Where the past few months have been known for a downwards trend, 2023 started off with a significant rally for the cryptocurrency market. Bitcoin started the year around the price level of $16.5K and ended the month at 23K, an increase of 40%. Despite the positive turn in sentiment, the beginning of the month was led by fear and uncertainty as Digital Currency Group (DCG) was possibly experiencing solvency issues. DCG is the parent company of Grayscale and Genesis Trading. The latest filing for bankruptcy by Genesis led to speculation about the finances of the parent company. Genesis still owes large sums of capital to various organizations such as Gemini and Bitvavo. Both organizations had approximately $900M and $280M located at the firm and wanted these allocations back as quickly as possible. Currently, both organizations are looking at DCG to repay the outstanding debt.
On the 2nd of January, Cameron Winklevoss, co-founder of Gemini, published an open letter to Barry Silbert, CEO of DCG, to clarify the situation as in his opinion the funds shouldn’t still be locked. Winklevoss claims that DCG owes Genesis $1.675B and that these funds can be used to repay all the debtors of Genesis. Barry Silbert responded that they didn’t borrow $1.675B and that no interest payments have been missed on all outstanding loans. In the published open letter, Winklevoss demanded a solution before the 8th of January. Currently, neither party has displayed strong action as the deadline has passed. The market is mainly concerned with DCG, if it's true that the organization can’t repay its outstanding loans it may be forced to sell assets under its management, resulting in a negative sentiment and sell pressure on the market. Currently, DCG holds approximately $50B worth of digital assets.
The predicament of Digital Currency Group slowly moved to the background as the first publication of the US Consumer Price Index (CPI) loomed closer. Prior to the publication of the data, Bitcoin experienced a strong rally as on the 11th of January, Bitcoins’ price rose from $17.3K to $18.4K, eventually stabilizing between $18.1K and $18.2K as the CPI publication closed in. On the 12th of January, the US Consumer Price Index (CPI) data was released. The publication of the numbers didn’t result in any big surprises as both the forecast of the Month-on-Month CPI (0.3%) and the Year-on-Year CPI (6.5%) were met. During the publication, there was some slight volatility that caused the price of Bitcoin to drop to $17.9K before stabilizing again at $18.8K. Bitcoin then continued its upwards trajectory toward $20K.
The change in sentiment and multiple liquidations of short positions led the market to continue its upward move. In the week of Jan 23 - 30, the market saw $340M shorts being liquidated, which strengthened Bitcoins' upward trend. The price of Bitcoin continued to rally to well over $23K, reaching price levels the market hasn’t witnessed since August-September 2022. With the current CPI data indicating that inflation is slowly cooling down, less aggressive interest hikes might be on the horizon. However, in 2022, Jerome Powell, the chair of the Fed, stated that they will try anything to achieve their goal of bringing back inflation to 2%.
On the 1st of February, the Federal Open Markets Committee (FOMC) will conduct its first meeting of the year and 99.7% of the market expects an interest hike of 0.25%. This will increase the federal funds rate to 4.75%, bringing it closer to the expected goal of 5%. However, if inflation doesn’t continue to cool down, the FOMC and the Fed will continue with the hiking of interest rates which will negatively impact financial markets.
In November 2022, OpenAI introduced ChatGPT, a prototype chatbot with artificial intelligence (AI), to the public and many were amazed by the capabilities of the prototype and its potential. Users can ask a variety of questions/tasks such as summarizing a report and the chatbot will (almost) accurately answer the given assignment. This new technology illustrates a shift in how we can utilize the internet and displays the future of it, making work and other issues easier and less time-consuming. This strong interest in AI also shifted to the cryptocurrency market, which caused significant rallies during January in cryptocurrencies with AI-driven technologies and implementations.
One of these cryptocurrencies is Ocean Protocol (OCEAN), a cryptocurrency that drives a data marketplace with the implementation of AI. In 2021, we wrote a report about OCEAN as we expected that this narrative would gain traction in the market. The Hodl funds also benefited from the upward movement of OCEAN as it is one of our holdings. We expect that this technology will have a substantial impact on the cryptocurrency market.
On the 25th of January, we announced the merger of the Dutch cryptocurrency investment firm True Asset Fund II (TAF) in the Hodl Group. As the market matures more challenges will arise and regulation will increase. As TAF and Hodl both have a similar investment approach, culture and ambition, there was a good match between the organizations. Since January 4, True Asset Fund is officially part of the Hodl Group. You can read more about the management of the two funds in our press release. With the integration of the fund, we want to introduce you to the new additions to the Hodl team: Ad van Kemenade and Deni Evendik. Ad will join Hodl as a Partner and will focus on the further growth of the organization and Deni will join our team of research analysts.
Ad: "It’s great to become part of a leading cryptocurrency fund with a global presence. Hodl is more than a buy-and-hold fund, it's also a knowledge center with a multidisciplinary approach to the cryptocurrency ecosystem. We look forward to continuing our path together and introducing the emerging crypto market to international investors".
Deni: "Since 2017, I have been actively involved in the cryptocurrency market and for some time I have been able to contribute as an investment analyst at True Asset Fund. I’m looking forward to continuing my adventure at Hodl and I am happy to join the research and trading team. I firmly believe that this merger offers great future prospects with promising challenges and developments in this sector".
The strong upwards trajectory of the cryptocurrency market during the month of January has led to an increase in the Hodl funds. The Hodl.nl Genesis Fund, the Hodl.nl Consensus Fund and the Hodl.nl Oracle Fund ended respectively at a Net Asset Value (NAV) of € 3.07, € 3.05 and € 0.29. True Asset Fund II ended the month with an NAV of € 15,278.26. Clients of True Asset Fund can view their personal performance in the IQ-EQ portal.
Throughout the year, we have made various changes to the website and Client Portal. In one of our previous feedback questionnaires, we were requested to improve the portal since the information provided was sometimes inadequate. We are excited to introduce the new Hodl Benchmark in the Client Portal. By logging into your personal account, you can compare the performance of your Hodl fund to other important asset classes such as stocks, bonds and gold.
In addition to the benchmarks, participants will also be able to download their fiscal year reports from the portal, making it more accessible and effortless for upcoming tax filings. As Hodl slowly matures in the international market, we will continue to improve our services, with the Client Portal being one of the most important aspects.
After months of preparation, we are delighted to announce that Hodl is expanding to Marbella, Spain. In addition to our previous expansions with the Numeri fund in Luxembourg and the AMC Hodl Artemis in Switzerland, we are excited to share that Hodl Primero will in the month of February. Hodl Primero is an actively managed investment fund that follows a similar structure as the previous Hodl funds. The Hodl Primero fund will also benefit from our algorithmic trading bots.
Together with our local partners, we are opening our office in Marbella to help Spanish investors diversify their portfolios with cryptocurrency. The upcoming months will be an exciting time in which we roll out international expansions. This third addition to the Hodl Group is a wonderful way to start the year 2023.
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