Cryptoassets of the Month: December 2022

Every month, our research team will present the cryptoassets of the month that increased or dropped in value by more than 15%. With a data-driven approach, we highlight the most important developments and events causing price movements.

Figure 1 – 30-Day Performance: Cryptoassets of the Month vs. Traditional Asset Classes

Data Source: 21Shares, Messari, and Yahoo Finance, from 30-Nov-2022 to 31-Dec-2022 (Close Price)

Avalanche (AVAX)

Avalanche's native token AVAX traded down 17.19% over the past month, despite an exciting network upgrade dubbed Banff 5. Banff 5 rolled out Avalanche Warp Messaging (AWM), enabling Subnets to communicate with each other easily and creating a natively composable blockchain-enabled ecosystem. In addition, Core – Avalanche's all-in-one Web 3 wallet – integrated Coinbase Pay, giving users more ways to deposit cash and convert it to crypto.

XRP Ledger (XRP)

XRP traded down 17.29% over the past month. On December 2, the SEC filed a brief supporting their motion for a summary judgment, arguing that Ripple did not dispute several facts, including that the crypto firm's offerings are "investment contracts." The SEC alleges Ripple raised $2 billion for itself via XRP's sale in 2013. If Ripple were to lose the case, XRP would be deemed a security. On another note, Coinbase announced that Coinbase Wallet would stop supporting the XRP Ledger in February 2023 due to the network's low usage.

Binance Coin (BNB)

BNB traded down 18.13% over the past month amidst a series of events surrounding the Binance crypto exchange. On the week of December 12, Binance saw $13.7 billion of outflows, with CEO Changpeng Zhao stating that he welcomed the "stress test." On December 16, French auditing firm Mazars said it was temporarily ceasing all work for its crypto exchange clients, including Proof-of-Reserves reports for Binance. In addition, Binance US attempted to acquire bankrupt crypto lender Voyager Digital's assets a few days later. However, the SEC objects to Binance.US's deal to buy Voyager Digital. On a more positive note, Flipside Crypto data revealed that as of December 16, BNB Chain was the Layer 1 blockchain with the most daily active addresses, at 1.1 million.

Polygon (MATIC)

Polygon's native token MATIC traded down 18.76% over the past month despite exciting developments. On December 1, Polygon zkEVM (i.e., a virtual machine compatible with Ethereum and zero-knowledge-proof computation) began an audit to evaluate its security. With the audit underway, Polygon launched the final testnet before mainnet on December 21. This milestone is significant as zkEVMs have the potential to scale Ethereum's network capacity by orders of magnitude, accelerating Web 3 adoption. Polygon's NFT ecosystem also saw clear traction – on December 25, y00ts, a popular NFT project on Solana, announced that it would officially bridge to Polygon in Q1 2023.

Fantom (FTM)

Fantom's native token FTM traded down 19.09% over the past month despite ecosystem traction. From December 12 to January 2, the Fantom Foundation leveraged Gitcoin's grants protocol for an initial funding round for projects building within the Fantom ecosystem. Through the partnership, Fantom builders secured 300,000 FTM or over $65K as of writing, donated by 16,344 unique contributors across 85 projects. On another note, on December 12, Dune Analytics – a community-driven platform to access crypto data easily – integrated the Fantom blockchain.

Aave (AAVE)

Aave (AAVE) traded down 20.50% over the past month. On December 23, Aave Companies founder and CEO Stani Kulechov announced that they would release a public testnet at the beginning of January for GHO – a fully-collateralized dollar-pegged stablecoin governed by AAVE holders. In addition, a "temp check" proposal to deploy Aave V3 on Metis passed on December 19. Aave V3 is already live on several Layer 2 platforms, including Arbitrum, Optimism, and Polygon.

Stellar (XLM)

Stellar's native token XLM traded down 20.94% over the past month. Stellar is an open-source payment network that allows regulated financial entities to issue fully-backed stablecoins. On December 15, the Stellar Development Foundation announced the launch of Stellar Aid Assist, a new disbursement program utilizing the Stellar network and enabling aid organizations to deliver cash assistance to vulnerable populations efficiently and transparently.

