Monthly Manager Commentary: July 2024

Multi-Strategy Fund Performance

July saw a positive return for the crypto markets, albeit with significant volatility. Early in the month, the German government liquidated their entire bitcoin holdings, amounting to 48,000 BTC. Concurrently, the Mt. Gox estate began distributing 76,200 BTC (53.7% of the total) to creditors. These combined sell pressures pushed the price of bitcoin down from $62k to $55k. However, as these one-time sell pressures subsided, the market rebounded sharply. Mid-month, bitcoin surged to $69k, driven by bullish sentiment after two US presidential candidates, Donald Trump and Robert Kennedy Jr., advocated for highly favorable crypto policies at the Bitcoin Conference in Nashville. Nonetheless, bitcoin’s price retreated to $65k by the end of July, influenced by weaker-than-expected economic data and the Federal Reserve’s decision to hold off on cutting interest rates.

Market Commentary

On Friday, July 26th, former President Donald Trump delivered a highly anticipated speech at the Bitcoin Conference in Nashville, where he made several significant policy statements regarding bitcoin. Notably, he outlined plans to boost energy production to support Bitcoin miners, pledged to end “Operation Chokepoint 2.0,” reaffirmed his promise to protect the right to self-custody, committed to creating a framework for the safe expansion of stablecoins, and promised to dismiss Gary Gensler as SEC chairman, a promise that received the loudest applause from the audience. However, the most notable announcement was Trump’s proposal to designate the approximately 200,000 bitcoins already held by the government as a “strategic stockpile” if he were re-elected.

Following Trump’s speech, Senator Cynthia Lummis unveiled a bill to establish a strategic bitcoin reserve for the United States. This proposed legislation not only designates the 200,000 BTC currently in the U.S. government’s possession as a strategic reserve asset but also mandates the purchase of an additional 1 million bitcoin over a five-year period. These purchases would be held for a minimum of 20 years and are intended to help pay down the U.S. debt over time. Lummis referred to this initiative as “our Louisiana Purchase moment,” drawing a parallel to the historic acquisition of 530 million acres of land from France in the early 1800s for $15 million. The bill was officially introduced and referred to the Banking Committee on August 3rd.

The day before Trump’s speech, Presidential candidate Robert F. Kennedy Jr. delivered his own rousing speech at the same conference, advocating for the use of the 200,000 bitcoin in the U.S. government’s possession as a strategic reserve asset. Kennedy took it a step further than Trump or Lummis by proposing that, if elected president, he would purchase an additional 4 million bitcoins on behalf of the U.S. government. His plan involves acquiring 550 bitcoins per day until the full 4 million are purchased, with the intention of using them to back the U.S. dollar.

While it is highly unlikely that the Lummis bill will pass this year, and even if the statements made by Trump and Kennedy are simply to court votes, these developments mark a significant moment for the crypto industry. Over the past two years, the crypto industry has faced an openly hostile approach from various government branches, including numerous lawsuits based on questionable legal arguments, a coordinated effort to de-bank the entire crypto industry, and politicians openly declaring the formation of an “anti-crypto” army.

Just two years ago, it was unimaginable that two Presidential candidates (including the current frontrunner) and a sitting U.S. Senator would publicly discuss the inevitability of bitcoin as a global reserve asset and propose steps for the U.S. government to accumulate its own stockpile to maintain its top position in the global economic hierarchy. Whether these proposals are genuine or merely campaign platitudes, the shift in tone and rhetoric surrounding the crypto industry has evolved from outright hostility to not just neutrality, but full embracement of bitcoin and the crypto industry.

The implications of the U.S. acquiring and storing a stockpile of bitcoin as a reserve asset, even if currently just talking points, could potentially force other countries to consider doing the same. No country can afford to ignore the potential strategic advantages of bitcoin accumulation. Regardless of the outcomes of these speeches and proposed legislation, the theorized “arms race” to acquire as much bitcoin as possible may have just begun. This strategic pivot towards bitcoin could also influence monetary policies, international trade agreements, and geopolitical dynamics, as nations vie to secure their own positions in this new digital economy.

The discussions and proposals surrounding bitcoin at the Nashville conference signal a potential turning point in the relationship between governments and the crypto industry. As the U.S. contemplates integrating bitcoin into its strategic reserves, the global financial landscape may be on the brink of a profound transformation, heralding a new era where digital assets play a central role in national and international economic strategies. This could lead to increased adoption of digital currencies worldwide and reshape the international financial system.

The Blockforce Team

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