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Q1

Q1 2024 Newsletter

The first quarter of 2024 marked a massive resurgence not only in the crypto markets, but also for Parkour. The year started off with the momentous decision to approve 11 applications for a spot Bitcoin ETF. This historic decision, long anticipated by the market, signifies a new era for Bitcoin and the broader cryptocurrency industry. At the same time, Parkour finalized the sale of our FTX claim for 75% of the original face value of funds. While the FTX case has been progressing, it may still take years to resolve. This option offered a guaranteed exit with immediate access to funds.

The approval of the Bitcoin ETFs, catalyzed a notable surge in prices, and brought widespread enthusiasm and optimism causing Bitcoin to break $50k for the first time in over 2 years. However, the subsequent “sell the news” phase saw prices rapidly retract from their peak to $40k. A move of -25% in only a couple of days. Parkour was able to anticipate this pullback by initially withholding the funds from the FTX sale out of the market and was able to use this opportunity to get allocated at opportunistic prices. This tactical move, along with identifying promising new crypto projects early in the cycle allowed Parkour to generate an approximate +95% return during Q1. Parkour is continuing to monitor and identify developments in the cryptocurrency space and is eagerly looking forward to the remainder of 2024.

Bitcoin ETF Approval and Inflows

Since the approvals in early January, the Bitcoin ETFs witnessed unprecedented growth and enthusiasm. BlackRock’s Bitcoin ETF added a staggering 12.6K BTC in a single day, with total inflows surpassing $10 Billion in only 37 days – the fastest to reach that mark of any ETF ever​. The surge in inflows was not just limited to BlackRock, as the broader market for Bitcoin ETFs also experienced significant inflows, including a record influx of over $1 billion in a single day.

The launch of spot Bitcoin ETFs in the U.S. has been a game-changer, providing institutions with convenient entry points into the digital assets market. Moreover, the success of these ETFs could serve as a catalyst for the approval and launch of other cryptocurrency ETFs. The broader adoption of Bitcoin and Bitcoin ETFs also increases the interest of market participants into other cryptocurrency projects as investors look to what else the space has to offer.

DePin & AI

One emerging sector of crypto innovation has been Decentralized Physical Infrastructure Networks (​​DePIN). Decentralized physical infrastructure projects utilize blockchain technology and crypto economics to motivate users to allocate their capital or resources towards a decentralized network. This aims to achieve more efficiency at scale than centralized counterparts.

DePIN projects can be broadly categorized into networks of physical or digital resources, each encompassing various sub-sectors. Regardless of their focus, whether it’s WiFi sharing, storage, sensors, or even computational power, these projects typically operate under similar models with centralized market structures. However, individuals in these decentralized networks benefit directly from sharing their resources, and decentralized networks are able to optimize efficiency by making use of unused resources. For example, decentralized storage can be cheaper than centralized storage by over 70%. 

As cryptocurrencies continue to become more mainstream, DePIN projects will continue to expand. While DePINs might not fully replace traditional networks anytime soon, they offer a compelling alternative and incentive. Many projects are even teaming up with traditional companies to broaden their reach and provide efficient underlying technology to more mainstream products. Imagine using a familiar Apple or Google interface without realizing the underlying technology is powered by DePIN and blockchain. This collaboration would ease users into DePINs by bypassing the complexities of crypto and blockchain. Ultimately, DePIN products could offer the benefits of Web2 (user-friendliness) alongside the transparency and cost-efficiency of blockchain. This could create a future where traditional networks and DePINs coexist.

Macroeconomic Factors – Federal Reserve

While technological development in the crypto space is constantly advancing, the macroeconomic environment still has a massive impact on crypto project performance. Therefore, it is imperative to follow the actions of the Federal Reserve as well as track the global economy.

