21Shares Research Newsletter - Issue 59

Market Outlook

One of the most promising cryptoassets within the industry and the second largest after Bitcoin is Ethereum (or Ether). We believe that Ethereum, like Bitcoin, is revolutionizing capital markets. Whilst Bitcoin offers an alternative to Gold as the world’s first digital gold, Ethereum will provide the fuel or oil for the entire $250B+ digital asset industry. The market is beginning to price in Ethereum’s next network upgrade, called Ethereum’s 2.0, where the digital asset will transition to using Proof of Stake — an environmentally-friendly alternative to Proof of Work — whilst improving the crypto asset’s transaction throughput and also providing a way for investors to generate yields.

Ether has been one of the best-performing assets this year (78.82%). Partially due to the market beginning to price in Ethereum’s upcoming upgrade, as well as growth in the variety of products, tokens, and applications launched on Ethereum — namely those within the Decentralized Finance (DeFi) segment. Adding 5% of the Ethereum to one’s portfolio would have drastically improved returns as you can see in the chart below.

We believe that Ethereum presents one of the best investment opportunities of this year and we provide an ETP for investors such as yourself to get exposure — the 21Shares Ethereum ETP (AETH; ISIN: CH0454664027). You can read our research primer on Ethereum which is available here.

The crypto asset market experienced a broad pullback in line with the downward movements of the S&P500 and wider capital markets last Wednesday — BTC (-3.36%), ETH (-6%), XRP (-5.49%), BCH (-7.21%), and BSV (-9.27%). U.S. stocks fell the most they had in 12 weeks on June 10 where, for example, the S&P500 fell by almost 6%. The US-centric downturn was likely a response to the rapid pace of the market’s rally since March 2020 and renewed fears of a second wave of the Coronavirus pandemic.

Webinar - How to Value Bitcoin

For those of you who have not had a chance to listen to our researcher Lanre Ige’s breakdown of Bitcoin’s valuation methodologies, have a listen here!

News - Fake KeepKey App Phishing Attempts | Shapeshift

What Happened?

Shapeshift publicly reported a fake version of their KeepKey app — a cryptoasset hardware wallet — asking users for their 12-word seed phrase providing authority over who can spend the cryptoassets in the wallet. Despite Shapeshift’s efforts, last weekend a Twitter user fell prey to a similar phishing attempt, losing the entirety of their crypto portfolio — at least $200K — which they were planning to use to purchase an apartment. Although the ethos of “Be Your Own Bank” or the self-custody of cryptoassets is appealing to the more tech-savvy demographics of this industry, with services like Casa leading the charge, there are risks associated with handling the security and custody of one’s own private keys (analogous to secret codes to a safe) for their Bitcoin. Examples include natural disasters, theft, sophisticated hacks, or simply human error.

Such risks will likely lead to enormous losses in generational wealth. It is estimated that between 1.5 to 6 million Bitcoin or almost $56 billion as of June 16th, 2020, are currently either lost, stolen, or inaccessible. In other cases, unfortunately, Bitcoin investors have passed away without leaving a formal and comprehensible inheritance plan to their heirs — adding at least another $1 billion to the total value of Bitcoin lost and unable to be inherited.

Why Does It Matter?

Bitcoin, the best-performing asset of the last decade, and other cryptoassets represent a once-in-a-generation investment opportunity and the ability to create generational wealth. Despite this fact, the complexities around inheritance have been an overlooked problem hidden in plain sight.

Three years ago, 21Shares’ founders began the mission of launching a suite of fully physically-backed ETPs such as ABTC as a solution to their frustrations with the lack of safe and user-friendly services for their families and other investors to invest in and safely store Bitcoin. At 21Shares, we believe that the most crucial problems to work on are often the ones almost nobody else even tries to solve. Making cryptoassets as easy to buy as stocks — which therefore facilitates easy purchase and inheritance — is undeniably one.

In the same vein, investors in Europe are increasingly becoming attracted to 21Shares ETPs to get exposure to cryptossets through their brokerage account. Additionally, typically brokers provide resources for inheritance which is not, in most cases, possible for those that self-custody their cryptoassets. However, such beneficiaries would not be eligible to claim any rights to one’s account and assets, such as Bitcoin, until the primary beneficiary’s death.

On the final note, 21Shares ETPs are easily traded like stocks in a regulated framework, on SIX Swiss Exchange, Switzerland’s principal stock exchange. Our ETPs are also available on BX Swiss and Börse Stuttgart using institutional-grade security and custody solutions. As such, the design of our products would likely help make the inheritance process possible for investors in such extreme events and provide an opportunity to save them potential millions in generational wealth, when compared to alternatives.

Learn more here.

News - Why Crypto Options: Explaining Growth and Anticipating Trillions | Deribit Insights

What Happened?

Deribit, a leading cryptoasset futures and options trading platform, has taken a hold of over 80% of daily average volume and open interest for existing cryptoasset options contracts. US-based venues for options trading such as CME and LedgerX reached all time-highs in open interest and volume last month. Similarly, Deribit currently has around $1.5 billion in open interest across its Bitcoin and Ether options contracts and 1 million BTC options have been traded with a notional value of $8 billion so far in 2020.

Why Does It Matter?

The maturation in perpetual swap markets as well as the growing liquidity in crypto options have sparked interest in options trading — explaining the market’s continued growth and pace. In traditional markets, options comprise 59% of futures volumes, while BTC options volumes make up only 1% of futures and perpetual swaps volume currently. Deribit Insights anticipates that the market share will significantly continue to grow especially following the rise of crypto options funds, with the market potentially reaching trillions of dollars in their view.

Learn more here.