Polkadot (DOT)

Polkadot's native token DOT decreased by 21.06% over the past month. On December 20, Syntropy – a fully distributed routing protocol – announced a decision to stop working with the Substrate framework, used to build parachains within the Polkadot ecosystem. In this regard, the Syntropy team will transition to the Cosmos ecosystem. As of December 30, 74 parachains have won an auction on Polkadot or Kusama, a "canary" network independent of Polkadot but running on the same software as a proving ground for new code.

Cardano (ADA)

Cardano's native token ADA traded down 22.88% over the past month. Although December was a quiet month for the Cardano ecosystem, some exciting developments are anticipated in early 2023. Djed, Cardano's first decentralized stablecoin, will go live on the network in January. Cardano developer Emurgo, which functions as Cardano's official commercial arm, also has plans to issue a dollar-pegged stablecoin called USDA on the smart contract platform in Q1 2023.

Decentraland (MANA)

Decentraland (MANA) traded down 27.51% over the past month. Despite the negative market sentiment, the user-owned metaverse continues to ship new features. On December 8, Decentraland enabled LAND (virtual land NFTs) owners to rent their property on the platform, effectively becoming "virtual landlords." The rental system uses a combination of signatures stored in a server handled by the Decentraland Foundation (off-chain) and Ethereum transactions (on-chain).

Chainlink (LINK)

Chainlink (LINK) traded down 27.66% over the past month. On December 6, LINK staking went live to bring a new layer of security to the decentralized oracle network, locking 7 million tokens valued at $51 million within the first 30 minutes. In addition, Chainlink launched "NFT Floor Price Feeds" in collaboration with Coinbase Cloud on Ethereum to provide a robust measure of an NFT collection's floor price. Via these feeds, Chainlink's time-tested oracle infrastructure could help integrate NFTs with DeFi applications.

Solana (SOL)

Solana (SOL) traded down 29.59% as the platform experienced the second-order effects of the FTX/Alameda debacle. For instance, on December 25, two of the most popular NFT projects on Solana – DeGods and Y00ts – announced they would be bridging to Ethereum and Polygon, respectively, in Q1 2023. Despite recent challenges, Solana has retained a loyal base of developers committed to its long-term success. Vitalik Buterin echoed this stance, arguing that "the chain has a bright future," and he hopes "it gets its fair chance to thrive." There are many indications of its thriving ecosystem; for instance, Solana was the second-largest blockchain by NFT sales volume in December, only behind Ethereum.

Tezos (XTZ)

Tezos' native token XTZ traded down 29.79% over the past month despite some exciting developments. On December 16, Manchester United Football Club launched its first set of "digital collectibles" (NFTs) on the blockchain. The first collectible is a digital key, offering a variety of rewards to fans, who are required to sign in using their Tezos wallets. In addition, Lima – the 12th Tezos protocol upgrade – went live on December 19. With Lima, development work is finalized for "Smart Rollups," a Layer 2 scaling solution expected to launch in the 13th network upgrade, called Mumbai.

Algorand (ALGO)

Algorand's native token ALGO traded down 30.71% over the past month, underperforming the broader market despite an exciting ecosystem development. On December 13, the Research Center for Technologies, Innovations and Finance (CETIF) of the Catholic University of Milan selected the Algorand blockchain to support an innovative digital bank and insurance guarantees platform in Italy. The initiative, expected to become operational in early 2023, is part of a broader trend attempting to bring real-world assets (RWAs) on-chain.

The Sandbox (SAND)

The Sandbox (SAND) traded down 35.40% as activity in the decentralized virtual world dropped significantly. About 8,400 unique wallet addresses interacted with The Sandbox throughout December, down 20% from November. In other news, On December 15, crypto cybersecurity firm OpenZeppelin announced the launch of its metaverse security service with The Sandbox as its first client. The goal is to quickly detect potential threats and anomalies, providing a safer user experience.

Strategies of the Month: December 2022

Every month, our research team will also present the ten best-performing strategies of the month in our product suite. With a data-driven approach, we highlight the most important developments and events causing price movements.

