21Shares Research Newsletter – Issue 100
Over the last week, we’ve seen Bitcoin once again hit the $60K mark before the market cooled down heading into the weekend, with Bitcoin reaching as low as $53K this morning. This downwards move was primarily driven by deleveraging-caused selling on crypto derivatives exchanges. The chart below shows the performance of Bitcoin over the aforementioned period.
As expected, the rest of the cryptoasset market generally followed the performance of Bitcoin. For example, all of the top five largest cryptoassets (by market capitalisation) are down from their point at the start of March 17, except for BNB, which returned only 2.8%.
Such leverage-driven downturns are common, especially given where we are in the cryptoasset market bull cycle. However, given that the sell-off does not represent a fundamental drop in demand for Bitcoin (or other cryptoassets), nor does it demonstrate a fundamental shift in the value proposition of the sector, it is likely that Bitcoin will recover to the $60K mark — bringing the market with it.
The returns of the top five crypto assets over the last week were as follows — BTC (-3.62%), ETH (-6%), BNB (-0.44%), DOT (-0.44%), and ADA (-10.54%).
The performance of our line of ETPs over the last 30 days is as follows: ABTC (17.7%), AETH (14%), ABCH (4.4%), AXRP (22.6%), ABNB (16.6%), AXTZ (19.9%), HODL (13.8%), ABBA (19.5%), KEYS (16.3%), SBTC (-17.8%), and ADOT (10.9%).
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Have you had a chance to read our Polkadot research primer? Polkadot is the fourth-largest cryptoasset and the closest competitor to Ethereum. Learn more here.
How has this flood of institutional investments been experienced in Crypto Valley? And what are the prospects for the near future? Find out next week at the online event hosted by CV Labs on March 30th, 2021, at 11 am CET, where our Head of Switzerland, Sina Meier, will attend as a speaker. Register here.
Our research associates, Eliézer Ndinga and Lanre Ige featured in Wall Street Italia, where they gave their insights into the upcoming upgrade of the Ethereum circulating supply, EIP-1559. Give it a read here.
We are hiring a new Vice President of Finance. Find out more about the job description here.
What Happened?
Wall Street giant Morgan Stanley, one of the largest American investment banks, will exclusively offer bitcoin-related funds to its wealth management clients. Morgan Stanley’s wealth management unit manages nearly $4 trillion in client assets across more than 16,000 advisors. They effectively become the first major US bank to offer bitcoin exposure, capping investments to as much as 2.5% of total net worth per client. According to an internal investor note, the bank considers the asset class as inevitably investable as the demand for Bitcoin investments has significantly surged over the past year. Due to the lack of exchange-traded products as in Europe or a Bitcoin ETF in the United States, Morgan Stanley will expose its clients to three bitcoin funds. Two of the funds on offer are from Galaxy Digital. The third is a joint effort from asset manager FS Investments and NYDIG.
"For speculative investment opportunities to rise to the level of an investable asset class that can play a role in diversified investment portfolios requires transformational progress on both the supply and demand sides. With cryptocurrency, we think that the threshold is being reached. A firming regulatory framework, deepening liquidity, availability of products and growing investor interest—especially among institutional investors—have coalesced." — Morgan Stanley.
Why Does It Matter?
The adoption of Bitcoin has occurred at an unprecedented pace. Since the second half of 2020, we have witnessed a range of institutions and companies get exposure to the asset class. Corporations like Square and recently Hong-kong listed company, Meitu, university endowments like Harvard and Yale, and even cities like Miami are interested in adding bitcoin to their treasury reserves. In the same vein, last week, Brazil officially launched its first Bitcoin ETF. listed on the B3, a stock exchange located in São Paulo and the second oldest in the country.
As the industry matures, there are also improvements in the tone used with regards to Bitcoin. For example, during a virtual panel discussion on digital banking hosted by the Bank for International Settlement, Federal Reserve Chairman Jerome Powell mentioned that Bitcoin is more of a substitute for gold than a dollar replacement (26:36). The world is also waking up to the sophistication of the crypto infrastructure; on that note, the world's largest custodian bank, BNY Mellon, invested in the $133 million financing round of FireBlocks, which will serve as the primary crypto custodian on behalf of BNY's clients.
On the final note, as institutional investment has become the dominant narrative related to Bitcoin's adoption, it is fair to admit that smaller players remain relatively unseen thus far in this cycle. But at 21Shares Research we like to investigate economic activity directly on the bitcoin blockchain and, based on that, we can’t be more optimistic about this current cycle as the wallets holding less than 1 BTC recently reached an all-time high — beating out even the height of the 2017 bullet market. This is a testament to the fact that both institutions and retail investors are embracing the asset class at a greater pace than ever before.
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The information provided does not constitute a prospectus or other offering material and does not contain or constitute an offer to sell or a solicitation of any offer to buy securities in any jurisdiction. Some of the information published herein may contain forward-looking statements. Readers are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties and that actual results may differ materially from those in the forward-looking statements as a result of various factors. The information contained herein may not be considered as economic, legal, tax or other advice and users are cautioned to base investment decisions or other decisions solely on the content hereof.
