August Market Commentary

INSIGHTS AT THE FOREFRONT:

MARKET INTELLIGENCE FROM OUR CIO, MARK O. WITTEN

Volatility and Corrections: The cryptocurrency markets experienced significant volatility in August, starting with a sharp decline due to broader financial instability triggered by the unwinding of the Yen carry trade. The month saw a mid-term recovery followed by a downturn after the arrest of Telegram’s CEO, affecting the TON token and highlighting risks related to centralised entities.

Market Performance: The CCI30 Index ended the month down 13%, with Bitcoin decreasing by 8.5%. The Portal Digital Fund and the Radiance Multi-Strategy Fund recorded losses of 3.5% and 11%, respectively.

Macro Outlook:

Economic Concerns: The markets have been reacting to higher-for-longer interest rates amid strong economic indicators and persistent high inflation, raising fears of a looming recession.
Regulatory and Political Developments: Political shifts in the U.S. are increasingly supportive of cryptocurrencies, evidenced by significant movements in the regulatory landscape and public endorsements by political figures, including former President Trump advocating for a strategic national Bitcoin reserve.
ETF Influence: Bitcoin and Ethereum ETFs have seen rapid growth and are influencing market dynamics, with Ethereum ETFs, in particular, introducing new institutional investment flows.

Altcoins and Network Developments:

Solana’s Performance: Solana faced initial sell-offs but recovered strongly due to network improvements and increased institutional support, although ETF applications were initially rejected.
Institutional Adoption: Notable developments include BlackRock’s tokenization of a money market fund and PayPal’s expansion into supporting Solana, indicating growing institutional confidence in crypto assets.

Strategic Portfolio Adjustments:

Bullish Outlook: The commentary maintains a bullish outlook for the cryptocurrency market, anticipating further growth driven by regulatory advancements, institutional adoption, and political support.
Focus on Altcoins: The funds plan to increase exposure to altcoins, leveraging the current market corrections as opportunities for repositioning in anticipation of a new bull market cycle.

Conclusion:

Long-Term Market Vision: Reaffirmation of the belief in a secular bull market, driven by a combination of declining supply, rising demand, and significant regulatory and political support, setting the stage for sustained growth in the cryptocurrency sector.

VOLATILITY, REGULATORY SHIFTS & INNOVATIONS PROPEL STRATEGIC ADJUSTMENTS

Greg Galton, Analyst Adviser

Market Overview:

• General Decline: The crypto markets saw a 13% decline in August, influenced by macroeconomic factors, ongoing Mt. Gox Bitcoin distributions, and fears of a potential U.S. government BTC sell-off. Despite these challenges, pro-crypto political agendas gained momentum.
• Bitcoin’s Performance: Bitcoin closed the month at $59k, experiencing an 8.7% drop. There was a net outflow of $92.2 million from Bitcoin ETFs, and miner earnings declined by 10%. However, BTC hash ribbons indicated the end of miner capitulation.
• Ethereum’s Struggles: Ethereum saw a significant drop of over 20%, with its transaction volume falling to a low not seen since May 2020. Despite initial inflows, ETH ETFs faced a two-week outflow streak.

Fund Performance Highlights:

• Top Performers: Helium (HNT) and Aave (AAVE) were standout performers in the fund, with gains of 19.2% and 21.0%, respectively. Helium benefited from new telecom partnerships, and Aave from the approval of V3 on zkSync.
• Challenges for Toncoin: Toncoin declined by 19.6% following the arrest of Telegram CEO Pavel Durov and operational disruptions related to the DOGS memecoin launch.

Sector Developments:

• Decentralized Computing Growth: Akash (AKT) reported a strong quarter, with significant increases in leases and revenue driven by AI projects, showcasing robust platform usage and growth.
• Regulatory Challenges: OpenSea received a Wells notice from the SEC, indicating potential legal challenges over how NFTs are classified.
• Protocol Rebranding: Maker Protocol has rebranded to Sky, introducing new stablecoin and governance token names as part of its upgrade strategy.
• Innovation in Bitcoin Utilization: Babylon launched its Bitcoin staking mainnet, introducing a new utility for Bitcoin in securing Proof of Stake networks.

Global Crypto Adoption:

• Leadership in Crypto Adoption: Singapore topped the Henley Crypto Adoption Index for 2024, followed by Hong Kong and the UAE, highlighting the significant role of progressive regulatory approaches and strong economic factors in fostering crypto adoption. The U.S. and U.K. also ranked highly due to their innovative environments and regulatory frameworks.