21Shares Research Newsletter - Issue 68

Market Outlook

A lot of the crypto market’s current momentum has been driven by the growth of Ethereum’s decentralized finance (DeFi) ecosystem — a group of assets and applications that aim to finance in a decentralized manner, whether it be lending, borrowing, saving, or trading. The chart below compares the returns of Bitcoin and Ethereum over the past 90 days to a number of DeFi assets.

As you can see, the return profile of most DeFi assets has been multiples ahead of the two stable large-cap crypto assets. This is to be expected given that the DeFi sector has grown from zero to being worth billions of dollars over the past three years and is still much smaller than other aspects of the cryptoasset market. Interestingly, as was the case during the 2017 bull market, the growth of a new segment of the industry tends to have a positive impact on the large-cap coins as well — due to their use in various aspects of exchange trading infrastructure and, in Ethereum’s case, as a “unit of account” for many DeFi applications.

While DeFi’s returns have been enticing, the amount of risk that an investor would have to take on to get exposure to the sector is also multiples ahead of Bitcoin and Ethereum. Given that fact Ethereum does act as a proxy for DeFi’s continued growth, Ethereum offers a good way to make a hedged bet on the continued growth of the sector.

Weekly Returns

Large-cap cryptoassets were all noticeably up over the last week and a new decentralized finance asset, Chainlink (LINK), has surged into the top five assets by market capitalization after a period of exceptionally strong performance. The top five crypto assets performed as follows: BTC (8.10%), ETH (14.17%), XRP (11.72%), LINK (29.93%), and BCH (13.25%).

Media Coverage

21Shares has crossed the $100-million mark of assets under management, as our suite of exchange-traded products (ETPs) increasingly satisfies the ever-growing demand for investors across Europe who want exposure to the cryptoasset market (e.g. Bitcoin, Ether, Tezos, etc.). We are very proud of the relentless hard work of the 21Shares team. This milestone was covered in several media outlets such as The Block, Financial News, and ETF Stream.

Our next goal is $1B. Learn more about our ETPs here.

Our researcher Lanre Ige was mentioned in Cointelegraph discussing the benefits of our digital asset ETPs for institutional investors looking for Bitcoin exposure.

“People don’t buy the native asset because many less sophisticated investors aren’t familiar with Coinbase/Kraken and want to invest through brokers they understand and keep the rest of their wealth in ... Buying Bitcoin through such a wrapper would allow an investor to benefit from many tax advantages in the same way investing in 21Shares’ suite of ETPs likely would.”

News - Tesla and Bitcoin: The Most Viewed Assets in America | TradingView

What Happened?

TradingView, the leading social network for traders and investors in the US, reported that Tesla and Bitcoin were the most popular assets on its website throughout July. Interestingly, TradingView’s data also shows that traders based out of the West Coast states of California, Washington, and Oregon have a clear preference towards Bitcoin. This should not come out as a surprise as both Tesla and Bitcoin are up more than 270% and 65% respectively since the start of this year.

Why Does It Matter?

TradingView received over 96 million web visitors throughout July according to the web analytics platform SimilarWeb, which puts Bitcoin in the spotlight in the traditional financial world. As the best-performing asset of the past decade, Bitcoin never ceases to exceed expectations, with its performance of more than 165% since the market crash in mid-March initiated by the early spread of the COVID pandemic across Europe.

As such, investors around the world and in this case in the US, such as ex-Prudential CEO George Ball have started to recognize the lucrative benefits of adding a digital-native and uncorrelated asset like Bitcoin to their portfolio. This is especially the case in a world where social distancing is enforced and, most importantly, amid uncertainty around economic recovery with emerging spikes in coronavirus cases across the globe.

Learn more here.