Crypto Market Recovers After Flash Crash: Key Insights

Market Outlook

The last few days have seen a derivatives-liquidation-driven flash crash within the crypto asset market, exacerbated by a bearish adjustment of the bond markets’ inflation expectations, then followed by a spot-driven recovery across crypto sectors.

All the major crypto assets such as Bitcoin (1%), Ethereum (-3.2%), BNB (-0.6%), Polkadot (8.1%), and the wider DeFi market (8.5%) have, for the most part, recovered their losses since February 25. Such a pattern is relatively common within the current market due to a large amount of leverage currently within the system and the aggressive deleveraging systems; both factors mean that following large spot-selloffs, the derivatives markets tend to overreact.

However, as has been the case several times before, the spot market for Bitcoin and other crypto assets tends to buy back the assets following the exacerbated sell-off. As was the case yesterday notably with Microstrategy buying another $15M of Bitcoin to increase their total holdings to over $4B. Two key metrics to now watch are: (1) any premium that emerges on Coinbase due to institutional buying; (2) Any notable increase in Bitcoin outflows from Coinbase. Both metrics have been strong indicators of past institutional and corporate buying which has preceded a new leg-up in Bitcoin prices.

These have often been placed following a large options expiry date (February 26) and after a deleveraging of the market. The market will be naturally fearful throughout March due to the events of last year’s March 12 flash crash still recent in investors’ minds, but sizeable (and somewhat expected) new institutional buying of Bitcoin could assuage such fears.

Weekly Returns

The returns of the top five crypto assets over the last week were as follows — BTC (0.14%), ETH (-3.30%), BNB (0.96%), DOT (5.86%), and ADA (22.82%).

Monthly ETP Returns

The performance of our line of ETPs over the last 30 days is as follows: ABTC (44.2%), AETH (7%), ABCH (22.2%), AXRP (18.9%), ABNB (392.3%), AXTZ (21.3%), HODL (52.8%), ABBA (37.7%), KEYS (33.4%), SBTC (-34.8%), and ADOT (77.7%).

You can learn more about our products here.

Media Coverage

Save the date, tomorrow Swissquote will host an exclusive webinar session with the 21Shares team composed of our CEO, Hany Rashwan, and our Research Associates, Eliézer Ndinga and Lanre Ige. Our team will delve into the topic of Bitcoin valuation in both the short and long run. Register here to attend, you don’t want to miss this episode.

Our Head of Global ETP, Laurent Kssis featured in an article published by ETF Stream delving into the hype around blockchain ETFs. Read the full article here.

Stefano Gianti, Education Manager at Swissquote published an article related to our latest webinar on how the Coronavirus crisis accelerated the adoption of Bitcoin. Give it a read here.

Have you got the chance to read our latest research note on how the looming Coinbase’s direct listing will trigger a repricing of Binance’s utility token, BNB? Read our piece here as it was featured in Crypto Valley Journal. You can also find more information on our Binance BNB ETP (ABNB) here.

News - The First and Second Best Performing ETPs/ETFs In The world Are 21Shares ETPs, ABNB and HODL

What happened?

Yesterday, on Twitter, Eric Balchunas, Senior ETF Analyst for Bloomberg Intelligence, pointed out that our Binance BNB ETP is up more than 500% year to date, which is four times more than any other ETF in the world. For the record, 5 of the top 10 top-performing ETPs in the world are 21Shares products. Indeed, since the start of the year, the best two-performing ETPs/ETFs in the whole world, have been our BNB and HODL ETPs as you can see in the table below. Investors who access crypto market exposure through our ETPs are best placed to benefit from the world's best-performing asset class.

Why does it matter?

As they say in finance, “the results speak for themselves”. Since 1st of January 2020, Bitcoin is up nearly 600% while the S&P 500 is up only about 16% and the crypto industry is more than just Bitcoin. The other assets and innovations are just as striking — Ethereum is another example. The crypto movement is very real and will have a direct impact on every facet of finance as the Federal Reserve of Saint Louis wrote in their paper on Decentralized Finance (DeFi) stating that the crypto infrastructure is a more robust and transparent system than the one traditional finance relies on. Indeed, the recent outage of the Federal Reserve’s key financial services attributed to human error is a testament to this fact. The disruption lasted four hours and amongst the systems affected was Fedwire Funds Service that banks, businesses, and government agencies use for mission-critical, same-day transactions. In other words, the entire US financial system was halted, in contrast to the bitcoin network that has been functional for 99.98% of the time since inception on January 3, 2009.

The appeal to the crypto industry is significant, there are more than a few leaders coming from conventional finance who have been both brave and ahead of the adoption curve in embracing these new but exciting technologies. To name just a few, Paul Tudor Jones, Ruffer, and the endowments of Yale and Harvard are hardly amateurs in finance. More critics will convert, as they have already over the last ten years. For instance, Shark Tank's Kevin O'Leary changed his mind about crypto assets and invested 3% of his portfolio weighted between Bitcoin and Ethereum. He admitted that crypto is here to stay while Goldman Sachs restarted its crypto asset trading desk after dropping its plan to open a trading desk for cryptocurrencies three years ago. In the same vein, Citibank, praised the innovation behind Bitcoin in their report:

"The philosopher Schopenhauer once remarked that “All truth passes through three stages. First it is ridiculed. Second it is violently opposed. Third it is accepted as being self-evident.”187 Though this sentiment was expressed more than 150 years before the emergence of Bitcoin, the introduction and evolution of the cryptocurrency illustrates this very human response to change."

It is our view that crypto is an important long-term investment and we will continue to show proof of that over the coming years. This is the reason why at 21Shares we have the largest product suite on the market to satisfy the investor demand. We offer 12 exchange-traded products (ETPs) listed on regulated European stock exchanges and traded in 4 currencies (USD, CHF, EUR, GBP), seven single trackers, four indexes, and one short ETP. And we have a set of criteria before deciding on listing a specific new asset. When we build an ETP, investors can make allocations to this new coin and we take that very seriously. We look for blockchain innovations, team composition, investor demand, liquidity, and regulatory status before considering any new products.

Polkadot, our latest product, met all these requirements and we are very excited to support what they are building. Investors seem to agree, with the Polkadot ETP gathering over $25million in 15 days, demonstrating further the immense popularity of our product suite.

Learn more here.