Fund Update
July was a very productive month for the fund. In addition to generating a positive return this month, the fund won yet another award and published a pair of thought leadership pieces, both of which have been well received.
A couple weeks ago, we found out that Preqin, the leading database on private equity funds, ranked us as the #1 Multi-Strategy hedge fund. Keep in mind, this is not limited to just crypto funds, this was across all asset classes. You can take a look at the rankings in the Preqin 2022 League Tables. We are once again honored and humbled by the recognition from Preqin and all the other awards we have received as well.
This past month also saw the fund publish not one but two research pieces. The first article was a deep dive look into the current fundamentals of the bitcoin network as well as on-chain metrics that have historically correlated with market bottoms. The second article is a culmination of months of research around Ethereum Layer 2 scaling solutions and lays out our thesis on the space moving forward. If you haven’t read both of these articles yet, we highly recommend doing so and would love to hear your thoughts after reading them.
Fund Performance
Coming off one of the most challenging months in crypto’s history, the Multi-Strategy fund was still positioned rather defensively heading into July. Despite that conservative approach, the fund still produced a solid return of 10% for the month and did so with roughly half the daily volatility of bitcoin. As we look out on the rest of the year, it appears that the leverage and fallout from Celsius, Three Arrows and others is mostly behind us at this point. Furthermore, momentum around the Ethereum ecosystem is building due to the upcoming merge and growth of Layer 2 networks. However, the crypto industry still faces tough macroeconomic headwinds with the Fed recently increasing interest rates once again. Hence, we remain cautiously optimistic as we wait for further confirmation that this is the beginning of a larger bull run rather than merely a bear market bounce off the bottom before we get more aggressive with the positioning of the fund.
| Blockforce Multi-Strategy | Bitcoin | |
| July Performance | 10.0% | 18.0% |
| July Daily Volatility | 1.7% | 3.3% |
Market Commentary
After one of the worst performing months in bitcoin’s history in June, July finally saw a long awaited rally with bitcoin reaching $24k before pulling back slightly at the end of the month. Yet it was Ethereum, which has underperformed bitcoin year to date, that outperformed in July rising 59% over the course of the month. The surge in price for Ethereum was likely driven by the announcement of a tentative launch date (September 19th) for the network’s highly anticipated merge to Proof-of-Stake. Ethereum developers successfully converted a testnet from proof-of-work to proof-of-stake which seems to have given the market confidence that the merge will happen on time. However, it will be interesting to watch the impact the next set of testing has on ETH’s price because depending on how that goes, ETH may experience more volatility.
The merge wasn’t the only good news for the Ethereum ecosystem. The growth of Layer 2 networks and their increasingly important role in the future roadmap for Ethereum led to both Polygon and Optimism rising 88% and 221% respectively over the last month. While it’s a bit of fortunate coincidence that both these tokens experienced a spike in price shortly after we published our thesis on Layer 2 networks, it does give us more conviction. DeFi as a whole also had a strong bounce back month. Led by Uniswap and Yearn (both Blockforce portfolio assets), the DeFi space as a whole was up 51% in July.
Finally, it also appears that most of the contagion triggered by the collapse of Terra and Three Arrows Capital has been unwound at this point. Given that much of the leverage caused by centralized borrowers has been wiped out of the system, we anticipate that the crypto ecosystem now has a solid base from which to grow. However, that growth may take some more time before it is fully reflected in prices as the crypto industry still faces macroeconomic headwinds.
Sincerely,
The Blockforce Team
Disclaimer: This is not investment advice. The content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice. Nothing contained constitutes a solicitation, recommendation, endorsement, or offer to buy or sell any securities or other financial instruments in this or in any other jurisdiction in which such solicitation or offer would be unlawful under the securities laws of such jurisdiction. All Content is information of a general nature and does not address the circumstances of any particular individual or entity.
Disclaimer: This is not investment advice. The content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice. Nothing contained constitutes a solicitation, recommendation, endorsement, or offer to buy or sell any securities or other financial instruments in this or in any other jurisdiction in which such solicitation or offer would be unlawful under the securities laws of such jurisdiction. All Content is information of a general nature and does not address the circumstances of any particular individual or entity. Opinions expressed are solely my own and do not express the views or opinions of Blockforce Capital or Onramp Invest.
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