21Shares Research Newsletter - Issue 78

Market Outlook - Bitcoin Shows Low Volatility Despite Price Run-up, StoneRidge Reveals $115M BTC Investment, and More

Bitcoin has not seen a large upswing in volatility following its recent resurgence to the mid-11K mark — bucking the trend seen last in July. This shows that the asset is building up a resistance to the $11K price level as the US election looms. The market’s expectations of volatility around the election result have consistently remained high but there’s good reason to believe that likely scenarios have appropriately been hedged. Given this fact, the election result itself is unlikely to be a key driver of volatility for markets or Bitcoin, though an unexpected event, such as an escalation of the trade war in the wake of the election, could lead to a change.

While previous price run-ups in the price of Bitcoin have often occurred alongside an equity boon or, at the very least, a surge in the wider cryptoasset market, Bitcoin’s recent flirt with the $12K mark (as of October 20) is unique in this regard.

The positive performance of Bitcoin is despite the recent news of prominent Chinese exchange OKEx’s indefinite suspension of withdrawals due to their CEO being under investigation by China’s public security bureau. The strongest hypothesis for why the cryptoasset has been able to positively contend with the ostensibly negative regulatory news related to BitMEX, the FCA, and now OKEx is that potential sell-offs have been stymied by likely corporate and professional investing, like what we’ve seen from Square and Microstrategy.

Weekly Returns

Bitcoin had a solid week, bucking the trend of weak performance from the equity and wider cryptoasset market, gathering resistance above the $11.5K mark — BTC (2.72%), ETH (-0.545%), XRP (-3.96%), BCH (-2.60%), and BNB (-1.58%).

Media Coverage

Our CEO, Hany Rashwan, appeared on Institutional Money where he gave an overview of our overall strategy to expand the outreach of our ETPs in the DACH region, in this case in Austria, to satisfy the increased interest from financial institutions in cryptoassets such as Bitcoin and Ethereum. Austrian investors, be they retail or professional, can access our physically-backed ETPs for Bitcoin and Ethereum — ABTC and AETH — on the Vienna Stock Exchange.

“At 21Shares, we are deeply rooted in the world of digital assets. However, we can also understand well investors' need for security and transparency. When cryptocurrencies were still in their infancy, they were initially located in a gray area. That was not a satisfactory solution. That is why we have tried to create clear rules from the start. We love to exchange ideas with thought leaders and people who still have reservations about crypto in order to reduce resentment. By entering the regulated stock exchange market, we want to make crypto assets more interesting for all investors.” says Hany Rashwan, co-founder and CEO at 21Shares. Read the full article here.

In addition, Hany will be speaking at the Crypto Assets Conference (CAC20B), organized by the Frankfurt School Blockchain Center on October 29/30/30, 2020! The conference is an excellent event bringing together experienced professionals in the blockchain and finance sectors: startups, corporates, regulators. CAC focuses on digital securities (day 1), cryptoassets (day 2) and the digital programmable euro (day 3). Have a look if this is interesting for you as well as blockchain, DLT and cryptoassets will be a key topic in 2021. Learn more here.

News - Stone Ridge Reveals $115M Bitcoin Investment As Part Of Billion-Dollar Spin-Off | Forbes

What Happened? Last week, the $10-billion asset manager, Stone Ridge Asset Management, revealed its investment into Bitcoin valued at over $115 million or roughly 10,000 Bitcoins. In the midst of a rise in personal bitcoin investments from its senior employees and advisors, the firm launched a spinoff to satisfy the needs of its clients in partnership with New York Digital Investment Group (NYDIG) acting as a custodian and granting the asset manager the possibility to hold and convert cryptoassets.

Why Does It Matter? The rationale behind the spinoff is the fact that internally, in the words of co-founder Robert Gutmann, Stone Ridge believes in the long term benefits and growth of an open-source monetary system in assets like Bitcoin. The current health crisis has proved to become a Schelling point for one of its most valuable characteristics, the fact that Bitcoin is uncorrelated with traditional assets; for example, since January 1st, 2020, Bitcoin is up 67.50% while S&P 500 is up 6.94%.

Although in times of uncertainty, correlations between all assets will always spike, in the medium to long term, it is well documented that Bitcoin stands out. The NYDIG’s lead investor even advises financial institutions to hedge their portfolio with Bitcoin and allocate between 100 and 500 basis points of their assets under management, amid unprecedented fiscal and monetary stimulus happening across the world.

On the final note, at 21Shares, we anticipate Bitcoin’s institutionalization to continue especially as the effects of tighter restrictions and lockdowns across the world, alongside rising caseloads, result in higher rates of bankruptcies and business closures. The Bank for International Settlements estimates that corporate bankruptcies could rise by more than 20%, from the 2019 baseline in 2021 for advanced economies — especially in the US due to a potential no-deal for the proposed stimulus package of which negotiations come to an end today.

Learn more here.