BLOK-Chain Monthly September 2024

Blockchain: Adoption Trends Are Accelerating

BLOK was down 3.81% (NAV return) in the month of August, with YTD performance of positive 18.15% (see standardized performance). Long term adoption is challenging to measure in the face of near-term market volatility, but the evidence we bring you in this latest report shows a breakthrough in the insurance market as well as further adoption of Real World Assets (RWA) in the form of Stablecoins and broad “Active Addresses.” 

Progress around innovation can be measured by price, but we would argue that broadly speaking, evidence of adoption is also a critical metric. It defines scalability and shows that digital assets on the Blockchain are accelerating and, in fact, making huge progress in their transformation. In the report this month, we’d like to highlight some quick key performance indicators:

1. According to RWZ.xyz, the number of on-chain addresses that have transferred a tracked stablecoin in the past 30 days is 119.57 million, up 3.95%. The value of Stablecoins is now over $170 billion.¹ We would also point out that Apple is now partnering up with key Stablecoin provider USDC (USD Coin), integrating it to securely transfer value in its NFC chip, or Near-Field Communication chip (see USDC to embrace tap-and-go payment after Apple opens up NPC²).
2. We appreciate the thesis around Bitcoin as a store of value and or secure means to transfer value, but when we see headlines out of Japan that read “Largest Japanese Banks to Use SWIFT-Linked Stablecoin System for Cross- Border Payments,” we believe that the transformation around digital assets is gaining scale and momentum going into 2025.³ 
3. According to 1RT's Dan Tapiero, total active addresses across all blockchains grew from 6.8 million in January 2021 to 60.1 million in August 2024.⁴

The performance data quoted represents past performance. Past performance does not guarantee future results. The 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 and current performance may be lower or higher than the performance quoted. For performance data current to the most recent month-end please visit BLOKETF.com.

Transactions and Repositioning:

There were no major switches in the month of August, but it should be noted that we sold completely out of our position in Walmart. While we believe Walmart remains at the leading edge of technology, our concerns were around the economy. We are practical in our views, and sometimes it simply makes sense to take a victory lap. We also trimmed our exposure to TSM to below 1.3%. This change is not necessarily material, but it helped us raise cash to increase exposure to the Bitcoin miners, specifically in Cleanspark Inc (CLSK) and Cipher Mining (CIFR). To be clear, we added due to the asymmetric risk associated with these stocks and only in a small way - about 1.5%. We should expect mining difficulty to increase further in September, but as economic conditions become more challenging (price lower and operational returns lower) we expect conditions to reverse. Our exposure to the mining group at the end of the month was about 21.32%. We continue to monitor this exposure closely, especially considering extreme oversold conditions, but will add only if we believe operating conditions are changing for the better. Oversold conditions and low valuations are not reason enough to increase exposure. Moreover, even then, you can expect that we will move incrementally. We are also open as investors to different areas of the cap table. 

¹https://app.rwa.xyz/stablecoins
²https://cointelegraph.com/news/usdc-embrace-tap-and-go-payments-apple-opens-up-nfc
³ https://news.bitcoin.com/largest-japanese-banks-to-use-swift-linked-stablecoin-system-for-cross-border-payments/
⁴ Dan Tapero is the Managing Partners, CEO and CIO at https://1rtfund.com/ and https://x.com/DTAPCAP/status/1832187578696728597