Figure 2: 30-Day Performance: Strategies of the Month vs. Traditional Asset Classes

Data Source: 21Shares Index Management Console and Yahoo Finance, from 30-Nov-2022 to 30-Dec-2022 (Close Price)

SHETH

The 21Shares Short Ethereum ETP (SHETH) rose 3.78% over the past month. SHETH seeks to provide a -1x return to the performance of Ethereum for a single day. The market downturn caused by the FTX/Alameda debacle combined with an uncertain macro environment may allow investors with stringent risk-management practices to benefit from tactical short-term inverse exposure to ETH.

SBTC

The 21Shares Short Bitcoin ETP (SBTC) rose 0.57% over the past month. Despite outperforming all the major cryptoassets, BTC still traded down 3.67% in December. SBTC seeks to provide a -1x return to the performance of Bitcoin for a single day. This allows sophisticated investors to hedge and benefit from tactical short-term inverse exposure to BTC.

USDY

The 21Shares USD Yield ETP (USDY) was flat over the past month. In normal market conditions, USDY provides exposure to USD while using the collateral (USDC) to seek to generate income from the digital asset lending ecosystem via a fully collateralized ETP structure. However, given the current market turbulence, 21Shares ETPs have no loans outstanding, with USDY lending suspended temporarily.

BOLD

The 21Shares Bytetree BOLD ETP (BOLD) traded down 1.09% over the past month. BOLD offers volatility-managed exposure to Bitcoin and Gold. Both assets have a low correlation between them, as Gold provides safety in hostile macroeconomic environments while Bitcoin captures the growth of the digital economy. The strategy adjusts weightings monthly according to historical volatility, allocating a higher weight to the less volatile asset. BTC's allocation in the past month hovered around 20%.

SPBTC

The 21Shares S&P Risk Controlled Bitcoin Index ETP (SPBTC) traded down 1.82% over the past month. Over the same period, Bitcoin traded down 3.67%. SPBTC achieved a better performance due to its rebalancing algorithm, which limits the volatility of the S&P Bitcoin Index to a target level of 40% by adjusting the exposure to the underlying index and allocating to U.S. dollars

SPETH

The 21Shares S&P Risk Controlled Ethereum Index ETP (SPETH) traded down 2.73% over the past month. Over the same period, Ethereum traded down 7.66%. SPETH achieved a better performance due to its rebalancing algorithm, which limits the volatility of the S&P Ethereum Index to a target level of 40% by adjusting the exposure to the underlying index and allocating to U.S. dollars.

KEYS

The 21Shares Bitwise Select 10 Large Cap Crypto ETP (KEYS) traded down 4.73% over the past month. KEYS seeks to track the investment results of an index composed of the top 10 cryptoassets ranked by inflation-adjusted market capitalization. Because Bitcoin and Ethereum's weights in the index represent about 90%, the index’s performance can be biased toward both assets, as was the case over this period.

HODLX

The 21Shares Crypto Basket 10 ETP (HODLX) traded down 5.74% over the past month. HODLX seeks to track the investment results of an index composed of the top 10 largest cryptoassets based on market capitalization. Once again, because Bitcoin and Ethereum currently represent about 60% of the global crypto market capitalization, the index's performance was biased toward both assets.

ABBA

The 21Shares Bitcoin Suisse Index ETP (ABBA) traded down 6.19% over the past month. ABBA seeks to track the investment results of an index composed of Bitcoin and Ethereum based on market capitalizations. Investors should understand that Bitcoin and Ethereum serve different use cases and can complement each other in a portfolio, with the former positioning as a non-sovereign form of money while the latter promises to be the foundational infrastructure for the new iteration of internet services.

HODL

The 21Shares Crypto Basket Index ETP (HODL) traded down 7.66% over the past month. HODL seeks to track the investment results of an index of the top 5 cryptoassets ranked by 2050 market capitalization. The 2050 market capitalization is calculated using a projected 2050 supply number and current prices. Bitcoin and Ethereum's weights are currently around 48% and 30%, while Polkadot is the third-largest constituent with a weight of ~14%. Layer 1 blockchains, like Ethereum and Solana, operate in isolation. In contrast, Polkadot works at a level below (Layer 0), supporting a growing ecosystem of specialized blockchains called parachains.