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: Messari and Yahoo Finance, from 15-Oct-2022 to 14-Nov-2022 (Close Price)
Polygon's native token MATIC rose 16.10% in the past month as the platform made massive strides toward mainstream adoption. On November 2, Meta announced that creators would soon be able to mint, buy, and sell Polygon-based NFTs on Instagram. On the same day, as part of the Monetary Authority of Singapore (MAS)'s Project Guardian, JP Morgan completed its first live blockchain trade against a liquidity pool of tokenized JPY and SGD deposits using a modified version of Aave on Polygon. In December last year, our very own Director of Research pointed out, "Polygon is really the sleeping giant. Your favorite apps will all be accessible there in the coming year". Indeed, Polygon's multifaceted approach to scaling Ethereum has paid off this year.
Aave (AAVE) traded down 17.95% over the past month. JP Morgan executed its first live DeFi trade using a modified version of the Aave protocol in Polygon. This event represents a significant step toward bringing traditional financial assets into DeFi, fully realizing the opportunities afforded by smart contracts. In another exciting development, Aave companies announced that they would experiment with the first testnet deployment of GHO, a fully collateralized dollar-pegged stablecoin governed by AAVE holders. Finally, a proposal to deploy Aave on zkSync 2.0, a protocol using zero-knowledge proofs to scale Ethereum, passed.
Algorand's native token ALGO traded down 18.18% over the past month despite ecosystem traction. On November 10, the Algorand Foundation launched a series of bounties hosted on Immunefi. The bounties, which feature payouts up to $2 million, are focused on enhancing the security of the core protocol and the ecosystem's DeFi applications. In addition, FIFA recently launched "FIFA+ Collect" on Algorand's blockchain. This digital marketplace allows football fans worldwide to buy and sell 2022 World Cup digital collectibles (NFTs), which will take place between November 20 and December 18 in Qatar. For context, FIFA announced a partnership with Algorand in May this year.
Stellar's native token XLM traded down 18.66% over the past month. Stellar is an open-source payment network that allows regulated financial entities to issue fully-backed stablecoins. On November 9, Japanese tech giant GMO Internet launched a regulated Japanese Yen-pegged stablecoin (GYEN) through one of its subsidiaries on the network. On another front, on October 11, Soroban – a smart contract platform compatible with the Stellar network – launched on testnet. The Stellar Development Foundation (SDF) announced a $100 million fund to support developers building on Soroban through incentive programs.
XRP traded down 21.78% over the past month as the FTX and Alameda situation has weighed heavily against most cryptoassets. In this regard, Ripple CEO Brad Garlinghouse argued that most crypto trading is offshore because companies in the US lack regulatory guidance that ensures compliance, transparency, and trust. Garlinghouse pointed to Singapore as a country embracing crypto at a regulatory level. On a different note, on October 31, Ripple announced that the XRP blockchain introduced support for NFTs through a token standard dubbed XLS-20.
The Sandbox (SAND) traded down 22.50% despite signs of traction in the decentralized virtual world. On November 8, former football player Sergio "Kun" Agüero launched "Kuniverse," his own space in The Sandbox. Kuniverse includes a collection of 9,320 avatars represented as NFTs granting exclusive benefits to holders, such as a chance to win a trip to Qatar for the FIFA World Cup and meet Agüero in person. In addition, from October 27 to November 9, the experimental concept store Gucci Vault hosted an exclusive event on The Sandbox, during which a selection of digital collectibles was available for purchase.
Tezos' native token XTZ traded down 25.74% over the past month despite some exciting developments. On November 11, La Poste – the French postal service – announced that it would launch NFT postal stamps on the Tezos blockchain in Q1 2023. In addition, from October 20 to 23, Tezos powered an interactive exhibition of generative art during this year's Paris+ par Art Basel, which brought together 156 contemporary galleries from 30 countries. A week before the event, Cathie Wood praised the ecosystem's NFT activity, saying: "I have been struck by artists' loyalty to Tezos. Art may imitate physical life, but art is central to digital life!".
Decentraland (MANA) traded down 30.88% over the past month. Despite the negative market sentiment, activity hasn't slowed down. The user-owned virtual world hosted its second annual Metaverse Music Festival (MVMF) from November 10 to 13 with over 200 hundred artists, including Björk, Ozzy Ozborne, and Motörhead. In addition, Norway's central register and tax authority announced that they have partnered with Ernst and Young (EY) to establish an office in Decentraland. The initiative aims to deliver services to a younger audience while establishing Norway's Web 3 presence.
