Charles-Edouard Bilbault
Global Equities Portfolio Manager
Product market fit
June started on a reassuring note from US Congress with a swift pass of the debt ceiling extension process, unwinding a key market overhang and contributing to positive sentiments for risk assets, which has been slightly tempered post-FOMC(1) meeting with hawkish rhetoric despite pausing rate hikes for the first time in over a year. Within that context, the portfolio outperformed, mostly carried by the “Blockchain infrastructure” theme and favorable earnings momentum. As described in last month comment, the SEC increased its regulatory pressure through lawsuits targeting key industry participants, but congruently faced pushbacks by way of bi-partisan supports for transparent and constructive regulatory framework. Unfolding of those events will take time, however, we are as well cognizant of different mindsets from other regulatory agencies around the world with productive backdrops now emerging in the European Union, United Kingdom and even in China, all publicly looking to attract more talent and capital into the Blockchain industry.
Meanwhile, digital assets have seen rebound of interest from institutional investors with US$255m(2) of inflows across related ETF products over the month. Engagement from traditional financial market participants remains buoyant, as illustrated by stronger volumes and rising open interest across digital asset derivatives, and cheerful following Blackrock’s filing for a spot bitcoin ETF, in addition of other asset managers quickly shadowed suit with applications of their own.
Ensuring a strong product market fit is crucial for driving widespread and sustainable adoption, yet many innovative technologies often struggle in this aspect. However, after years of investment, the blockchain industry has matured significantly, aided by the establishment of industry standards that have positioned it as a viable and impactful solution across various sectors. In a recent industry report released by The Block Research, it was revealed that 83% of surveyed Fortune 500 executives who are familiar with blockchain reported their companies either have ongoing initiatives or are planning to implement them(3). Moreover, 64% of these executives emphasized the importance of investing in blockchain technologies to maintain a competitive edge. These industry efforts primarily focus on Blockchain infrastructure, Process automation, and Supply chain management, with the goal of unlocking operational efficiencies and cost savings. In the near future, we anticipate a significant increase in product launches by those companies (as illustrated within our monthly “Industry news to watch” segment), where mainstream customers will utilize blockchains as backend infrastructures without even realizing it.
On the portfolio management side, we have been selectively taking profits from main outperformers like Palantir, Coinbase or Nvidia. “Web 3.0 / Metaverse” bucket has been also trimmed with some light cuts on Roblox and Shopify. Lufax, a leading Chinese fintech company related to Ping An, has been introduced to the portfolio. Some reallocations have been operated with tactical buys on Gitlab ahead of earnings and BC Technology following the implementation of a new regulatory framework for retail trading in Hong Kong. At month-end, fund’s equity exposure was 98.7%(4).
Industry news to watch
Announcements by established companies of blockchain based innovations continued to impact various sectors of the economy and enterprise use-cases. Among many others: Unpacking The Web3 Strategy Behind Louis Vuitton’s €39k Digital Treasure Trunk NFTs6 (Forbes): LVMH continues its journey into the consumer blockchain space with a differentiated product offering, attracting a new breed of customers through new experiences(5).
Mastercard launches DLT network for settlement of tokenized bank deposits (Ledger Insights): Blockchain as a back-end infrastructure thesis is already taking shape across the financial industry with market incumbents actively working towards solutions for asset tokenization(6).
China releases first national standard for blockchain technology to accelerate development (Global Times): Echoes a warming stance coming from the Central Government towards Blockchain applications in order to establish China as a leading Web 3.0 innovation hub(7).
