Stand: 16.01.2024
During the quarter ended October 2021, the CoinShares Blockchain Global Equity Index ( Index) generated a total return of 12.9%, in comparison to the MSCI World Net Total Return Index which generated a total return of 3.8%. Hive, Hut 8 and Coinbase were the largest positive contributors, while Kakao, Rio Tinto and Nexon were the most significant detractors. This strong quarter was primarily driven by a resurgence in crypto prices. However, although crypto prices overtook their April 2021 highs, stock valuations have not returned to the elevated levels seen in the first half of the year. We are adding four new members to the Index this quarter, two of which are crypto miners, Bit Digital and Fortress Technologies. The Index now consists of five miners, representing 12.7% of the portfolio, the highest exposure at a rebalance point since inception. This reflects the continued positive environment for mining, which we outlined in our July 2021 note. Some clients have expressed concerns about the environmental sustainability of miners and their energy usage. The portfolios miners have a better carbon emission profile in relation to the overall set of listed peers. Amongst our constituents, two mining companies use nearly 100% hydroelectric power, while the remaining three mostly draw their energy from Canadas national grid, in areas of considerable hydro production, or focus on flare gas (excess gas which would otherwise have been burnt). We have avoided some of the larger listed mining companies dependent on coal. It is our belief that hydropower is not only more environmentally friendly than other sources of power, but also critical in ensuring the long term profitability of the businesses. This has always been a key part of our investment thesis. Since the Index launched, investment returns have been strong in all seven of the blockchain business areas. Of the 72 names which have ever been included, only 12 have had a negative impact on absolute performance, with a combined contribution of minus 10.4%. The index benefited from tailwinds, such as rising crypto prices and a booming technology sector throughout the period. More recently, the environment has also been positive for financials, an increasingly important area for the Index. The prices of most asset classes are reaching unprecedented levels. While this favourable backdrop continues, the Index is likely to continue to perform. The economic and political landscape has conspired to close off any reasonable escape valve for this phenomenon and therefore it feels as if these conditions must continue indefinitely, but we know inside ourselves that this cannot be the case. Therefore the approaching pivotal moment could radically and fundamentally change the investment climate. As this happens, the Index wont continue on its merry way, however it is possible that if Bitcoin plays the role that some expect, the unique concoction of miners, financials which own equity stakes in crypto exchanges and computer database names could provide a degree of protection.