The portfolios achieved a positive return around +17% in March.
In the run-up to the halving, the price of Bitcoin increased further in March from $61,000 to $71,000, meaning that the price of Bitcoin has now risen for seven consecutive months. The halving of the number of new Bitcoin that will come into circulation over the next four years is planned around April 20th. Of the maximum 21 million Bitcoin that will ever be in circulation, approximately 19.7 million are currently in circulation. The halving is a special event for Bitcoin as a monetary experiment. After all, Bitcoins inflation rate is halved based on computer code. With fiduciary money (such as the euro and the US dollar), money is printed without too much clarity. Most central bankers deny that printing money leads to inflation. The fact is that the purchasing power of fiat money decreases in the long term.
For the coming period, the new compensation for miners will be 3.125 Bitcoin per block of 10 minutes on average. This fee per block ensures that approximately 450 new Bitcoin will come into circulation every day over the next four years. Expressed in an inflation rate, this is 0.85% per year in increase in new Bitcoin compared to the number of Bitcoin in circulation. In addition to the reduced future supply of Bitcoin, the expected demand for Bitcoin (particularly from the Bitcoin ETFs) is fairly stable and significant enough to have an impact on the price. In March, approximately $4.5 billion was invested in Bitcoin ETFs. The Grayscale fund had a significant outflow of around $6.3 billion, leaving the other funds raising $11 billion in new capital. The Grayscale fund started at 660,000 Bitcoin, currently Grayscale is at approximately 320,000 Bitcoin. The daily outflow of around $300 million at Grayscale is effortlessly absorbed by the market because there is currently an average daily trading volume of around $40 billion in Bitcoin. In the most pessimistic case, Grayscale’s sales of a decent size will last for a maximum of 3 months, after which the Bitcoin pot will really be empty.
A major information advantage for investors in cryptocurrencies is that blockchain technology is used. This ensures that all transactional data is publicly available. What is striking is that the data shows a clear difference between long-term investors compared to short-term investors. As a volatile investment, Bitcoin is interesting for traders looking for quick profits. What makes Bitcoin unique is that no transaction has taken place with about 70% of Bitcoin for more than a year. In general, this Bitcoin belongs to long-term investors. Short-term investors make do with the remaining 30%, and it is striking that some long-term investors cash in profits during periods of price increases. This cycle, for example, includes FTX and Genesis, which have collectively withdrawn at least $3 billion from Grayscale’s Bitcoin ETF as a result of dealing with various lawsuits/bankruptcies.
What has also been noticed in the past month are the major differences between other cryptocurrencies. With a return of +62% over the past month, Solana does a lot better than Cardano (-1%). Now that the crypto market is a number of years old, we can look back at the performance of various crypto coins. In a negative respect, EOS stands out, the project raised $4.1 billion with an ICO in 2018. The cryptocurrency has now almost dropped out of the top 100 with a market capitalization of $1.2 billion. The total crypto market has grown by a factor of 10 since the ICO, which means EOS can be described as a failed project. Unfortunately, EOS is no exception, the vast majority of projects have shown negative returns. The crypto coins that have shown positive returns are often those that were often not expected in advance, such as various meme coins, which cannot possibly be described as a serious investment. The concentration of portfolios around Bitcoin and to a lesser extent Ethereum has ensured that BlockBay Capital’s portfolios have achieved an annualized return of +69% over the past five years.
In the current cycle there is still sufficient potential to further increase this return. For the coming months, the opportunities lie in the further growth of the Bitcoin ETFs through new capital inflows. The successful launch of the ETFs may attract new investors. Bitcoin ETFs are offered by institutional parties, but there are still a limited number of institutional investors who invest in Bitcoin. There is still a lot to be gained. The increasing scarcity will ensure that Bitcoin will remain an interesting investment proposition for years to come.