Bitcoin Slumps Amid ETF Rejection, Market Caution

Market Outlook

The overall market sentiment has turned cautious in light of the rejection of a Bitcoin spot ETF application in the US. This news item has triggered profit-taking amongst short-term investors, as evidenced on the Bitcoin blockchain. As a result, Bitcoin dropped by 8% in the past seven days. As of November 15th, approximately 90% of the selling pressure came from investors who bought Bitcoin over the past 12 months. At 21Shares, we spotted the same pattern with sell orders filled from value investors who bought the cryptoasset 3 to 5 years ago. The silver lining is this cohort of investors only represented less than 4% of the selling pressure in the same time frame. This is a testament that the fundamentals and innovation of Bitcoin and the long tail of the crypto market have not changed in the eyes of long-term investors.

At 21Shares, we believe that the crypto market is on the path to experiencing a multi-decade hyper-growth akin to the SaaS industry after the Dot Com boom, despite potential black swan events in the interim, which could trigger higher downside volatility levels. Although less than 2% of the world’s population has access to crypto, it has been clear for us that this industry will re-architect how we think about money, financial services, and the broader range of internet services we use regularly.

Bitcoin keeps innovating as a base layer with its undeniably most significant upgrade since 2017 and arguably of all times, dubbed Taproot. Taproot brings enhanced user privacy, transaction efficiency, and automation efficiency, benefiting both the Bitcoin blockchain and the Lightning Network. Find below the building blocks of Taproot.

Source: Kraken

Weekly Returns

The returns of the top five crypto assets over the last week were as follows — BTC (-4.98%), ETH (-3.51%), BNB (-0.19%), XRP (-6.8%), and ADA (-11.3%).

Net Inflows per 21Shares ETP

The net inflows of our ETPs combining $38.78 million in the past week, were as follows: AADA(+$ 14,839,052.08), ABBA(+$ 4,140,186.25), ABCH(+$ 641,459.27), ABNB(+$ 930,124.39), ABTC(-$ 9,755,349.71), ADOT(+$ 4,607,972.96), AETH(+$ 11,922,022.64), ASOL(+$ 2,867,837.50) AXLM(-$424,627.33), AXRP(+$2,198,350.03), HODL(+$6,596,018.23), HODLV(+$575,006.00), HODLX(+$1,248,296.09), MOON(-$1,602,058.49)

Media Coverage

We are so proud to have made it to the first runners up at the Swiss ETF Awards 2022 scheduled to take place on the 2nd of December. 21Shares has been shortlisted as the best new ETF Issuer. You can find our Head of Switzerland Sina Meier in the photo above on the left.

For a thorough recap on what happened in the crypto industry last month, from Bitcoin Futures, NFTs to Layer 2s, our monthly review is out and you can see it here. On another note, our Q3 review is turning heads in Italy, after it got featured on the country’s second biggest daily financial newspaper, MF.

In other news, our Research Lead Eliezer Ndinga got featured in a report by Capital.com that discusses how functionality and growing NFT sales are driving ETH’s returns. “Art, music, sport, businesses are building on Ethereum. NFTs are here to stay, and they could potentially disrupt the music industry,” Capital.com quoted Eliezer.

Have you checked out our latest State of Crypto? Click on the cover below and download your issue!

Once you click on the cover page: For web users, click on ‘print’ at the bottom right-hand side of the page. For mobile users, click on ‘continue to website’, then click at the top right-hand side on the three dots, then click ‘direct download’.

News - Biden Signs Infrastructure Bill, But Anti-Crypto Provisions Can Still Be Fixed

What happened?

US President Joe Biden just signed a controversial bill this morning aiming to collect up to $28 billion over a decade through more crypto taxation to finance improvements of roads, bridges, and transportation systems. Primarily, crypto allies in the Congress are concerned about section 6050I of the bipartisan legislation, which criminalizes failing to report digital asset transactions over $10,000 to the IRS. Although passed, the Infrastructure Bill is allegedly still not taken into effect, which essentially buys Congress more time to make the required amendments.

Why does it matter?

Section 6050I would be impossible to comply with, according to this report by Proof of Stake Alliance. Issued in 1984, the section in question was meant to discourage in-person cash transfers and encourage the use of financial institutions for large transactions. Evidently, a law that was written for fiat currencies, decades before Bitcoin was invented, is difficult to apply to the transfer of any “digital representation of value” using distributed ledger technology, which includes NFTs.

In most situations, the receiving person or entity would not be in the position to report the required information, nonetheless miners, stakers, lenders, decentralized application and marketplace users, traders, businesses and individuals are all at risk of being subject to this reporting requirement. Although the US Treasury said on TV that it wouldn’t target miners and hardware developers, the US crypto community is concerned that this promise isn’t legally binding and doesn’t prevent new administrations from going after them in the future.

At 21Shares, we’re optimistic that the upcoming congressional elections would bring about a championship for crypto rights and put a fix to these anti-crypto provisions. We’ve been both anticipating and witnessing a brain drain of US-based crypto companies to start moving to places such as Canada, Switzerland, Germany and Singapore; the most sought after locations with regulatory-friendly frameworks advantageous to crypto operations.