Big Firms Are Getting Louder
The Fund’s reversal in February, down 12.75% (NAV return), reflects investor sentiment towards tariffs and impatience with volatility over the long-term potential benefits that may come from the administration’s proposed policy changes (see standardized performance). While we acknowledge that Trump’s aggressiveness is alarming and uncomfortable, we would remind people that the Fund is positioned for the long term to benefit from the new administration policies around technological innovation and efficiencies. Year-to-date, the Fund is down 2.95%. The challenge with such a decision is to know when to get back in, and as we observed from the previous month, volatility works both ways.
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.
The Mastercard Example
Talk about tariffs may have created some questions about the economic path ahead, but there can be little question that in 2025 transformation of industries using Blockchain technology and tokenization will accelerate. Recent evidence of progress came through a Form 10-K filing from Mastercard which disclosed that in 2024, 30% of its $28.2 billion in net revenue transactions were tokenized.1 Note that the program was only launched in May 2024 (press release: Mastercard Crypto Credential goes live with first peer-to-peer pilot transactions, adds new partners to the ecosystem | Mastercard Newsroom).2 The company further noted that blockchain innovation and enhanced cybersecurity are transforming payment rails that “could result in new technologies that may be superior to, or render obsolete, the technologies we currently use in our programs and services”.2 In its Form 10-K filing, Mastercard references stablecoins as a threat to its business that “may also result in new and innovative payment methods, products and services.” Moreover, the firm stated that it expected to drive transformational market change by “extending the reach of our network to enable the tokenization of credentials, identities, assets and data and the exchange of those items between counterparties.” For a better understanding about how Mastercard sees Tokenization integrating with its customer experience, see Mastercard’s video (Mastercard Reimagining Online Checkout).3
Mastercard’s public adoption of Blockchain is helpful as an example of the competitive benefits that this technology can offer, but they are not alone. It is likely that large firms in 2025 will now be able to disclose more developments in technology where previously they had fears of retribution and business disruption.
Firms like JP Morgan’s Kinexy’s benefit from the potential distribution of alternatives as tokenized funds, which could capture $400 billion in revenues for participants in the ecosystem. Nicki Sharma, Executive Director and Head of Growth at Kinexys Digital Assets writes on Linkedin, “The crux of our thesis is that by creating a synchronous shared data layer, automating manual workflows, and introducing new features like trading of tokenized funds, tokenization can help overcome key pain points with alternative investments. Specifically, tokenization could lay the foundation to enhance liquidity, collateralization, transparency, and customization of funds. And together, this could unlock broader, more tailored exposure to Alts”.5 Kinexy’s is responsible for an average of $2 billion worth of transactions on a daily basis. Like Mastercard, JP Morgan is taking the “let’s disrupt rather than be disrupted” position. For further information we encourage readers to learn about Kinexy’s ambitious plans for Blockchain and tokenization: “About Kinexys: Our Story, Leadership and More | J.P. Morgan”.6
Some Nomenclature and Definitions
It makes sense that most people are focused solely on the price action of Bitcoin. Afterall, that is the most well-known blockchain, and its value proposition as it goes higher is easiest to measure. However, the transformation that will come from Blockchain technology as a platform is about to become clearer as government policy offers a more distinct path for the evolution to show tangible traction. This is why the formation of the Bitcoin reserve on March 6th, the gathering of White House leaders for Crypto Summit, and the SEC’s Crypto Task Force is so important. Steps are clearly being taken with urgency and a follow-up roundtable discussion is already scheduled for March 15th to develop better regulations around the space. It is clear that President Trump is pushing forward to make good on his promise to make the United States the “crypto capital of the planet.”
As a reminder, while we are believers in Bitcoin’s importance and foundational leadership, it is but one Blockchain with the focused use case as a “Digital Commodity.” What distinguishes Bitcoin from many others, of course, is the elegance of its consensus algorithm, which aligns interests from a decentralized network with incentive structures that are backed by the cost of energy and infrastructure. Over time, we believe stablecoin, with about $230 billion in market value, will be the next policy to be worked through.7 Stablecoins, of course, can naturally serve as a “Digital Currency.” A third asset category that will need to be tackled with better guidelines is called Real World Assets (RWA) and/or Security Tokens. As an open source code, there are also Utility Tokens that reference the value of goods and services on a network. We would highlight that the Fund’s indirect investment in tZERO through Beyond (BYON) is an example of the opportunity for RWA.
Tokenization does not have to involve the price action of Bitcoin or Meme Coins, but what it does have to involve is a digital asset. Broadly speaking, the visionary goal for tokenization is that transactions are tracked almost in real time, and securely. This means that ultimately, as an example, a "supply chain" could be tracked in a more transparent manner across borders with “trust” and less complexity among transfers of value with receipts. The benefit of decentralization is it provides accountability from the service provider without middleman intervention that can drive costs higher.
Transactions and Repositing:
Pursuant to process, we trimmed back our positions twice in MetaPlanet (3350 JP) due to it eclipsing our 5.5% rule. Similarly, we also trimmed back Robinhoood Markets (HOOD). Historically, we have found that when positions run from 4% to over 5% on quick capital appreciation, a little trimming around the edges provides for efficient risk management. This is an important differentiator from others. We increased our basket approach to Spot ETFs with some of this cash.
1https://s25.q4cdn.com/479285134/files/doc_financials/2024/q4/MA-12-31-2024-10-K-as-filed-with-exhibits.pdf
2https://www.mastercard.com/news/press/2024/may/mastercard-crypto-credential-goes-live-with-first-peer-to-peer-pilot-transactions-adds-new-partners-to-the-ecosystem/
3https://www.youtube.com/watch?v=OG_Q_TeTvJY
4https://www.jpmorgan.com/insights/payments/payment-trends/introducing-kinexys
5https://www.linkedin.com/posts/nikhilbsharma_how-tokenization-can-fuel-a-400-billion-activity-7150280857478381568-EW_9?utm_source=share&utm_medium=member_desktop&rcm=ACoAACw46agB--LTIRJlH1IIO9V0VAghyNhU9ww
6https://www.jpmorgan.com/kinexys/about#our-team
7https://coinmarketcap.com/view/stablecoin/