Funds Management Monthly Report – July 2023

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Market Commentary


The month of July was characterized by cautious market sentiment in both crypto and traditional markets following the gains from earlier in the year. In general, both cryptocurrency specific news and macro developments have been favourable through July, however price appreciation stalled.

The market was due a breather, though it is surprising that multiple spot Bitcoin ETF applications and a favourable outcome for Ripple in its case against the SEC did not spark a move higher.

We have said for a while now that we believe the fourth quarter is the time to be proactive in the market and we still believe that to be the case.

Let’s deep dive into the key happenings and what they imply for the future:




  • US equities gained, driven by favourable US inflation data. The S&P 500 rose 2.42%, mostly driven by big tech and the Artificial Intelligence narrative, while the Dollar Index (DXY) fell by -2.26%, contributing to the strong performance of risk assets generally in 2023.


  • With the next FOMC meeting not until September, many market participants expect that we have now seen the last hike in the USA. All eyes will be on inflation and unemployment data to assess the probability of further rate hikes. With commodity prices now rising we believe this view may be premature and that impressive recent inflation numbers may see a temporary reversal leading to a short term sell off in risk assets in August.


  • The US Treasury still has some heavy lifting to do as far as debt issuance is concerned and it will be interesting to see what happens to treasury yields if Japan and China reduce their appetite for the asset especially after a recent rating downgrade from Fitch. If treasury yields do spike, we may see further movement out of bank deposits and into treasuries putting further pressure on smaller banks – we don’t think we have seen the end of stress in the USA banking system.


  • During the last period of banking stress, we saw Bitcoin outperform other risk assets and we expect to see a similar reaction if the above does eventuate. We continue to watch key metrices including the flow between corporate/investment grade bonds and into/out of treasuries, as a signal of investor sentiment in the wider equity market.




  • Mid-month (July 13th), history was made in a landmark victory for the cryptocurrency industry as U.S. Judge Torres ruled in favour of XRP in its case against the SEC. The ruling concluded Ripple did not break federal securities laws by selling XRP on public exchanges, in a move that not only sent the value of the token up significantly, but will likely provide ammunition for other crypto firms battling the SEC. This ruling was felt throughout the world of cryptocurrency as the SEC’s approach to cryptocurrency enforcement was questioned, and in this case, overturned.


  • Notably, the ruling’s broader implications offer a potential defence for platforms like Coinbase and Binance, who were involved in the secondary sales of the asset during its ICO (Initial Coin Offering), as evidenced in the surge of Coinbase’s stock (COIN). As a result, our Coinbase debt positions saw a surge in prices, gaining 5.56% over the month. We are yet to see the response from the SEC and if they are going to appeal.


  • Shifting focus to the ETF discussion, the submission of a spot Bitcoin ETF from many of the world’s largest asset managers and BlackRock CEO Larry Fink’s recent endorsement of Bitcoin, is a notable catalyst for the increasing acceptance of cryptocurrencies among Wall Street veterans. Fink, who was previously sceptical of cryptocurrencies, now emphasizes BlackRock’s goal to streamline and reduce costs associated with Bitcoin trading and investment. Fink’s recognition of Bitcoin’s potential as a revolutionary financial instrument signals a significant change in the narrative from asset managers and senior executives.


  • This shift validates Bitcoin’s integration into mainstream finance. We maintain an optimistic outlook and believe a spot Bitcoin ETF will be approved before the bitcoin halving next year but not in August as some are speculating. Although regulatory scrutiny and the ‘War on Crypto’ continues, we still believe that the endgame of USA regulators is to move the market out of the hands of crypto natives who have an inherent conflict of interest and a proven inability to keep investor money safe and put it in the hands of incumbent financial institutions with a diverse existing revenue stream which they are not willing to risk through bad behaviour.


  • It is difficult to argue with them if that is in fact their motive. The stance they have taken has reduced the status of USA as a hub for the market and now there is more activity in the Crypto markets in Asia than there is in USA and Europe combined. Regulators in the East are becoming more accommodating with Hong Kong and Japan taking a more proactive stance in order to attract activity and talent. We expect the global turf war in crypto to intensify and that is only good for the market.


  • With the US election cycle nearing, we are starting to see the political focus shifting to Crypto. Until the government establishes the rules and who is responsible for their enforcement, the industry and its regulators will be hamstrung by a lack of clarification surrounding the new asset class.


  • In July, four significant bills advanced through a congressional hearing, reflecting the government’s efforts to establish a clear regulatory framework for the rapidly evolving blockchain ecosystem.
    • The first two bills underscored the distinction between securities and commodities regulators, aiming to provide clarity on their respective roles in overseeing the crypto market. These bills were seen as promoting a more conducive environment for blockchain development.
    • Simultaneously, two additional bills focused on crucial aspects of crypto regulation where one delved into stablecoin regulation, a critical topic due to the increasing prevalence of these digital assets. The bill aimed to establish guidelines for stablecoin issuance and management.
    • The final bill concentrated on privacy concerns related to self-custody, recognizing the importance of safeguarding users’ privacy while maintaining the integrity of the blockchain network.
    • Though we do not expect them to pass through the two houses soon, or in their current format, at least the debate is starting.




  • All above factors reinforce our view that from the last quarter of this year, through the halving and for the remainder of next year that crypto has many tailwinds that it has not experienced in the last 18 months and should perform significantly better than other risk assets.


  • We will be positioned to capture that upside but vigilant for the black swan events that seem to plague this market. As always capital preservation is our number one priority but with the environment looking much more favourable, we will be accumulating during any temporary dips over the coming months.


  •  For the first time in 18 months, we encourage investors to focus early on the cryptocurrency market and its recovery rather than waiting for asset values to rise significantly before evaluating incremental involvement.


Register your interest in MHC Digital Asset Fund, MHC Market Neutral Fund or in any other of MHC Digital Group’s products by contacting our team at




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