21Shares Research Newsletter - Issue 80

Market Outlook - The US Election's Effect on Bitcoin, Bitcoin Turns 12-Years Old, and More

Markets over the last week have been spooked and went downhill due to the failure of Senate majority leader McConnel and House of Representatives leader, Pelosi, to reach a deal over a potential stimulus package. According to the Wall Street Journal, the Dow Jones Industrial Average wrapped up its worst month since the market-wide crash of March as Coronavirus restrictions began to come in place worldwide.

The S&P500’s returns dropped as low as -3.56% throughout the week in response to a wholesale drop in market confidence especially among stalwarts such as some of the leading tech stocks. As we mentioned last week, we believe that market uncertainty around the stimulus bill, as opposed to the election, is what drove markets in recent weeks, but with the knowledge that a new stimulus package is likely to be approved by early 2021, uncertainty over the election results, which could be debated, are likely to drive down markets to a larger extent than they have previously.

Focusing a bit more on Bitcoin, one question we may have is: how has Bitcoin performed before and after previous presidential elections? In the following section, we look at the performance of Bitcoin a month before and after the 2016 and 2012 elections to see what indication we can get of its likely performance over the next month — during this especially heated political cycle.

Historically, Bitcoin has ended at a higher level than on the day of the election which suggests that the election could be a positive driver of Bitcoin’s performance. In addition, the cryptoasset’s performance during this election has drastically outperformed its performance in previous elections as Bitcoin continues to become more embedded into financial markets and the global economy.

Weekly Returns

The entire crypto asset market faced a difficult week as wider capital markets fell with concerns of today’s US election and the economic implications of it — BTC (-0.568%), ETH (-4.50%), XRP (-6.75%), BNB (-11.66%), and BCH (-2.60%).

Media Coverage

Last week, Wall Street Italia featured our then all-time high daily performance of over $5 million in trading volume across our 21Shares ETPs. What’s more important is the fact that on October 28th, we already beat our own record by doubling daily volumes to over $10 million! You can read the full article here.

If you understand Italian, our Managing Director of Southern Europe, Massimo Siano, featured in Business Insider discussing the impact of Bitcoin mining on the environment and what the rise of proof-of-stake blockchains would mean for the industry going forward. Find the article here.

News - Happy Birthday Dear Bitcoin: Crypto's First White Paper Turns 12 | CoinTelegraph

What Happened? On a Friday, October 31st, 2008 at around 2 PM EST, an unknown character or group of people in the name of Satoshi Nakomoto, wrote a whitepaper titled "Bitcoin: A Peer-to-Peer Electronic Cash System" and subsequently published its main characteristics and benefits in a cryptography mailing list. You can find the original email here as well as the whitepaper.

Why Does It Matter? The release of the bitcoin whitepaper came approximately six weeks after the Great Financial Crisis (GFC) reached its pinnacle with the collapse of the investment bank, Leman Brothers, which filed for bankruptcy on September 15. In hindsight, it is hard to tell if the launch of Bitcoin was simply a coincidence or a concrete example of marketing prowess on the part of Satoshi Nakamoto due to the fact that the BitcoinTalk account of the anonymous character(s) has been inactive since December 13, 2010. But the timing couldn’t have been better, although Bitcoin was ignored for a year by mainstream media following the launch of the whitepaper.

Bitcoin not only offered a solution to prevent double-spending within an internet-based currency — a long-time and bedeviling flaw in previous digital cash systems, and an unsolved problem in Computer Science — but it also represented a minimum viable product for a new and potentially better financial system free from a central authority.

12 years later, no one has discovered the real identity of Satoshi Nakamoto, not even intelligence and security services such as the FBI or the CIA. But Satoshi left behind an asset akin to a scarce precious metal like gold, which now has a market value of more than $235 billion. In the midst of this health crisis and in an environment of zero to negative interest rates, Bitcoin has stood out as the best performing asset this year and over the last decade, with a global endorsement from corporations and professional investors as a hedge against inflation with risk-on-like returns. Even risk-adjusted, Bitcoin continues to outperform Gold, and US stocks, and bonds.

Learn more here.