BlockBay Capital portfolio update October 2023

BlockBay Capital portfolio update October 2023

The BlockWealth portfolios achieved a positive return of between the +15% and +20% in October.

The market has become optimistic about the Bitcoin ETF that may be on the horizon. In the run-up to this, the price of Bitcoin rose from $27,000 to $35,000. Recent applications for the Bitcoin ETF from BlackRock, among others, and a won lawsuit against the SEC mean that analysts expect that the Bitcoin ETF will be approved in 2023. There are currently about 8 to 10 concrete applications from various parties for the Bitcoin ETF. The American regulator (SEC) has recently been in discussions with these providers. The SEC ultimately faces several deadlines for the assessment, with the latest deadline for ARK Invest / 21Shares’ specific application being January 10, 2024. The deadlines vary per provider, with the application deadline for BlackRock, for example, being two months later on March 15, 2024. In order not to give parties preferential treatment, it is expected that approval for several ETFs will come at the same time.

The main reason to get excited about a Bitcoin ETF is the inflow of new capital. It will be relatively easy for both institutional and retail investors to add Bitcoin exposure. It is now known that Bitcoin can act as a possible diversifier from a portfolio perspective because Bitcoin is generally uncorrelated to stocks, bonds and interest rates. This has been visible over the past period because shares and bonds, unlike cryptocurrencies, have achieved negative returns in the past three months.

The timing of the approval of the Bitcoin ETF and the associated inflow of capital also fits perfectly with the upcoming four-yearly halving of new Bitcoin in circulation in April 2024. As is known, there are a maximum of 21 million Bitcoin, of which there are currently around 19.5 million in circulation. This means that since the start of the Bitcoin network in 2009, 93% of all Bitcoin that will ever exist has already been put into circulation. The last 7% will gradually come into circulation in the coming years. This means that there will be an enormous scarcity because few new Bitcoin will come into circulation, which translates into low Bitcoin inflation. This is in contrast to fiat money such as the euro and US dollar, where it is unclear how many euros and dollars will be added in the future. In the current four-year cycle, 1.3 million Bitcoin have been added. At the current rate of $35,000 per Bitcoin, that is about $11 billion in new Bitcoin per year. Particularly in a declining market, there is little inflow of new capital, the relatively high creation of new Bitcoin and the associated selling pressure from miners in combination with various scandals have caused price pressure in the past period. Long-term investors have been buying up Bitcoin at a rapid pace, leaving less and less Bitcoin available for new investors.

The positive sentiment is also slowly starting to spread to other cryptocurrencies. The value of these cryptocurrencies (not including Bitcoin and Ethereum) has recently risen above $400 billion again, this is the highest value in the past year and a half and still about 60% below the highest value ever of $1,000 billion. In the past, there has often been a rotation of capital from Bitcoin, to Ethereum and to other cryptocurrencies. Such a scenario is now quite possible with the upcoming Bitcoin halving and the possible approval of the Bitcoin ETF.

A lower supply of available Bitcoin in combination with increasing demand (as a result of inflows partly due to the new Bitcoin ETF) is a perfect mix for further rising prices in the coming period. Other crypto coins will also benefit from the positive sentiment.