21Shares Research Newsletter - Issue 141

Market Outlook

Today, we are thrilled to announce our first product launch in 2022: The world’s first Terra ETP. Want to learn more about Terra? Read our Primer written by our Research Associate, Zoe, here.

Terra is a public blockchain protocol deploying a suite of algorithmic decentralized stablecoins which underpin a thriving ecosystem that brings DeFi to the masses. Terraform Labs developed the Terra network in 2018 by Daniel Shin and Kwon. Kwon now acts as the company’s CEO and is a former Microsoft and Apple software engineer. The company is funded by Binance, Arrington XRP, Polychain Capital, and Huobi Capital, to name a few.

This includes:

✔️ An industry-leading decentralized stablecoin, UST

✔️ A vibrant smart contracts platform

✔️ A thriving cross-chain DeFi environment

✔️ A system built on the cosmos SDK & tendermint consensus

Luna, the native token of the Terra blockchain, has risen almost 8,000% over the last year.

More demand for Terra stablecoins (UST) means more value captured by LUNA - Terra’s decentralized reserve asset.

As of January 2022, Terra is the second largest ecosystem in crypto with $18.81 billion in total value locked (TVL). The Layer 1 first came to prominence in the DeFi space in early April 2021 with the launch of two prominent services, Anchor protocol — a lending and borrowing platform and Mirror — a synthetics assets protocol. Anchor Protocol managed to cross the $1 billion mark in TVL within just six weeks upon the launch.

Weekly Returns

The returns of the top five crypto assets over the last week were as follows — BTC (-2.5%), ETH (-0.99%), BNB (-4.27%), SOL (-4.3%), and ADA (-6.38%).

Net Inflows per 21Shares ETP

The net outflows of our ETPs amounted to -$6.69M in the past week. Find the breakdown of the inflows and outflows per ETP below.

Media Coverage

Last week, Bloomberg featured our co-founder and president Ophelia Snyder in an article that guides readers on where to invest their money in 2022. “Ophelia Snyder of 21Shares and Amun Tokens recommends investing in the infrastructure of the metaverse,” the article reads. “The returns on these assets have been very, very steep. These are very high-volatility products, but they are longer-term technical bets. This is like investing in early Internet protocols,” Ophelia told Bloomberg. The Streets also picked up the feature,

Business Insider published a report about Bitcoin’s price, combining analyses from eight experts; one of whom is our very own Research Lead, Eliézer Ndinga, who revealed to the publication that he looks at the derivatives market to gauge sentiment and volatility of the cryptocurrency.

“To get a sense for volatility, Ndinga suggests looking at DVOL, which is the VIX of the bitcoin market based on the options traded on Deribit, the largest crypto options exchange,” the article reads. “For fundamentals, Ndinga suggests monitoring developer activity. Developers tend to set the tone for innovation at the base and application layers in the industry, he added.”

In other news, our Year In Review got featured in the Swiss Crypto Valley Journal, you can read the full report here.

News - China Pilots Digital Yuan at the Beijing Winter Olympics

What happened?

Ahead of the Beijing Winter Olympics slated to take place in February, China is taking its digital yuan for a spin, trying it out on athletes and their coaches who are eligible to get wristbands that can be used to pay for goods and services at the games. This marks the country’s first major test of the digital currency, which essentially is a Central Bank Digital Currency (CBDC) controlled and issued by the People’s Bank of China, with tech giants like Alibaba and Tencent on board.

Why does it matter?

Many countries are exploring the introduction of CBDCs in their economies, however little to no substantial efforts have been exerted to turn this into a reality. This makes China the first-mover in this space, possibly aiming to topple not only the US dollar but any other currency that is tethered to it – take USD-pegged stablecoins for example. The digital yuan, or the e-CNY, aims to become primarily a tool for remittance, which is one thing it has in common with stablecoins.

The US has so far listed embargoes against 30 countries or territories, all of which make a promising market for the digital yuan which aims to eliminate not only intermediaries but also wiring and foreign exchange fees. Forbes described the transaction to be as easy and cheap as sending an email.

It comes as no surprise that data privacy is posed as the main concern. Like most of the world as it stands, US regulators are wary about cryptocurrencies due to the anonymity and “lack of traceability,” although blockchains are the most transparent systems that ever existed, relying on forensic research software like Chanalysis and Elliptic to track the flow of funds. However, a centralized payment infrastructure that is directly monitored under the chin of the Chinese is a whole other horror story. This comes at a very sensitive time when Congress together with financial regulators explore regulation mechanisms to further control stablecoins or even ban them altogether, as per conversations in the last crypto hearing at Capitol Hill. At 21Shares, we will closely monitor how the future unfolds on that front.