21Shares Research Newsletter - Issue 90

Market Outlook

Finland announced on Thursday, January 7th, their right to sell over $69 million worth of Bitcoin which was seized from drug traders. Although there is no publicly-available evidence to this sale, we suspect it became part of the bearish sentiment over the weekend for short-term traders. Yesterday, the crypto market experienced a correction of as much as 26%, starting on Sunday, January 10th as a derivative-driven flash crash caused by weekend traders on unregulated crypto exchanges becoming too levered on the way up to $40K which then lead to a subsequent cascade of liquidations of over $2 billion.

This has been exacerbated by issues with some other crypto exchanges like Coinbase which experienced service outages preventing some users' bids from going through — making the selling pressure even more noticeable due to price discrepancies against other exchanges. On top of that, the issue with Coinbase played an important role in fueling the market downtrend in the futures markets as many derivatives exchanges rely on Coinbase’s price feed for their index calculations. To add to the bearish sentiment over the last two days, the fact that the CIO of Guggenheim argued on Twitter that the price surge of Bitcoin was not sustainable in the near term further created to some extent panic selling for market participants that bought recently in the past weeks.

For less than an hour, Bitcoin traded as low as $30.6K but has since retrieved its losses and at the time of writing this research note, Bitcoin is valued at around $34K. In retrospect, Bitcoin broke the $30K mark for the first time in history on January 2nd this year and has returned nearly 400% since the start of 2020.

For the record, although past performances are not always an accurate indication of future results, on January 5th 2017 Bitcoin dumped 20% after recently making a new all-time-highs of over $1K after a 3-year bear market Bitcoin, it then appreciated 2,500% by the end of that year. Yesterday, January 11th 2021, Bitcoin dropped by more than 20% after recently breaking a new all-time high of $30K after a 3-year bear market. While the previous bull run of 2017 was mostly retail-driven, this time it is clearly organic demand and institutional driven and most importantly based on macroeconomic circumstances.

Weekly Returns

Finland announced on Thursday, January 7th, their right to sell over $69 million worth of Bitcoin which was seized from drug traders. Although there is no publicly-available evidence to this sale, we suspect it became part of the bearish sentiment over the weekend for short-term traders. Yesterday, the crypto market experienced a correction of as much as 26%, starting on Sunday, January 10th as a derivative-driven flash crash caused by weekend traders on unregulated crypto exchanges becoming too levered on the way up to $40K which then lead to a subsequent cascade of liquidations of over $2 billion.

This has been exacerbated by issues with some other crypto exchanges like Coinbase which experienced service outages preventing some users' bids from going through — making the selling pressure even more noticeable due to price discrepancies against other exchanges. On top of that, the issue with Coinbase played an important role in fueling the market downtrend in the futures markets as many derivatives exchanges rely on Coinbase’s price feed for their index calculations. To add to the bearish sentiment over the last two days, the fact that the CIO of Guggenheim argued on Twitter that the price surge of Bitcoin was not sustainable in the near term further created to some extent panic selling for market participants that bought recently in the past weeks.

For less than an hour, Bitcoin traded as low as $30.6K but has since retrieved its losses and at the time of writing this research note, Bitcoin is valued at around $34K. In retrospect, Bitcoin broke the $30K mark for the first time in history on January 2nd this year and has returned nearly 400% since the start of 2020.

For the record, although past performances are not always an accurate indication of future results, on January 5th 2017 Bitcoin dumped 20% after recently making a new all-time-highs of over $1K after a 3-year bear market Bitcoin, it then appreciated 2,500% by the end of that year. Yesterday, January 11th 2021, Bitcoin dropped by more than 20% after recently breaking a new all-time high of $30K after a 3-year bear market. While the previous bull run of 2017 was mostly retail-driven, this time it is clearly organic demand and institutional driven and most importantly based on macroeconomic circumstances.

Monthly ETP Returns

The performance of our line of ETPs over the last 30 days is as follows: ABTC (64.7%), AETH (63.4%), ABCH (52.7%), AXRP (-46%), ABNB (34.1%), AXTZ (13.5%), HODL (51.9%), ABBA (63.6%), KEYS (58.5%), and SBTC (-47%).

Learn more about our products here.

Media Coverage

Our Research Associate, Eliézer Ndinga featured in Coin24, where he gave his perspective on the patterns and implications for the crypto industry in 2020 alongside his expectations for 2021. Read the full article here.

Our Research Associate, Lanre Ige was interviewed by Trending Topics, where he explained why Bitcoin has become attractive to institutional investors, the dangers of investing in crypto, and why Bitcoin is considered digital gold. Read the full article here.

“These companies and other stakeholders are investing in Bitcoin because they are increasingly convinced by the thesis of Bitcoin as a sort of digital Gold. The combination of both macroeconomics factors such as the Coronavirus as well as microeconomic, Bitcoin-specific factors such as improved institutional-grade infrastructure, such as our ETPs and Futures, and large steps forward in the regulation of the industry. Companies and investors see investing in Bitcoin as an alternative and complement to investing in Gold and as a systematic hedge against both monetary inflation and geopolitical instability as we’ve seen across the world in 2020." — Lanre Ige.