21Shares Research Newsletter - Issue 82

Market Outlook - Bitcoin Likely to Test All Time Highs Before Year End, Bitcoin Cash Undergoes Fork, and More

Bitcoin has just passed the $17K mark and looks likely to overtake its all-time-high level of $20K in due course. Over the last few months we’ve seen the most promising market for Bitcoin since 2017 and in many ways signs point to this current bull market being even more positive than the last. Instead of new capital inflows being driven by speculative retail mania, they have been driven for inflation-hedge purposes by institutional investors such as Wall Street legend Bill Miller and corporate allocators who are looking to hold Bitcoin for the long term.

As recently as November 16, Anthony Scaramucci's SkyBridge Capital, with $7 billion AUM, announced it will seek exposure to cryptoassets through investments in other funds. The chart below shows Bitcoin’s performance over the last year and compares it to the search interest for “Bitcoin” on Google.

As expected, the previous peak of Bitcoin’s price matches the peak for search interest in it. However despite the fact that we’re nearing similar highs, search interest for Bitcoin is still extremely low which is indicative of the fact that this is not a retail-driven run. However, Bitcoin has been continually establishing itself as a recognizable investment and brand, as indicated by the rising adoption of crypto-enabled services such as CashApp selling over $1 billion worth of Bitcoin in Q3 2020.

Interest in institutional investment vehicles for Bitcoin exposure such as the 21Shares Bitcoin ETP — currently holding nearly $50 million worth of BTC — has consistently increased and it is undoubtedly the case that these forms of investment vehicle, alongside OTC deals by large institutions and corporates have been where the capital inflows have predominantly come from.

Retail interest will come back eventually, this shouldn’t be under any doubt, especially in light of the recently announced change in the SEC leadership with Bitcoin-skeptic Chairman Jay Clayton stepping down — potentially opening the door for a US Bitcoin ETF. However, it’s likely that it’ll come after Bitcoin has surpassed the $20K mark and could lead to an even more sustained and public bull run for Bitcoin in the early months of 2021. This is even more likely to be the case as more avenues for retail Bitcoin investment open up, such as that of Paypal’s addition of a product that allows US customers to invest in cryptoassets. There are additional signs that a mainstream and retail-driven bull market is getting closer — just ask Maisie Williams, the young star of the blockbuster Game of Thrones series.

Weekly Returns

The large cap stalwart of the crypto asset market all had strong weeks, with Litecoin (LTC) in particular almost reaching returns of 30% for the week — BTC (9.29%), ETH (12.38%), XRP (13.03%), LINK (-3.49%), and LTC (27.10%).

Media Outlook

Our CEO, Hany Rashwan will be speaking from 3:45 to 4:15 PM GMT at the panel hosted by the Global ETFs Insight Summit delving to “Understanding Crypto ETPs in Europe and Global 2021 Outlook”. Register here. Hany was also mentioned in Crypto Valley Journal explaining why we are still early in the adoption life cycle of Bitcoin and cryptoassets in general. Read the full article here.

“Our products fill a gap in the market. Due to the relative novelty of the crypto asset class, there is a shortage of institutional-structured products that allow institutional investors to build exposure to the best-performing asset class of the century. We identified this problem in early 2018 and solved it in late 2018 by wrapping Bitcoin and other crypto-currencies in a well-known ETP structure and listing them on the regulated stock exchange, giving institutions additional transparency and security. Since the launch of our first crypto basket on the SIX Swiss Exchange in November 2018, we have listed a total of 11 different crypto ETPs in four different currencies on five different regulated exchanges in Europe, including the German stock exchange Xetra and the official market of the Vienna Stock Exchange.” – Hany Rashwan, CEO of 21Shares AG.

Our Research Associates, Lanre Ige and Eliézer Ndinga featured in Extra ETF diving into the rising adoption of Bitcoin institutional-grade products at the expense of Gold ETFs. Read the full article here.

News - Bitcoin Cash Hard Fork: Here's What Happened | Decrypt

What Happened?

On November 15, Bitcoin Cash, the fifth largest cryptoasset by market value underwent a hard fork; in other words, a backwards incompatible software upgrade due to a change in mining algorithm and disagreement over a 8-percent developer tax imposed on block rewards. This dispute led to two blockchains Bitcoin Cash Node (BCHN) and Bitcoin Cash ABC (BCHA).

Why Does It Matter?

Bitcoin Cash Node gained greater financial traction and miner support than Bitcoin Cash ABC (BCHA), which was led by the ABC developer team which is a proponent of the developer tax.

At 21Shares we support the leading Bitcoin Cash fork — Bitcoin Cash Node (BCHN — as we’ve listed the world’s first and only Bitcoin Cash ETP (ABCH - CH0475552201) on the SIX Swiss Exchange in July 2019 as part of its mission to provide investors with the largest selection of crypto assets ETPs to implement any digital asset portfolio strategy.

In addition, the two index ETPs 21Shares Bitwise 10 Select ETP (KEYS - CH0475986318) and 21Shares Crypto Basket ETP (HODL - CH0445689208), which consist of the top 10 and top 5 largest cryptocurrencies by market capitalization respectively, also hold Bitcoin Cash in the basket as an underlying asset and have been affected by the aforementioned hard fork.

ABCH and HODL are also listed on the regulated segment of SIX as well as BX Swiss exchange and Boerse Stuttgart.

Learn more here.