Blockforce Manager Commentary: March 2023

Blockforce Update

March was another strong month of performance for crypto prices but the industry also weathered what appears to be a coordinated attack on the crypto banking sector by the US federal government. Silvergate wound down and returned all funds to depositors after being cut off from the FHLB loan facility and Signature was forcefully taken over by the FDIC even though the bank was financially healthy. Though this is a blow to many startups in the crypto industry who now need to find new options to store their working capital, fortunately for Blockforce, we were not impacted materially as we keep very little cash in traditional bank accounts.Though we are currently working on establishing new banking relationships, we expect operations of the fund to continue uninterrupted.

Multi-Strategy Fund Performance

Similar to January, bitcoin led the rally and outperformed most other cryptoassets as is common in early stages of a bull market. Given we are still in the early phases of what we believe will be a healthy upward trend over the next couple of years, bitcoin remains by far our largest holding in the portfolio. Our diversified portfolio saw much more modest gains this past month compared to a bitcoin only strategy as the rest of the other assets lagged behind bitcoin in terms of performance. This is a common pattern we have seen in previous cycles with alt coins really gaining steam during the second half of bull markets in which the greatest returns tend to come. Despite some of the news drama from Q1, it’s been a very healthy start to the year for both the industry and our Multi-Strategy Fund.

Market Commentary

Since the start of the year, several metrics indicate a healthy increase in bitcoin’s network usage. Though the number of transactions is a simple metric, it is often a reliable leading indicator for increased adoption and use of bitcoin. As more people interact and transact within the bitcoin economy, it typically leads to periods of increasing adoption, network effects, and investor activity. While 2022 was relatively flat, there has been significant growth in the number of transactions on the bitcoin network since the start of the year.

There has also been a recent spike in the number of new users on the bitcoin network since the start of the year. This is generally a strong signal of increasing adoption as well. Taken in conjunction with the increase in transaction volume, it’s fair to say that after a period of muted activity in the second half of 2022, usage is beginning to pick back up again in 2023.

The strong out-performance from BTC thus far in 2023 appears to be due to growth in the usage of the network indicating the recent price increase is a sustainable trend. It’s worth noting that this usage growth comes at the same time the traditional financial and banking system faces challenging conditions which suggests a move by market participants out of the traditional system and into crypto, even if only as a hedge. Bitcoin was built out of the global financial crisis of 2008 and only stands to reason that it would benefit should we experience another bank crisis or continued global currency debasement. 

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.