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After painting a seventh consecutive month in the green, a record in Bitcoin’s history, the markets opened April with a slight correction. This turbulent period coincides with a rise in the U.S. dollar index, which reached its highest level of the year, signaling a strengthening of the dollar against other major currencies. At the time of writing, the price is trading around the significant 30-day exponential moving average, which has served as an important support since the beginning of the current bull market.
The crypto market’s reaction is partly due to the anticipation that the U.S. Federal Reserve might delay the interest rate cut until later in the year, despite initial hopes for an imminent cut. The increased yields on Treasury bonds, coupled with persistent inflation and strong manufacturing activity, have induced a shift of capital from risk assets, while we see the resilience of certain investments like gold. In short, the beginning of April is marked by a climate of caution among investors in a high-interest rate environment. Data and forecasts from various tools and markets indicate a trend towards consolidation, expecting little change in monetary policy in the short term.
U.S. traded Bitcoin ETFs experienced net capital outflows on Monday, breaking with the trend of net inflows observed every day of the previous week, which had reached a total of $860 million. Despite contributions of $165.9 million to BlackRock’s IBIT ETF, these inflows were not sufficient to offset the substantial outflows of $302.6 million from Grayscale’s GBTC fund, resulting in a net outflow of $85.7 million for the day, according to CoinGlass data. The selling pressure on Grayscale’s GBTC remains strong, with total outflows surpassing $15 billion. A recent Coinbase report mentioned the potential sale by Genesis Global Holdco LLC of nearly 36 million GBTC shares, valued at around $2 billion, as a possible factor in this pressure. The fluctuations in GBTC’s fund outflows have caught analysts’ attention, some suggesting a slowdown despite a recent rebound.
Nonetheless, these ETFs have enjoyed resounding success. In March, the cumulative monthly transaction volume of spot Bitcoin ETFs nearly tripled compared to February, moving from $42 billion to $111 billion. This marked increase reflects a growing interest in these new financial instruments based on cryptocurrencies. Data aggregated by Yahoo reveal a notable dynamic in the adoption and engagement of investors towards these products, first launched on January 11.
Analysts, including Eric Balchunas of Bloomberg, emphasize the significance of this transaction volume for March, reflecting significant growth and potential for continued or increased interest in the coming months. Despite a return to net capital outflows during Monday’s trading session, illustrating the volatility and constant fluctuations of the market, the ETFs from Grayscale, BlackRock, and Fidelity remain predominant in terms of transaction volume.
Sam Bankman-Fried, founder and former CEO of the cryptocurrency exchange platform FTX, was sentenced to 25 years in prison after being convicted of various offenses, including fraud, money laundering, and conspiracy. This sentence follows a trial in New York where he was found guilty on seven charges, revealing that he had embezzled over $8 billion in client funds to finance risky investments, celebrity partnerships, and a luxurious lifestyle in the Bahamas. Bankman-Fried’s lawyers argued for a reduced sentence, claiming that a lengthy detention would prevent any possibility for him to lead a meaningful life or contribute to society, proposing a duration of five to seven years. In contrast, prosecutors demanded a much harsher sentence, between 40 and 50 years, emphasizing the severity of Bankman-Fried’s actions and their impact on thousands of victims, while aiming to deter potential future financial crimes.
Following his conviction, SBF expressed regrets in an email exchange with ABC News, stating that he has been trying to correct his mistakes from his cell. He insisted that he never believed he was acting illegally, while acknowledging that he did not meet the high standards he had set for himself. Bankman-Fried also expressed empathy for the defrauded FTX clients, maintaining that the existing assets should be sufficient to fully reimburse clients, lenders, and investors, a claim he has made previously. While acknowledging his poor decisions, Bankman-Fried attempted to distance himself from the image of a criminal, suggesting that his actions were not motivated by selfishness, but were nonetheless wrong. However, this perspective has not convinced the new leadership of FTX or the jury. Despite the recent recovery of the cryptocurrency market, which has partially helped to offset the losses, Judge Lewis Kaplan stressed that this does not mitigate the severity of Bankman-Fried’s actions. Currently in prison, he seeks to appeal his conviction, while continuing to express his desire for amends, despite the limitations imposed by his current situation.
A British court has frozen $7.4 million in assets belonging to Craig Wright after ruling that he was not the pseudonymous creator of Bitcoin, Satoshi Nakamoto. This measure is to prevent Wright from dispersing his assets before exhausting his legal options, following
a trial where the organization COPA, supported by Twitter co-founder Jack Dorsey, opposed him. The decision follows concerns about Wright transferring his shares in his company, RCJBR Holding, to a Singapore-based company, raising doubts about his willingness to evade the financial consequences of his trial. The judge required Wright to quickly provide a detailed statement of his assets, while the decision to freeze the funds aims to cover COPA’s legal expenses and prevent any risk of fund dissipation by Wright.
The company Bitfarms, specializing in Bitcoin mining, plans to invest nearly $240 million in upgrading its mining equipment to increase its competitiveness post-Bitcoin block reward halving this month. The goal is to triple its current hash rate, with the acquisition of 88,000 high-efficiency Bitcoin miners. This upgrade follows the purchase of several Bitmain miner models and aims to increase the company’s operational hash rate to 21 exahashes per second, thereby boosting its target operational capacity by 83% to reach 440 megawatts and improving fleet efficiency by 40%. Bitfarms, which sold almost all the Bitcoins it mined in the last two months to fund this expansion, holds total liquidity of $123 million, including cash and BTC assets. This strategic initiative is intended to consolidate Bitfarms’ position in the Bitcoin mining industry, optimizing performance and profitability in the face of the imminent halving challenges. Meanwhile, the Texas-based company Giga Energy is expanding its mining operations in Argentina to utilize the wasted energy from flaring natural gas produced in oil extraction, although its profitability remains uncertain pending the full importation of the necessary equipment. In short, the positioning of major mining players in anticipation of the halving continues to evolve.
Performance and positioning of the Rivemont Crypto Fund
Let’s take a step back and look at the past 12 months. We have witnessed an impressive performance of Bitcoin. However, not everything has been rosy in the cryptocurrency domain. In fact, apart from Solana and its known governance issues, only Bitcoin has truly performed well. For the fund, there are 2 ways to add value relative to Bitcoin (although this is not the fund’s only objective):
1. Take positions in the best-performing altcoins.
2. Remain partially liquid during bear markets.
Obviously, we have been looking for several months to leverage the first point more, notably by significantly adding ETH to the portfolio. However, like most altcoins, it has significantly underperformed relative to BTC, as seen below:
This is to say that the fund has been optimally positioned over the last year to maximize returns, without actually managing to significantly outperform Bitcoin. Let’s see if the coming months will be a continuation of the past 12 or if interesting opportunities will arise.
The presented information is as of April 3rd, 2024, unless otherwise indicated and is provided for information purposes only. The information comes from sources that we believe are reliable, but not guaranteed. This statement does not provide financial, legal or tax advice. Rivemont Investments are not responsible for any errors or omissions in the information or for any loss or damage suffered.
