21Shares Research Newsletter - Issue 62

Market Outlook

One interesting facet of Bitcoin since the March 12 flash crash has been its extended period of low volatility. Market participants have often commented on the fact that Bitcoin has been stuck within the $9,000 - $10,000 trading range for several months now as the irrational exuberance that has captured traditional capital markets (especially in the U.S) has failed to take hold within crypto markets. Bitcoin’s 30-day moving average of its volatility is approaching its lowest point in the last three years — which it reached at the bottom of the bear market before the early 2019 crypto resurgence.

It seems unlikely that Bitcoin’s volatility will become noticeably lower than its current level as, in order for that to be the case, the asset would have to quickly begin approaching its lowest levels of volatility ever — an unlikely fact given the relatively positive sentiment of Bitcoin and the burgeoning derivatives market. As such, we can expect a likely gradual increase in Bitcoin volatility in the coming months, especially levels in line with other segments of the crypto market (such as “Decentralized Finance”) which have experienced much higher amounts of volatility.

The entire crypto asset market was in the green this week lead by Bitcoin SV (BSV) which had a weekend surge of over 20%, though as mentioned above Bitcoin once again had a week of extremely low volatility: BTC (1.06%), ETH (4.34%), XRP (6.64%), BCH (8.17%), and BSV (23%).

Media Coverage - 21Shares Launches Bitcoin ETP (ABTC | ISIN: CH0454664001) on Deutsche Boerse's Xetra

Europe’s third-largest exchange, the Deutsche Boerse, has listed 21Shares Bitcoin (ABTC | ISIN: CH0454664001) ETP on its electronic trading venue, Xetra. More than 90% of all trading in shares at all German exchanges and about 30% of trading in ETFs in Europe are traded through Xetra. This move will drastically improve the access of Bitcoin and other cryptoassets to retail and institutional investors across Europe. ABTC has a management fee of 1.49% and has a track record of over 1 and a half years.

Commenting on the new listing on Xetra, 21Shares’ managing director Laurent Kssis said: “The listing on Xetra not only strengthens our current position in Germany but also opens up institutional-grade crypto products to the wider European and international markets.” You can read more about the launch here.

Media Coverage - Coinbase Takes Over Servicing for 21Shares' Bitcoin ETP

Announced on Wednesday, Coinbase Custody will secure assets used in 21Shares' Bitcoin ETP in an offline storage solution. 21Shares' managing director Laurent Kssis told CoinDesk the firm plans to use Coinbase Custody for more ETPs, including some new ones, in the future. Learn more here.

News - A Resting Bitcoin Bull | Bloomberg Intelligence

What Happened?

Last week Bloomberg Intelligence published a 9-page report diving into various indicators of Bitcoin’s organic growth, with the argument that this could lead to an appreciation in the value of Bitcoin. The main indicators mentioned in the report were declining volatility, growth in on-chain addresses, investor flows, and futures open interest. The author of the report, Mike McGlone, tweeted that “Bitcoin means financial freedom” and suggested that Bitcoin is increasingly becoming like gold given the current macroeconomic environment.

Why Does It Matter?

With a limited supply of 21 million, there will be a cap on the Bitcoin available for sale to the total addressable market of more than 7 billion individuals. It is estimated that between 1.5 to 6 million Bitcoins are either lost, stolen, or inaccessible as people may have lost their private keys and in other cases, unfortunately, some Bitcoin holders passed away. Additionally, there are Bitcoins kept by miners and long-term investors who will not sell in the near future.

As reported by Bloomberg intelligence, Bitcoin is winning in one of the most quintessential categories, demand. The number of on-chain addresses has breached last year’s level, for example. Using historical data from Coinmetrics, when the address count on the Bitcoin blockchain exceeded its latest high, the price of Bitcoin recovered from the depth of the bear market in late 2018. As you can see in the chart below, the address count has recently surpassed the highest count since February 2018 of 856 million addresses.

On the final note, Bitcoin bottomed to the lowest volatility level ever compared to crude oil which indicates Bitcoin’s progression into the mainstream and the continuing organic demand for an equivalent of gold in a social-distancing-induced environment. All of the above indicators show the maturation of Bitcoin as investors are gradually seeking to gain exposure to the best-performing asset of the last decade.

Learn more here.

News - Market Wrap: As Traditional Markets Rally, Bitcoin Gets Boring | CoinDesk

What Happened?

Despite new highs in daily caseloads in the US alongside renewed tight containment measures imposed by some states such as Florida, the equity market rallied substantially with the NASDAQ 100 index hitting new all-time highs. Phenomena like this only serve to demonstrate the decoupling of traditional financial markets from the real economy especially given the current health crisis we are currently experiencing. Coindesk reports that such excitement in the equity market has likely had an impact on Bitcoin’s low volatility levels.

Why Does It Matter?

The price of Bitcoin has been oscillating to the low $9,000 lately because there has been a shift of eyeballs from the crypto market towards traditional capital markets. The rally in equity markets was initiated by the gradual reopening of various economies across the world as well as the Federal Reserve’s efforts to prop up the market through quantitative easing measures.

This shift away from the crypto market is certainly driven by the trend of professional traders seeking momentum-driven investment opportunities, given their control of much of the liquidity in crypto. According to Chainalysis, professional traders account for about 85% of all the USD value of Bitcoin value sent to exchanges, therefore, they likely represent a significant share of the market’s movements such as the March 12 market crash.

Despite various efforts to boost institutional adoption, retail traders account for 96% of all exchanges' transfers (i.e, less than $10K deposited on a weekly basis since 2018) while 60% of all investors hold BTC as a long-term investment as per Chainalysis' latest report. This also indicates the organic growth and interest in Bitcoin as a long-term investment opportunity as more short-term traders deviate from the crypto market at the moment.

Learn more here.