21Shares Research Newsletter - Issue 75

Market Outlook

The chart below compares the rolling volatility over September of the S&P 500 index, Tesla, and Bitcoin. Over the last month, our research has increasingly been focused on Ethereum’s growing Decentralized Finance (DeFi) segment, Ethereum itself, and the market’s increasing appetite for the ecosystem. This fact has resulted in significant volatility for DeFi-based assets, and to a lesser extent, Ethereum whilst Bitcoin has seen a depressed level of volatility as of late — even paling in comparison to the ever-volatile Tesla, instead of being more comparable to that of the general equity market.

Such a pattern is common and was present during previous cycles where other Ethereum-based assets dominated the market’s attention during the summer of 2017. What is common, however following a temporary relaxation of the market exuberance, is the repositioning of many participants’ portfolios to a larger and more “stable” allocation which may consist of larger amounts of Bitcoin and stablecoins. It’s impossible to accurately predict whether this will happen again but such a move seems likely. This fact alongside the mid-October launch of Filecoin, the $200M+ funded decentralized storage crypto asset launching on an entirely new blockchain, may be the impetus behind an increased mindshare of non-Ethereum based assets — if only temporarily.

Weekly Returns

The weekly performance of the top five cryptoassets was as follows: BTC (1.97%), ETH (3.48%), XRP (4.06%), BCH (3.64%), and LINK (18.64%). The majority of the market was relatively flat when compared to the performance of certain decentralized finance (DeFi) assets such as LINK which experienced a noticeable resurgence after a mostly-disappointing September.

Media Coverage

The newspaper, La Repubblica featured us in an exclusive interview, appearing on the front page of their alternative-investment section. Europe has been the bedrock of organic demand for investing in Bitcoin and other cryptoassets by retail and institutional investors — and the Italian market is climbing up the list among active investors. Read the full article in Italian here.

The recording of the latest State Of Crypto webinar on Ethereum and DeFi led by our CEO Hany Rashwan and our Research Associate, Lanre Ige and Eliézer Ndinga — is available on our YouTube channel. Our investment thesis for Ethereum is that it will continue to act as the settlement layer for decentralized finance, by serving as a Digital Oil. Watch the full video below to understand more here.

Our Head of Southern Europe, Massimo Siano and our Senior Associate, Davide Vicini were invited to a webinar hosted by SIAT - International Federation of Technical Analysts, an international institution, which brings together associations from 24 different nations. The web conference was also attended by Eugenio Sartorelli, SIAT Vice President. Watch the full video here.

News - Bitcoin Sets Record 63 Straight Days Closing Above $10,000 | CoinDesk

What Happened?

For the second time in history, Bitcoin has been trading above the five-digit mark or above $10,000 for more than two months — precisely 65 days as of September 29th. This price support breaks its latest record of 62 days from December 1st 2017 through January 31st, 2018.

Why Does It Matter?

At 21shares, one of our predicted patterns in the wake of the COVID-19 pandemic has been the acceleration of organic demand for Bitcoin as a global digital-native asset uncorrelated with current financial markets around the globe. As the outlier of the past decade, Bitcoin has outperformed most of the traditional indexes such as the S&P 500 (~2.8%) with a return of over 55% since the start of the year. Bitcoin has attracted high-profile investors such as Paul Tudor Jones, MicroStrategy, and ex-Prudential CEO George Ball — combining over hundreds of millions of dollars into Bitcoin. In a profit-maximizing race between assets, Paul Tudor Jones even said he would “chose” Bitcoin if he was forced to bet in his investor letter, The Grand Monetary Inflation.

The price of Bitcoin resisting a fall below the $10K mark is a testament to the ever-increasing adoption of Bitcoin from long-term investors seeking the performance of a risk-on asset with properties such as scarcity to hedge one’s portfolio against prospective inflation. For the record, so far, over 88% of Bitcoin’s maximum supply of 21 million has been mined — in other words, 18.5 million. Over 2.5 million Bitcoin remains to be created through mining over the next 120 years but investors around the world have started to recognize the value-add of Bitcoin within their portfolio. As adoption keeps growing so will the price of the cryptoasset.

Learn more here.