BlockBay Capital portfolio update October 2021

BlockBay Capital portfolio update October 2021
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The BlockWealth portfolios achieved a positive return of +31% to +37% in October.

There were a few milestones for Bitcoin in October. First thing was the new all-time high for Bitcoin of $67,000. The second thing is the approval of the first Bitcoin Futures ETF by the US regulator. The ETF was able to count on investor approval, with more than $1 billion in inflows into the ETF in its first 2 days. The first applications from market parties for a Bitcoin ETF have been out for 7 to 8 years now, this new development is a new step in the legitimacy of Bitcoin for institutional investors in particular. In addition to the price developments, there are two other important developments that are relevant, namely the metaverse and inflation.

Metaverse
October was also the month in which Facebook announced a new name (Meta). Well-known apps of the company (Instagram, Facebook and Whatsapp) will fall under this parent company. The name change shows that Facebook is more than social media and that they want to focus more on the metaverse in the future. The metaverse is a virtual environment in which the digital world comes together with the real world. For this, the internet and digital tools (such as VR glasses) are used to develop a new digital world in addition to the real world. The important aspects of life are becoming digital, especially for younger generations. Work is moving from physical workplaces to laptops and zoom meetings. Friends turn from neighbors to followers on social media, the youth are playing games more and more. Everything becomes digital, your friends, work and also your identity.

Cryptocurrencies ensure that assets are also available virtually. The developments in the field of digital art (non-fungible tokens) are moving fast and have been going on for a while. A token ensures that valuable digital assets actually belong to the owner (and not to the developer of the game who can ban the user). In the new metaverse, cryptocurrencies will play an important role in the area of digital assets. If we look 10 to 20 years ahead, at some point there will be a tipping point in which the digital world is more important to many than the real world. Historically, 99% of our attention has been focused on the physical world. The TV has brought this down to 85%, computers to 70% and mobile phones even to 50%. New digital smart glasses may ensure that 90% of our daily attention is focused on the screen, that’s when the metaverse will really start. That’s the point that virtual life becomes more important than real life. These outlined developments may still sound implausible or undesirable, but the developments will move quickly. Facebook currently invests $10 billion annually in Facebook Reality Labs, the metaverse division responsible for AR & VR hardware, software and content. With the investment (and the name change), Facebook shows that it is committed to this new digital world. Previously, Facebook was working on its own digital currency that can be used well in the metaverse.

Inflation Concerns
Historically, the last months of the year have been good for cryptocurrencies. An end-of-year rally is also possible this year, the market conditions are still favorable for hard assets such as equities, real estate and Bitcoin. Central banks are sticking to an inflation target of around 2%. Inflation (as a result of the corona virus) is now above that level for the first time in years. Rising inflation often means that interest rates must also rise because otherwise the real interest rate (nominal interest rate minus inflation) will become too low. A negative real interest rate reduces the purchasing power of savers and consumers. The trouble is that the total debt of governments and companies now reached a level that rising interest rates can cause serious economic problems. Central banks therefore have an interest in keeping inflation from rising too high and interest rates remaining low. A possible consequence of this policy is that asset prices (shares, real estate, Bitcoin) will rise even further in the coming period.