21Shares Research Newsletter - Issue 86

Market Outlook

The market has been on a slow upwards trajectory over this week, following a slight consolidation across the market the previous week. The big news of the week was that 169-year-old insurance firm MassMutual had invested $100M into Bitcoin — representing yet another example of legitimate institutional and corporate buying into the asset due to its nature as an uncorrelated hedge.

Lauded investors such as Stan Druckenmiller, Ray Dalio, and Paul Tudor Jones have publicly spoken on Bitcoin's unique ability as a totally uncorrelated asset and digital gold. We expect 2021 to be a year where more and more institutional investors and corporates invest in Bitcoin because of its diversification benefits. The chart below compares the performance of Bitcoin over the last year to that of the S&P500 and EUROSTOXX50. Bitcoin has returned 164% this year compared to 12.8% for the S&P500, and -7.14% for the EUROSTOXX50.

Even on a risk-adjusted basis, Bitcoin's Sharpe Ratio this year is nearly 6 times that of the S&P500. Risk-averse insurance firms and world-famous investors are getting exposure to Bitcoin, what's stopping you? The 21Shares Bitcoin ETP (ABTC | ISIN: CH0454664001) is the safest and cheapest way for an investor to get exposure to Bitcoin today, and it is available at your favourite broker and exchange.

Weekly Returns

The performance of the top five cryptoassets is as follows: BTC (1.92%), ETH The performance of the top five cryptoassets was as follows: BTC (5.16%), ETH (5.80%), XRP (-10.77%), LTC (7.16%), and BCH (3.63%).

Monthly ETP Returns

The performance of our ETP suite over the last 30 days was as follows: ABTC (15.6%), AETH (22.8%), ABCH (8.4%), AXRP (75.2%), ABNB (5.9%), AXTZ (6.5%), HODL (28.82%), KEYS (19.8%), and SBTC (-15.6%).

Learn more about our products here.

Media Coverage

We are excited to have been shortlisted for an ETF EU 2021 award in the following category — Best New Entrant. Please cast your vote, using the following link, here. Thank you for all your support.

ByteTree featured the 21Shares Bitcoin ETP (ABTC) in their latest investor letter. As stated in their analysis, flows into institutional-grade products are still rising, but at a lesser rate than the previous weeks, which is little surprise as we move into the holiday season. As you can see on the chart below, the unit growth of ABTC has outperformed that of WisdomTree, CoinShares and Grayscale respectively. Read the full newsletter here.

Our 11 products appeared in the December 2020 ETP Snapshot published by Digital Asset Research. You can read the full report here.

Globe News Wire mentioned our policy on the SPARK Airdrop, which occured on December 12th as it is relevant to our Crypto ETPs holding XRP. Read the full article here.

Our Managing Director of Southern Europe, Massimo Siano was interviewed by FinanzaOnline where he explained the race to bitcoin as a store of value alongside the investment case and relevance of our product suite in midst of increased institutional adoption. If you understand Italian, you can watch the full interview here.

News - JPMorgan Sees $600B Demand for Bitcoin From Global Institutional Adoption | Bitcoin.com

What Happened?

Last week, a JPMorgan Chase analyst wrote a note demonstrating the investment case for Bitcoin's growing demand, which they estimated at $600B, following the purchase of the cryptoasset by MassMutual.

Why Does It Matter?

The Long term holder MVRV (LTH-MVRV) metric indicates when the price of Bitcoin is above or below fair value to assess the behavior of long-term investors that hold Bitcoin for at least more than 5 months (155 days). MVRV stands for market value and realized value and is the ratio between the two. While Market Cap serves as a measure of network valuation. Rather than using the last traded price and multiplying by the coins in circulation as seen in Market Cap, Realised Cap approximates the value paid for all coins in existence by summing the market value of coins at the time they last moved on the blockchain.

When LTH-MVRV reaches the red zone (above 20), this generally indicates a global top — the last time it reached above 20 was in December 2017 during the ICO bubble. But as we can see in the chart below, bitcoin's LTH-MVRV is still very far from the red zone.

This a noticeable bullish signal as a longtime skeptic of Bitcoin, J.P. Morgan, estimates a $600-billion demand for Bitcoin in the aftermath of MassMutual's investment into Bitcoin as the leading American mutual life insurance company with over $675 billion in AUM has invested over $100 million in Bitcoin.

At 21Shares we expect new waves of institutional investors and corporations to invest in Bitcoin and support its ecosystem such as Square's $10 million initiative to foster clean-energy-enabled Bitcoin mining. This intensified adoption and recognition will benefit from the fact that there’s a shift in narrative overly positive with regards to Bitcoin as the cryptoasset historically suffered from reputational damage. For example, last week, the Chinese state media indicated that the rise of Bitcoin will cause downward pressure on Gold, while in the same vein, Morgan Stanley Investment Management’s chief global strategist published an opinion article on the Financial Times questioning whether Bitcoin’s rising acceptance could overthrow the dominance of the US Dollar — and more.

In addition, historically unregulated products have dominated the market in terms of volume and aggregated open interest, but the share of regulated products has progressively increased over the last few years and this trend will continue. As of early December the combined AUM of institutional-grade products currently accounts for 2.52% of the entire crypto market value. Due to counterparty risk and fiduciary responsibility, institutional engagement is expected to grow in tandem with the expansion of regulated financial products such as the 21Shares product suite or the Ethereum ETF that went live in Canada last week.

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