Since last August, the Federal Reserve has maintained the benchmark rate within the range of 5.25%-5.50%, reinforcing a “higher for longer” stance to combat inflation. This adjustment in expectations may be one factor as to why there has been a short-term pullback in crypto and equities as investors recalibrate their outlooks based on a potentially slower pace of rate reductions. The Federal Reserve continues to balance its commitment to controlling inflation with the need to support economic growth. Despite recent market dynamics, the Fed still plans to implement multiple rate cuts within the year. This eventual rollback of restrictive monetary policy will provide another tailwind for the crypto market.

Macroeconomic Factors – Israel and Iran Conflict

On April 13, 2024, tensions between Iran and Israel escalated dramatically when Iran launched a significant military strike against Israel. This attack involved over 300 drones and missiles, including ballistic and cruise missiles in response to an Israeli airstrike a few weeks prior. Israel’s defense systems, aided by international allies like the US, successfully intercepted most of the projectiles. However, this still provoked yet another response from Israel, targeting an air defense radar site near Isfahan, Iran. This action was intended to showcase Israel’s capabilities without substantially escalating the conflict further. The strike was reported to have successfully destroyed the targeted site, demonstrating a controlled use of force aimed at deterring further aggression while avoiding broader regional destabilization​.

The initial reaction to this conflict was fear. Cryptocurrency markets initially experienced a sharp sell-off, reflecting uncertainty among investors. This is a common response in financial markets where risky assets like cryptocurrencies are quickly liquidated in favor of safer investments during times of crisis. However, as the immediate fears subsided and Israel’s measured military response became apparent, cryptocurrencies along with other markets began to recover.

Global crisis events often invoke peak fear in all markets indiscriminately. However, after the dust settles, it’s imperative to note which markets the conflict will affect directly. At times like this, Bitcoin and other cryptocurrencies can be seen as safe-haven assets as they are a global currency and are able to operate outside of geopolitical influence. While the initial reaction is fearful, these types of events can often prove to be the best buying opportunities.

The Halving and Supply Dynamics 

Another major event this month was the long awaited Bitcoin halving! The halving occurred on Saturday, April 20th, marking another significant milestone in the cryptocurrency’s history. Scheduled approximately every four years, this event saw the rewards for mining new blocks cut in half from 6.25 BTC to 3.125 BTC. With each halving, the supply of new bitcoins entering circulation decreases, contributing to the digital currency’s scarcity and disinflationary nature. As a result, the potential for a supply shortage becomes more pronounced, particularly as demand for Bitcoin continues to grow among institutional investors, corporations, and retail traders alike.

Post-halving, Bitcoin will become a harder asset than Gold. Bitcoin’s inflation rate will be cut in half –  from 1.7% (around the same as for gold) to 0.9%. Bitcoin will have a lower inflation rate than Gold for the first time in history. Past halvings have sparked significant price increases and the upcoming halving is expected to have a positive influence on Bitcoin’s price.

This anticipated scarcity has historically fueled positive rallies in the cryptocurrency market, underscoring the impact of supply dynamics on Bitcoin’s price. The dwindling supply dynamics, combined with the new spot ETF demand creates a high potential for a significant rally post-halving as these market factors find a new equilibrium. 

Looking Ahead into 2024

As we look forward towards the next phase of the crypto market, several implications become clear. Firstly, the integration of decentralized computing and DePIN within the blockchain space is poised to unlock new efficiencies, functionalities, and market opportunities, heralding an era of innovation and growth. Secondly, the success of Bitcoin ETFs and the potential for new ETFs across different cryptocurrencies will likely continue to attract a diverse range of market participants, further embedding digital assets within the global financial system.

Finally, the Bitcoin halving event is set to play a pivotal role in shaping the market’s direction, potentially catalyzing a new cycle of growth and value appreciation across the crypto space. This confluence of factors—technological advancements, regulatory progress, and macroeconomic conditions—positions the crypto market on the cusp of a transformative era, promising an exciting journey ahead for investors, innovators, and enthusiasts alike.

As we look forward, the integration of blockchain technologies with broader financial and technological ecosystems hints at a future where digital assets play a central role. The path ahead is ripe with opportunities for innovation, growth, and will redefine what it means to engage with financial markets in the digital age.

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