Terra Classic's native token LUNC traded down 34.47% over the past month, underperforming the broader market. The network's fundamentals haven't improved since the collapse of the network's algorithmic stablecoin UST in May. Notably, the cryptoasset is 99.99% below its April all-time high price of $119. Many investors had flashbacks of the LUNA/UST death spiral after the dramatic price decline of FTT in light of FTX and Alameda's insolvency.
Solana's native token SOL traded down 52.75% over the past month. On November 2, a CoinDesk report showed that Alameda Research had roughly $1.2 billion worth of SOL in its balance sheet, equivalent to 10% of the cryptoasset's circulating supply. The now-bankrupt trading firm sold off large amounts of SOL in a failed attempt to raise liquidity, triggering a liquidation cascade. Despite these setbacks, Solana's ecosystem has achieved escape velocity. In addition to Polygon, Meta also integrated support for Solana-based NFTs, allowing Instagram and Facebook users to connect their accounts directly to their Phantom wallet. Then, on November 5, Google Cloud announced that they were running a Solana validator and would add support for the blockchain in BigQuery next year.
FTX Token (FTT) traded down 93.60% over the past month due to FTX's insolvency. FTT provided various benefits to users of the now-bankrupt FTX crypto exchange. On November 2, CoinDesk leaked Alameda's balance sheet, showing that $5.2 billion of the trading firm's $14.6 billion of assets (36%) were held in FTT. It was known that Sam Bankman-Fried was the majority shareholder of both businesses, but until then, the public perceived that they operated independently of each other. In light of these revelations, Binance chose to liquidate a portion of FTT on its books, which spooked investors, prompting a bank run on the FTX exchange. On November 8, FTX halted withdrawals, and the price of FTT dropped more than 80% in 24 hours. After failing to raise capital, on November 11, more than 130 entities tied to FTX.com, FTX US, and Alameda Research filed for Chapter 11 bankruptcy, with the Alameda petition listing assets and liabilities of at least $10 billion each.
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 14-Oct-2022 to 14-Nov-2022 (Close Price)
The 21Shares Short Bitcoin ETP (SBTC) rose 13.84% over the past month. 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. The FTX debacle weighed heavily against the broader crypto market, with BTC down 12.98% month-over-month.
The 21Shares Bytetree BOLD ETP (BOLD) rose 2.50% 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%. Thus, even though Bitcoin was down almost 13% this month, Gold increased 7.8% over the same period, contributing to a positive performance by BOLD.
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. In addition, neither USDY nor any other 21Shares ETP has any exposure to BlockFi or any other borrower. The U.S. dollar is the world's reserve currency and has acted as a "safe haven" during this year's adverse macroeconomic conditions.
The 21Shares S&P Risk Controlled Ethereum Index ETP (SPETH) traded down 2.15% over the past month. Over the same period, Ethereum traded down 2.62%. 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.
The 21Shares Short Ethereum ETP (SHETH) traded down 4.48% over the past month. SHETH seeks to provide a -1x return to the performance of Ethereum for a single day. Due to systemic risks derived from the FTX and Alameda collapse, SHETH may allow investors with stringent risk-management practices to benefit from tactical short-term inverse exposure to ETH.
The 21Shares DeFi 10 Infrastructure ETP (DEFII) traded down 8.77% over the past month. DEFII tracks the investment results of an index of decentralized applications and their underlying infrastructure. The index's best-performing assets were BNB and Uniswap, which appreciated 3.89% and 0.50%, respectively, over the same period. Centralization has been the common denominator of every implosion in 2022 – FTX, 3AC, Celsius, and Voyager, among others. Terra (LUNA/UST) even disguised as a decentralized protocol, but its reserves were centrally and poorly managed by a handful of individuals. The failures of these entities have reinforced the need for DeFi, where self-enforcing smart contracts on top of a public blockchain allow for a more transparent, non-custodial, and sustainable system.
