Less Is More
BLOK’s NAV returns started the year up 11.24% for the month of January and reflects the business momentum and conditions we envision for the year (see standardized performance). This administration has created appropriate urgency and pent-up inertia around innovation and the need for disruption. The future is no longer about past money, and complacency will no longer be tolerated. Whether you are IBM (IBM), Block (XYZ), Coinbase (COIN) or Beyond (BYON), this is the year of transformation! Investors need to buckle up and be prepared for volatility!
Less is more! Readers should review our outlook for 2025 that was outlined in our November and December BLOK blogs and feel free to inquire further. We would like to add 5 points:
As the sub-adviser, we are proud that BLOK was nominated for the 2025 ETF Thematic Award by ETF.com.1 BLOK has received a number of accolades in the 7 years since its launch, and we take none of them for granted. We believe we are a great example of how investors can benefit from “active over passive” when capitalizing on innovation and disruption, and we are proud that investors have recognized this thesis. The internet did not stand still in its early development - nor will Blockchain/AI.
Investors who follow Bloomberg’s Eric Balchunas and James Seyffart will appreciate that BLOK was highlighted as #5 in ETFs to watch for 2025.2 Portfolio managers do not usually highlight media attention, and we promise not to let the accolades go to our head.
Trump’s strategy and policy will lean towards the saying “the best defense is a strong offense” and following what he does over the rhetoric is our policy. We will not get caught up in the media excitement. To this point, we came into the DeepSeek sell-off with a 5-6% weighting towards cash after trimming back some of our higher beta3 exposures. With this in mind, we reviewed the news objectively and point to the fact that the news had leaked out earlier in the month. For real players, the risk was known. We believe the announcements about the $500 billion Stargate Project with Oracle, Open-AI and Softbank, the $5 billion Macquarie commitment with Applied Digital, and the tone from firms like Blackrock, Microsoft, and Meta suggest that spending will likely accelerate in this area. The fact is that America must lead the transformational technologies trends in the symmetry between AI and Blockchain, and this administration will support businesses that lean in on these trends.
The progress around Bitcoin adoption as a form of investment to solve real world problems continues to be reflected through potential adoption by so many US states and sovereign entities. This is well illustrated by the chart below that outlines the US states pursuing a Bitcoin reserve. But before readers get excited about Bitcoin price action, we recommend that they ask about the WHY more than just the PRICE. Bitcoin Blockchain adoption is driven by people looking to solve a problem, such as excess government spending, inflation, purchasing power and transfer of value.
Venture capital will accelerate in 2025 as policy frameworks and regulations offer greater clarity. Check out Chris Dixon’s interview. He is the general partner of A16z, which manages about $40 billion across 20 funds, including the $7.2 billion raised back in April 2024. As a leader in the technology venture capital sector, we would expect this firm’s example will lead to an acceleration of capital allocation in the space.
The performance data quoted represents past performance and does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when sold or redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance quoted. For most recent month-end performance, visit BLOKETF.com.
Transactions and Repositing:
We are not a tactical strategy, but that does not mean that we aren’t proactive at trying to manage market risk. Markets are dynamic and we have strict rules around things like industry classifications, as an example. These rules lead to a weekly review of holdings and investment categories (8). We are also cognizant about sentiment and notice when asymmetry risk has changed or when the risk/reward ratio is, in our opinion, no longer favorable.
As a reminder, we make changes in 50-100 BP* (basis point) increments and frequently trim when positions scale between 5.00% and 5.50%. While selling our winners may sometimes limit some of the exponential upside, we see so much opportunity in the group that offsetting risk from overexcitement creates discipline around big moves. In January, we trimmed our beta exposure by reducing direct Spot Bitcoin ETF exposure and trading around Marathon Platform (MARA) and HUT8 (HUT). The position in Bitdeer (BTDR) was reduced more significantly by trimming the position back to the original level of +/-1.25% after realizing profits of about 2%. Actively capturing profits in the ETF wrapper is a competitive advantage over other ways some are investing in the space. We also trimmed 125 BPs of Bitcoin indirect exposure. Positions that were scaled back at the 5% level include Galaxy Digital Holdings (GLXY -CN/BRPHF), and Robinhood Markets (ROBN). Roblox (RBLX) was also scaled back after a substantial move on no news.
In the month, we purchased...
1https://www.etf.com/sections/news/etfcom-announces-nominees-2025-awards
2https://blinks.bloomberg.com/news/stories/SQ4S9NDWLU68
3Beta is a measure of a portfolio’s or stock's volatility in relation to the overall market.
*BPs: A basis point (BP) is a unit that is equal to 1/100th of 1%.