21Shares Research Newsletter - Issue 54

Market Outlook

The big news of this week was that of Bitcoin’s third Halving, yesterday on May 11 at 19:23 UTC at block number 630,000. Bitcoin’s block reward dropped from 12.5 BTC to 6.25 BTC — marking a significant milestone in Bitcoin’s history. The last block in the previous epoch was mined by a China-based mining pool called F2Pool, one of the world's largest. Interestingly, the mining pool left the following message inscribed in the mined block — in homage to a similar message inscribed in the first Bitcoin block by Satoshi Nakomoto — which was: "NYTimes 09/Apr/2020 With $2.3T Injection, Fed’s Plan Far Exceeds 2008 Rescue.”

As we’ve described in previous research, the Halving events are important milestones as they are integral to Bitcoin’s key property of its 21 million supply limit — as the graphic below shows.

As key investors like Paul Tudor Jones have argued, Bitcoin is an emerging Store of Value and the Halving is a key focal point to help educate the market about its finite supply and decreasing inflation rate. In the coming weeks, we’ll be releasing a full research report analysing the outcome and the effects of the Halving on the wider market and Bitcoin’s economics. Stay tuned!

This week the crypto asset market was noticeably down driven by a weekend crash of over 10% (for Bitcoin) in the days prior to the Halving. Surprisingly, the day of the Halving (11 May) saw very little volatility but this was likely due to the largely movements during the days before — BTC (-4.39%), ETH (-9.86%), XRP (-11.01%), BCH (-5.13%), and LTC (-10.54%).

On-chain volumes increased for the second week in a row from $2.99B per day to $3.29B — BTC ($2.57B), ETH ($457M), XRP ($133M), BCH ($100M), and LTC ($30.4M).

Webinar - State of Crypto Webinar - May 7, 2020

Last Thursday, May 7th, we hosted another webinar session — breaking down the factors driving the market over the past week and gave a deep dive into the factors influencing the price action of Bitcoin.

In the first part, our senior associates Hansen Wang and Davide Vicini gave an update on the market along with a technical analysis of Bitcoin. Watch the presentation (9 minutes) here.

While, in the second part, our research associate, Eliezer Ndinga, delved into the key elements impacting Bitcoin’s price. Watch the presentation (6 minutes) here.

Next week, two members of the 21Shares team will respectively participate in two conference calls and if your schedule allows, we recommend you to join them with us!

Tuesday May 19th from 5:30 PM to 6:30 PM CET, our Senior Associate, Davide Vicini, will be the main speaker in the webinar held by CornerTrader. Sign up here.

The next day, Wednesday May 20th from 3:00 PM to 3:45 PM CET, in an event hosted by DisruptNetwork, our Director of Business Development, Sina Meier, will share her story on how she broke into the cryptoasset industry. She will also talk about how to pave the way for more women who may want to join the crypto asset industry. Sign up here.

News - Hedge Fund Pioneer Paul Tudor Jones Says He Hold 1-2% of Assets in Bitcoin | CoinDesk

What Happened?

On May 7th, one of the most successful hedge fund managers in the world, Paul Tudor Jones confirmed our predictions made, a day before, by our research associate, Eliezer Ndinga to the journal CoinDesk. Paul Tudor Jones’ fund, Tudor BVI is buying Bitcoin futures as an inflation hedge due to the current monetary policies implemented by the Federal Reserve — creating a total of $3.9 trillion through quantitative easing since last February.

Why Does It Matter?

Amid market uncertainty due to the Coronavirus pandemic, there’s been a significant drop in dollars invested in high-risk assets by large financial institutions. As a new asset class, cryptoassets such as Bitcoin are not immune to similar investment behaviors. But as mentioned by our research team, the digital nature of cryptoassets with a finite and predictable supply — uncorrelated with current monetary and fiscal policies and with transportability that does not require social contact — have the chance to increasingly become an attractive asset. This is in line with Paul Tudor Jones’ Bitcoin investment thesis.

However, it is safe to say that, with the rise of unemployment rates across the world, assuming cryptoasset retail investors lose jobs, along with businesses closing shop due to the COVID19 pandemic, the cryptoasset industry could move more away from being retail-driven towards becoming more institutionalised than ever going forward.

In fact, 56% of people in the United States unfortunately don't have rainy-day savings that would cover 3 months of expenses. If our hypothesis holds true, this could put significant sell pressure in the price action of cryptoassets, especially if retail investors affected by the economic consequences of this pandemic, have portfolios that have performed poorly and can no longer meet their financial obligations. Although, only time will tell, we will closely observe how the future unfolds on that front.

Learn more here.

News - Trump and Chip Makers Including Intel Seek Semiconductor Self-Sufficiency | The Washington Post

What Happened?

The COVID19 pandemic has likely worsened tensions between the United States and China, which could linger after the virus is contained. Yesterday, the Washington Post reported that the White House in talks with Intel and TSMC, is seeking ways to reduce the dependence on Asia for processors and as such build chip factories in the US.

Why Does It Matter?

It is still early in the process to tell how and when the implementation of new US chip factories will happen. Nonetheless, this initiative could bring more decentralization and competition to two quintessential mining segments in the cryptoasset industry.

This could take us to the next Bitcoin halving estimated in 2024, to have new factories up and running, but if implemented successfully, first, this could disrupt Bitmain, one of the main mining rigs manufacturers in the world. And secondly, more US chip foundries could also pave the way for more US-based mining pools and eat up some of the hash-rate share from China estimated at over 60 percent at the moment.

Learn more here.