21Shares Research Newsletter - Issue 81

Market Outlook - Bitcoin Experiences Post-Election Pump, JPM Institutions Ditching Gold for Bitcoin, and More

Over the last few weeks, we’ve focused extensively on the effect of the US election and potential Coronavirus stimulus talks on capital markets; and in fact, it’s hard to dispute that they have been the primary drivers of market movements in recent weeks. As the chart below shows, the performance of Bitcoin before and after the 2020 US election has been significantly better than in 2012 or 2016. As of yesterday, Bitcoin has returned around 45% since 30 days before the election, compared to around -12% in 2012 and 14% in 2016.

The conclusive results of the election (despite the protests from some) coupled with the strengthening narrative around Bitcoin as a form of digital gold — recently repeated by one of the most reputable fund managers of all time Stanley Druckenmiller — have been the impetus behind Bitcoin’s strong growth. It’s likely, in the absence of a large exogenous shock to the macroeconomic climate in the shape of pushbacks on a Coronavirus timeline or escalations of the US-China trade tensions, that Bitcoin will enter into 2021 on a strong footing. Unlike previous times where Bitcoin’s price has tested the $16K mark, this growth looks like a sustained push rather than an irrational frenzy given that retail demand for the current market has remained low as the graph below shows.

As a result, it’s likely that this current market will continue to be driven by institutional inflows and potentially marked by noticeably higher levels eventually than Bitcoin’s previous $20K all-time-high, especially when eventually retail inflows do start to come in. With a potentially-improved outlook of the Coronavirus pandemic due to the possibility of reliable vaccines, increased certainty around the US’ political situation, and the continuing strength of Bitcoin’s adoption, it is likely that the last few months of 2020 and the start of 2021 will be especially strong for the asset.

Weekly Returns

Both cryptoasset and wider capital markets experienced a post-election surge which was further pulled along by the news of a Coronavirus vaccine with a 90% success rate being the final stages of development by Pzifer and BioNTech. The pharmaceutical firm aims to receive emergency approval to use the vaccine by the end of the month. The performance of the top five cryptoasset was as follows — BTC (9.45%), ETH (14.41%), XRP (4.60%), BNB (3.84%), and BCH (8.02%).

Media Coverage

Our product suite was mentioned in a research article written by Copper called “The age of the Bitcoin ETP”. Read the full article here.

Our Managing Director of Southern Europe, Massimo Siano, was invited by Finanza Operativa for an interview on the impact of our ETPs on the increasing adoption of cryptoassets across Europe. If you understand Italian, you can watch the full interview here. In the same vein, Massimo was mentioned in the newspaper, La Stampa, to talk about the recent price movements of Bitcoin. Read the full article here.

Our CEO, Hany Rashwan, appeared on the leading crypto podcast, The Break Down, explaining how he was convinced of the potential of Bitcoin when his native country’s, Egypt, currency devalued in 2016. Listen to the podcast episode here.

The leading crypto research firm, Digital Asset Research, published an ETP report listing the institutional-grade products available on the market including 21Shares ETPs. Read the report here.

News - JPMorgan Says Institutions Ditching Gold ETFs for Bitcoin | U Today

What Happened? J.P Morgan, the global leader in financial services, noted in an exclusive report the extent of the exponential growth of capital inflows into institutional-grade products — outpacing that of Gold ETFs over the past year.

Why Does It Matter? Bitcoin has increased by over 100% since the start of the year, remarkably boosted by organic adoption from legendary value investors such as billionaire Stanley Druckenmiller and leading corporations like JP Morgan seeking portfolio diversification.

Last week, Bitcoin surpassed the $15,000 mark for the first time since January 2018. More importantly, despite being historically categorized as a highly volatile asset, over the past 60 days Bitcoin has maintained lower volatility levels than blue-chip US stocks such as Tesla, Apple and Facebook. In the same time frame that Bitcoin’s price has spiked by over 28%, the following US stocks performed quite poorly — Telsa (-9.49%), Apple (-11.54%) and Facebook (-0.69%), Amazon (-5.37%), Microsoft (-1.56%) and the S&P500 (-0.69%).

Another metric confirming Bitcoin’s growing and sticky interest is the Bitcoin’s Relative Unrealized Profit (BRUP), which measures the total number of Bitcoins that were bought below the current price — $15,400 as of November 10. These bitcoins are described as being unrealized profit from the investors who currently hold them.

Over the past six years, whenever this metric reached 80% of all Bitcoins that haven’t taken any profit — we observed large sell-offs as you can see on the chart below. The only exceptions have been the local top last year of 64% and the pandemic-induced market crash of mid-March this year. At current prices, the metric indicates that 56% of all Bitcoins holders have not engaged in profit-taking at the moment, which also demonstrates, based on historical data that there’s more room for growth in Bitcoin’s price going forward — especially after promising news from Pfizer and BioNTech on their COVID-19 vaccine.

Learn more here.