The 21Shares Layer 1 ETP (LAY1) traded down 9.09% over the past month. LAY1 seeks to track an index comprising the largest Layer 1 blockchains. The weights are proportional to market capitalization, capped at 30% per asset to promote diversification. Ethereum and BNB are currently the largest constituents of the index, while the inclusion of Solana had an outsized negative impact on its performance. Regarding Ethereum, ETH's net issuance since the Merge turned negative on November 8 (54 days after the switch to PoS) alongside an increase in the amount of ETH burned, a sign that the cryptoasset's prospects as a deflationary asset depend heavily on network usage.
The 21Shares S&P Risk Controlled Bitcoin Index ETP (SPBTC) traded down 10.93% over the past month. Over the same period, Bitcoin traded down 12.98%. 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.
The 21Shares Crypto Basket Index ETP (HODL) traded down 12.46% 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 50% and 28%, while Polkadot is the third-largest constituent with a weight of ~17%. 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.
The 21Shares Crypto Basket 10 ETP (HODLX) traded down 12.60% 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. Because Bitcoin and Ethereum currently represent about 60% of the global crypto market capitalization, the index's performance can be biased toward both assets, as was the case over this period.
This document is not an offer to sell or a solicitation of an offer to buy or subscribe for securities of 21Shares AG. Neither this document nor anything contained herein shall form the basis of, or be relied upon in connection with, any offer or commitment whatsoever in any jurisdiction. This document and the information contained herein are not for distribution in or into (directly or indirectly) the United States, Canada, Australia or Japan or any other jurisdiction in which the distribution or release would be unlawful.This document does not constitute an offer of securities for sale in or into the United States, Canada, Australia or Japan. The securities of 21Shares AG to which these materials relate have not been and will not be registered under the United States Securities Act of 1933, as amended (the “Securities Act”), and may not be offered or sold in the United States absent registration or an applicable exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. There will not be a public offering of securities in the United States.This document is only being distributed to and is only directed at: (i) to investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (“FSMA”) (Financial Promotion) Order 2005 (the “Order”); or (ii) high net worth entities, and other persons to whom it may lawfully be communicated, falling within Article 49(2)(a) to (d) of the Order (all such persons together being referred to as “relevant persons”); or (iii) any other persons to whom this document can be lawfully distributed in circumstances where section 21(1) of the FSMA does not apply. The securities are only available to, and any invitation, offer or agreement to subscribe, purchase or otherwise acquire such securities will be engaged in only with, relevant persons. Any person who is not a relevant person should not act or rely on this document or any of its contents.In any EEA Member State (other than the Austria, Belgium, Croatia, Denmark, Finland, France, Germany, Great Britain, Hungary, Ireland, Italy, Liechtenstein, Luxembourg, Malta, The Netherlands, Norway, Poland, Romania, Slovakia, Spain and Sweden) that has implemented the Prospectus Regulation (EU) 2017/1129, together with any applicable implementing measures in any Member State, the “Prospectus Regulation”) this communication is only addressed to and is only directed at qualified investors in that Member State within the meaning of the Prospectus Regulation.Exclusively for potential investors in Austria, Belgium, Croatia, Denmark, Finland, France, Germany, Great Britain, Hungary, Ireland, Italy, Liechtenstein, Luxembourg, Malta, The Netherlands, Norway, Poland, Romania, Slovakia, Spain and Sweden the 2021 Base Prospectus (EU) is made available on the Issuer’s website under www.21Shares.com.The approval of the 2021 Base Prospectus (EU) should not be understood as an endorsement by the SFSA of the securities offered or admitted to trading on a regulated market. Eligible potential investors should read the 2021 Base Prospectus (EU) and the relevant Final Terms before making an investment decision in order to understand the potential risks associated with the decision to invest in the securities. You are about to purchase a product that is not simple and may be difficult to understand.This document constitutes advertisement within the meaning of the Swiss Financial Services Act (the “FinSA”) and not a prospectus. In accordance with article 109 of the Swiss Financial Services Ordinance, the Base Prospectus dated 12 November 2021, as supplemented from time to time and the final terms for any product issued have been prepared in compliance with articles 652a and 1156 of the Swiss Code of Obligations, as such articles were in effect immediately prior to the entry into effect of the FinSA, and the Listing Rules of the SIX Swiss Exchange in their version in force as of January 1, 2020. Consequently, the Prospectus has not been and will not be reviewed or approved by a Swiss review body pursuant to article 51 of the FinSA, and does not comply with the disclosure requirements applicable to a prospectus approved by such a review body under the FinSA.