21Shares Research Newsletter - Issue 84

Market Outlook - Bitcoin Reaches All-Time-Highs, Bitcoin is Winning the COVID-19 Monetary Revolution, and More

Over the last week Bitcoin reached all-time-highs, passing the levels last seen in December 2017 on exchanges like Bitstamp and Coinbase and according to data aggregators like Bloomberg and CoinGecko.

Bitcoin reaching all-time-highs was matched by some of the largest OTC desks within the space reporting record volumes and competing assets, such as Gold, seeing some of their large weekly product outflows on paper. For the third time over the last month, Bitcoin has neared or even reached all-time-highs and then faced significant resistance at first due to rumours of U.S. Treasury Secretary Mnuchin planned to rush out new regulation concerning crypto wallets before the end of his term and then due to large sell orders placed on exchange at previous all-time-high levels.

Despite the market’s fight against resistance, interest in cryptoassets and Bitcoin has only gotten stronger on both the retail and institutional fronts. In addition, the potentially negative reaction to the US regulatory news has been offset by the realization that similar laws have passed in crypto-friendly markets like Switzerland.

It’s likely that Bitcoin will break the all-time-high resistance consistently within the next week or so as momentum builds around investing in the asset at such levels.

Weekly Returns

The performance of top five cryptoassets was as follows — BTC (7.03%), ETH (1.03%), XRP (9.56%), LTC (-0.502%), and BCH (-1.17%).

Monthly ETP Returns

The chart below shows the performance of our ETP suite over the last month — ABTC (44.9%), AETH (50.5%), ABCH (16.2%), AXRP (178.5%), ABNB (-2.6%), AXTZ (30.5%), HODL (58.4%), ABBA (44.4%), KEYS (52.8%), SBTC (35%).

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Media Outlook

Our CEO, Hany Rashwan appeared on Skynews for those of you who understand Arabic. Watch the full interview here.

Our Research Associate, Eliézer Ndinga featured in Crypto Briefing discussing the rising adoption of Bitcoin due to the presence of institutional-grade products similar to 21Shares ETPs. Read the full article here.

Eliézer was quoted as saying the following: “This market has been driven by a rise in institutional adoption to the extent that legendary hedge fund manager Ray Dalio, historically a Bitcoin skeptic, has begun to wonder whether he’s missing something about Bitcoin. As a result, more issuers are entering the industry to offer institutional-grade products to financial institutions.”

21Shares was mentioned in an analysis published by Coindesk as the price of Bitcoin briefly broke its all-time high record. Read the full article here.

To quote from the article: “Ongoing capital inflows into the Grayscale Bitcoin Trust and other exchange-traded products (ETPs) issuers, including 21Shares and CoinShares, are evidence the institutions in traditional financial markets are pouring money into bitcoin, Vinokourov said.”

News - Bitcoin Is Winning the COVID-19 Monetary Revolution | Bloomberg

What Happened?

Renowned financial historian and previous Bitcoin-skeptic Niall Ferguson wrote an opinion piece on Bloomberg where he broke down all the factors confirming the fact that Bitcoin is winning what he calls “the COVID-19 monetary revolution”. In the piece he even advised the nascent Biden’s administration to consider the benefits of adding Bitcoin to the US financial system.

Why Does It Matter?

The current health crisis and macro environment of zero to negative interest rates have significantly accelerated the adoption and importance of digital services and, most importantly, of Bitcoin. What might have taken years has been achieved in less than a year as our Research Associate, Eliézer Ndinga reported to CoinDesk in the wake of the COVID-19 pandemic: “the digital nature of cryptoassets with a finite and predictable supply uncorrelated to traditional monetary and fiscal policies with transportability that do not require social contact, have the chance to increasingly become an attractive asset.”

The cryptoasset came out as a stealth-mode monetary system, free of censorship and central authority, launched at the pinnacle of the great financial crisis, six weeks after the collapse of Lehman Brothers on October 31st 2008. A year later in mid October 2009, Bitcoin was worth exactly $0.00099 as Martti Malmi, an early Bitcoin developer, paid $5.02 for 5,050 BTC via PayPal in what is known as the first recorded Bitcoin trade to seed a new bitcoin exchange site called New Liberty Standard.

Despite the fact that Bitcoin has suffered reputational damage due to some early nefarious use cases, which today account for less than 1% of all activity within the crypto industry, 12 years later Bitcoin has demonstrated characterics akin to digital gold. Today the asset is considered a long-term investment by legendary investors and financial institutions such as the investment giant, AllianceBernstein. As it has responded to increased adoption from both retail and institutional investors, Bitcoin is now worth hundreds of billions of dollars in market value — surpassing the market cap of Mastercard and the largest ETF in the world, SPY.

The long-awaited launch of Facebook's Libra in Q1 next year will undoubtedly have a positive impact on the crypto industry overall with a new and regulated stablecoin whose value is pegged to the US dollar. This will facilitate commercial and regular transactions to over 2 billion of Facebook’s users. However, if widely adopted Libra and stablecoins alike will potentially threaten fiat-currencies sovereignty as warned by ECB President, Chrisitne Lagarde, which on the flipside will indicate the importance of a censorship-resistant monetary system like Bitcoin which can exist alongside existing fiat currencies.

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