21Shares Research Newsletter - Issue 111

Market Outlook

This past week, Bitcoin's price has been oscillating between the $39K to $31K trading range and has posted a negative 7-day performance of -8% as of writing.

While the developments in China regarding a crackdown on Bitcoin mining and trading are still unclear, Xinhua News, China's highest-level official media, provided some color on trading activities. Namely, Chinese investors should be allowed to invest in Bitcoin as a virtual commodity at their own risk. However, they also must avoid excessive speculation, if explicitly promoted by service providers. In such a case, a crackdown on these businesses needs to occur to protect investors. This statement gives a more positive and nuanced indication of the current state of bitcoin investing within the Chinese market than an outright ban. Li Bo, the deputy governor of the Chinese Central Bank, shared similar views. In April, Bo mentioned that Bitcoin is an investment alternative, akin to gold, rather than a threatening digital currency to their sovereignty.

Despite this fact, the market sentiment gave a neutral response to this news item due to an enigmatic tweet from Elon Musk, which raised concern over his views on the cryptoasset and whether there could be any selling pressure coming from the entrepreneur or Telsa.

Elon Musk’s bitcoin holdings are unknown, but this tweet has established lingering uncertainty for short-term traders and has significantly waned speculation on derivatives venues. Funding rates for perpetual futures have entered the negative territory, while the futures open interest has reached one of the lowest levels in the past month of $11 billion in total.

With current price levels, the NUPL ratio for Bitcoin, standing for “net unrealized profit and loss” has hit the lowest point of 0.42 since late September 2020. In other words, 42% of Bitcoin investors could likely sell at a profit, while the majority and so the rest of the investor base, 58%, bought the asset at levels higher than ~ $31K. In simple terms, NUPL measures the P&L of bitcoin investors and this metric has been instrumental to gauge investor sentiment in the past years.

On the one hand, the current state of the crypto market has created a buying opportunity as we witness long-term investors accumulating Bitcoin at a discounted price compared to its previous all-time high of $64K. On the other hand, for newcomers, this is their first crypto major correction. The next few weeks will be paramount to keep an eye on whether Bitcoin settles above the $40K mark or trades below $30K. The latter case could exacerbate the selling pressure from short-term investors, while the former case will boost market confidence.

For us, at 21Shares, the fundamentals have not changed. Bitcoin and the long tail of cryptoassets will keep chugging along and, at this stage, will attract fundamental demand. As a testament to our 2021 prediction regarding government adoption, the president of El Salvador is contemplating a law to establish bitcoin as legal tender.

This regulatory advancement is underappreciated and significant legally. If this law passes, it will put Bitcoin on the pedestal of foreign currencies such as the Euro and the Chinese Yuan, which could boost the adoption of Bitcoin in foreign-currency reserves held by central banks and other financial institutions. We believe government adoption will most certainly come from emerging countries with crypto-friendly views rather than from the Western world to start. This announcement has created a wave of government officials in Latin America who have shown support for Bitcoin on Twitter.

Weekly Returns

The returns of the top six crypto assets over the last week were as follows — BTC (-8.01%), ETH (-0.99%), BNB (-0.61%), XRP (-14.67%), and ADA (-9.58%).

Monthly ETP Returns

The performance of our line of ETPs over the last 30 days is as follows: ABTC (-32.16%), AETH (-20.73%), ABCH (-31.46%), AXRP (-31.67%), ABNB (-37.73%), AXTZ (-36.83%), HODL (-29.34%), ABBA (-30.09%), KEYS (-28.52%), SBTC (34.31%), ADOT (-30.68%), AXLM (-26.53%), AADA (31.36%).

Media Coverage

Crypto Valley Journal (CVJ) featured our monthly review for May. You can read it here.

Coindesk mentioned our latest investor letter in their article on the state of the crypto market last week. Read the full article here.

Some of the most important media outlets such as L’Economia (1), Les Echos (2), Business Insider (3), and Le Figaro (4), featured our listing in Paris. Read the articles here 1, 2, 3 & 4.

Next week, on June 14th, our Managing Director, Laurent Kssis, will appear on national television in France as he is invited by B Smart TV to discuss the listing of our Bitcoin and Ethereum products in Paris.

News - 21Shares to Launch UK Bitcoin ETP on Aquis Exchange with GHCO

What happened?

We are happy to announce that our Bitcoin ETP will be one of the first cryptocurrency exchange-traded products (‘ETPs’) available to institutional investors in the UK to trade on Aquis Exchange. This arrangement is in partnership with GHCO, a leading market-maker and liquidity provider specialising in ETFs.

Why does it matter?

Aquis Exchange is a pan-European MTF business based in London and Paris which offers trading in some of the biggest and most liquid stocks across 15 European markets. The ETP will be centrally cleared (CCP) and is engineered like an ETF for institutional investors in the UK to get exposure to Bitcoin via a regulated framework and structure which they are already accustomed to.

The ETP has been designed to provide institutional UK investors with secure and cost-effective exposure to Bitcoin without the associated Bitcoin custody and security challenges. One unit of 21Shares Bitcoin ETP represents exposure to roughly 0.00035 Bitcoin entitlement.

GHCO, an Authorised Participant (AP) for the 21Shares product, will act as the liquidity provider for the Bitcoin ETP, meaning that institutional investors will have access to ample liquidity as easily as the underlying asset. GHCO has been actively trading ETFs and recently started quoting crypto ETPs. It has an unrivalled track record in quoting the tightest spreads, a key demand for institutional investors.

With Aquis Exchange, we will plan to cooperate on bringing more products to institutional investors in the UK, including ETPs in other prominent cryptocurrencies such as Ethereum, Ripple, Tezos, Polkadot, Cardano and Stellar.

Hany Rashwan, our CEO said: “This is the right time to bring our successful crypto ETP to the institutional UK market. Our strong track record and existing institutional reach across continental Europe means that investors can confidently gain exposure to Bitcoin via a liquid and conventional investment product.”

Dan Izzo, CEO of GHCO, added: “ETPs are a key development for investing in crypto assets as it matures as an asset class. We expect more demand for this reliable, easily-accessible infrastructure with deep pools of liquidity – liquidity that we are happy to facilitate.”

Alasdair Haynes, CEO of AquisExchange concluded: “We have been working alongside 21Shares on this project as we are keen to respond to institutional demand in the UK for digital assets.”

The 21Shares Bitcoin ETP will be available on Aquis Exchange for professional investors only. The forthcoming UK launch is expected to take place this summer and follows recent successful debuts on Euronext Paris and Amsterdam on 1st June.

ISIN : CH0454664001 ABTC - 21Shares Bitcoin ETP (man. fees 1.49%) in USD & GBP