21Shares Research Newsletter - Issue 101

Market Outlook

Over the few days, Bitcoin and the broader cryptoasset market have largely recovered from the leverage-driven mini-crash we experienced last week. The chart below shows the performance of the top five cryptoassets over the previous month.

As we can see, the downturn in the tail-end of March now looks like a blip in a generally positive month for Bitcoin and the broader market. Despite the occasional downwards pressure driven by the derivatives market, there is still a substantial amount of spot demand for Bitcoin and other large-cap cryptoassets, larger holders selling off their assets or mining-driven selling.

As Bitcoin hovers closer to its all-time-high of slightly less than $62,000, another move upwards could see the asset testing new levels of resistance at the $70,000 mark. We’re optimistic about Bitcoin as it enters into the next month and other critical verticals within the market such as DeFi and Smart Contract platforms.

Weekly Returns

The returns of the top five crypto assets over the last week were as follows — BTC (5.51%), ETH (8.34%), BNB (7.47%), DOT (0.43%), and ADA (6.74%).

Monthly ETP Returns

The performance of our line of ETPs over the last 30 days is as follows: ABTC (18.2%), AETH (14.9%), ABCH (4.4%), AXRP (27.1%), ABNB (5.9%), AXTZ (21.8%), HODL (9.6%), ABBA (20.4%), KEYS (15.3%), SBTC (-19.6%), and ADOT (-2.8%).

You can learn more about our products here.

Media Coverage

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.

We published our latest Bitcoin primer; you can learn more about Bitcoin and its potential here.

We are hiring a new Vice President Finance. Find out more about the job offer here. We also have other job opportunities available here. Spread the word as someone in your network might be psyched about the crypto revolution & our mission of making investing in crypto as easy as buying stocks.

Our Research Associate, Eliézer Ndinga, featured in Coin24 in an exclusive interview where he discussed the various methods to value Bitcoin. You can read the article here.

News - CME Launching Micro Bitcoin Futures in May | The Block

What Happened?

The Chicago Mercantile Exchange (CME), with over $75 billion in assets, will launch micro bitcoin futures in the next two month, sometime in May. These futures will represent in size one-tenth of a Bitcoin to efficiently provide Bitcoin exposure to a broader audience in their client base and respond to the demand for smaller-sized futures contracts. The futures market’s monthly volume is significantly more enormous, with $1.8 trillion so far this month than the spot market processing $889 billion in volume — showing the growing domination of institutional interests in the Bitcoin market. Since June 2020, the open interest in Bitcoin futures has experienced an unprecedented growth of more than 450% — from less than $450 million a day to over $2.7 billion as of March 29.

"The introduction of Micro Bitcoin futures responds directly to demand for smaller-sized contracts from a broad array of clients and will offer even more choice and precision in how participants can trade regulated Bitcoin futures in a transparent and efficient manner at CME Group." — Tim McCourt, CME Group's global head of equity index and alternative investment products.

What Does It Matter?

Various jurisdictions are waking up to the potential of Bitcoin as an emerging store of value in an increasing digitalised world, especially since the start of the health crisis last year. The institutional adoption of Bitcoin has grown in tandem with the availability of institutional-grade investment vehicles such as investment trusts traded over the counter in the US, ETPs/ETNs in Europe, and ETFs in Canada as well as recently in Brazil. These investment vehicles represent alternatives and options for institutional investors that will eventually pick the one that fits into their mandate. There is a panoply of structures, in addition to those above, such as certificates like Coinshares’ that have by design expiration dates and also lack independent market makers for liquidity, unlike ETPs and ETFs, as the issuer of certificates also transact in them, which to some extent involves counterparty risks.

Nonetheless, the rise of ETFs outside Europe doesn't preclude the unprecedented interest in 21Shares ETPs in Europe as our product suite is the most expansive in the world. For the record, ABNB and HODL, two of our ETPs, are the best-performing vehicles amongst all ETPs and ETFs in the world.

The chart below is a testament to the interest in Bitcoin since April 2020, a month in the health crisis at the time. Since the start of the COVID-19 pandemic, the bitcoin wallets aged between 1 month to 6 months have nearly doubled and reached a year-on-year high — representing over 25% of the entire circulating supply of Bitcoin.

At 21Shares, we expect this trend to continue for two reasons:

The first is Tether (UDST), the largest dollar-pegged stablecoin on the market with over $40 billion in market cap, just released its transparency report proving its solvency. Tether has more assets than liabilities. This is excellent news, as Tether has often been considered the potential Achilles Heel for crypto demand and adoption if investors can't redeem their Tether for real US dollars in case of insolvency.

The second reason is that the US lacks a Bitcoin ETF while applications keep being submitted with the latest application from asset manager giants like Fidelity. The latter named their Bitcoin ETF “Wise Origin” as a tribute to Satoshi Nakamoto — "Satoshi" in Katakana means “wisdom” while "Nakamoto" in Kanji means “origin”.

Learn more here.