Crypto
April 2021 Commentary
Blockchain Strategies Fund (BSF) delivered +17.93% and +15.84% (USD/EUR share class respectively) for April, the 6th successive double digit monthly return and a YTD return of +204.47% and +210.90% (to 30/04/21).
Bitcoin retreats & altcoins run.
April was a volatile month and one where Bitcoin retraced. We saw the crypto market cap jump from $1.9tn to $2.27tn then fall to $1.73tn before rising to end the month at $2.17tn (coinmarketcap.com).
Our final paragraph on last month’s market comments read “Finally, with Bitcoin Dominance Ratio Below 50% it would signal that the next few weeks or months could be very attractive for ‘Altcoins’. This is a prime example of the need for diversification and technical analysis”.
Well… April was such a month. We saw Bitcoin (BTC) retrace 4% from $59,195 to $56,745 but in contrast:
Cardano (ADA) was up 13.4% from $1.19 to $1.35
Chainlink (LINK) rose 35% from $28 to $38
Litecoin (LTC) gained 35% from $193 to $261
Binance Coin (BNB) gained 106% from $301 to $621
Ripple (XRP) jumped a huge 175% from $0.56 to $1.54%
(source: coinmarketcap.com).
We also stated last month that “with so much of the DeFi revolution built on Ethereum (ETH) and the huge ‘value locked in’, ETH remains undervalued”. We were therefore pleased to see a 42% increase in ETH which moved from $1,935 to end April at $2,754.
ETH is not without its issues (gas fees and transition to ETH2) and whilst believing ETH is undervalued we still expect other smart contract platforms like Polkadot (DOT), Binance Smart Chain (BSC) & Cardano (ADA) to increase market share and provide solid returns this year.
Decentralised Finance (DeFi) continues to attract investment with the Total Value Locked increasing by 46% in April jumping from $47.5bn to $69.7bn (source: defipulse.com). This is a sector we remain very focussed on and expect strong gains from DeFi projects/token. Yield farming and staking in another vertical together, along with NFTs and the token economy of gaming royalties with real economic deliveries, are generating much of interest.
Clearly, we are bullish on the outlook for digital assets. The Macro-economic factors remain supportive and both fundamental and technical support is resoundingly positive. However, we must remain level-headed and even cautious, retracements are normal, even in a bull market, but they also offer opportunity.
May Outlook
Whilst we remain bullish and believe that we are only midway through the current bull cycle, we do expect volatility ahead. We have now seen 6 months of sustained growth (to end of April) but we can see that a correction has occurred in the near terms. The Coinbase IPO in mid-April generated incredible hype, however, as is often the case within the crypto market, just as everyone is talking about it, a retracement occurs.
So, what has caused the May correction?? Well, many will point to Elon Musk and his tweets! On the 12th May Elon announced on Twitter that Tesla will no longer accept BTC as payment due to concerns over energy consumption from fossil fuels which happened to correspond with an instant fall in the Bitcoin price. This is more a accounting issue more than a believe and Tesla playing the game on clean energy. However, just a few weeks later came Elon’s next tweet on the creation of the North American Bitcoin Miners Council Bitcoin Mining Council to report renewable energy usage - BBC News. Was this really an ESG play about concern over the use of fossil fuels, or was this all a ruse to reduce the level of BTC mining dominance in China and increase US crypto mining… we will let you decide on that, but to help you the following informed article from Coinshares will help:
A Closer Look at the Environmental Impact of Bitcoin Mining — CoinShares
The fact is that FUD (fear, uncertainty & doubt) is prevalent in the crypto market, though maturing, it remains susceptible to overreacting to news and announcements from major players in the industry, financial institutions, governments, and whales (holders of huge amounts of digital assets). This is certainly something we believe has occurred in May. Unfortunately, when this FUD or manipulation does occur, it’s the less informed or retail investors that panic sell and the institutional buyers (often the generators of the FUD) are the ones that buy. So, who is buying right now? Take a read of the following articles:
MicroStrategy Buys 229 Bitcoin - Bitcoin Magazine: Bitcoin News, Articles, Charts, and Guides
Japanese gaming giant Nexon invests $100M into Bitcoin (cointelegraph.com)
E-Commerce Giant MercadoLibre Discloses $7.8M Bitcoin Buy - CoinDesk
IT Giant Globant Joins Buys $500,000 Worth of Bitcoin (cryptopotato.com)
Legendary Hedge Fund Manager Ray Dalio Reveals He Owns Bitcoin | Cryptoglobe
$83K Bitcoin price in the cards after data shows BTC whales bought the dip (cointelegraph.com)
A temporary pull back in the crypto market would certainly suit those waiting to invest, large institutions that require deep analysis, due diligence & board/shareholder approval. Which institutions are now looking to join the world of digital assets investing????
Bitcoin ($BTC): UBS Looking to Offer Crypto Investments to Rich Clients: Sources - Bloomberg
Wells Fargo Investment Institute to onboard crypto clients by next month (cointelegraph.com)
Goldman Offers New Bitcoin Derivatives to Wall Street Investors (bloomberglaw.com)
JPMorgan Job Posts Hint at Bank's Broader Cryptocurrency Ambitions - CoinDesk
'Damn Huge': Germany Opens Up to Institutional Crypto Funds - Decrypt (ampproject.org)
Warren Buffett And Tim Cook Snub Blockchain As Corporate Giants Embrace (forbes.com)
We think that this speaks volumes, do not fall for the FUD & manipulation, the institutions want your crypto’s!!
Interesting news:
Cathie Wood Says $BTC Going to $500,000, Still a Bitcoin Believer - Bloomberg
Bitcoin is officially a new asset class: Goldman Sachs (yahoo.com)
3 potential bullish catalysts for Ethereum price in June (cointelegraph.com)
Beyond Dogecoin: The 5 hottest cryptocurrencies on Twitter this month (cointelegraph.com)
Bitcoin Adoption Picks up Steam in Peru After Presidential Ballot – Bitcoin News