation with equities was high. Recently, it can be seen that the correlation with not only the Nasdaq 100, but also with the S&P 500 has become neutral for the first time since 2021. From a portfolio perspective, just like what happened in the first half of 2023, cryptocurrencies will have to start adding value in the portfolio again in the coming period.

Central bank policies may increase investor interest in cryptocurrencies. In addition, developments from the large traditional financial parties such as BlackRock are interesting to follow. Especially given the track record and knowledge they have in the field of laws and regulations, something that remains a challenge with cryptocurrencies. With assets under management of $9,000 billion, BlackRock is the largest investor in the world, including stocks and bonds, and the fact that they are the first to submit a new application for a Bitcoin ETF creates a lot of optimism.