Digital Assets Monthly Report | October

24 October 2022

Cryptocurrency Monthly Report: Key Takeaways

  • Crypto decouples as BoE forced into QE pivot — will Fed reverse?
  • Bitcoin holders climb to all time high despite bear market
  • Governments move to capture massive Metaverse potential

Macro Outlook

Crypto decouples as BoE forced into QE pivot — will Fed reverse?

The main criticism levelled at digital assets since their November 2021 record high has been that markets have been tightly coupled with equity markets. That correlation appears to be breaking down as macro blows up. Across September, central banks were forced to sell dollars to defend their crashing currencies, while the Bank of England made an emergency move to step in to buy government bonds in the face of a UK pension fund meltdown.

At the same time, the three major US equity indices: the S&P 500, the Dow Jones and the Nasdaq, continued their losing streak in the third quarter of the year to 30 September. Across Q3, each fell by -5.3%, -6.7% and -4.1% respectively, leaving all three benchmarks more than -21% down for the year.

By contrast, in Q3 Bitcoin moved slightly up by 1%, while Ethereum climbed 29% from its 18 June lows.

Even the New York Times[1] had to (begrudgingly) accept that Bitcoin’s correlation with equity markets may not continue indefinitely. “When central banks raised interest rates, Bitcoin largely traded like risky assets such as tech stocks. But that hasn’t necessarily been the case over the past month. Bitcoin has traded in the green [in] September while the tech-heavy Nasdaq is down nearly -10% over that period,” senior editor Bernhard Warner reported.

In line with expectations, the Federal Reserve raised rates by 75 basis points, but also signalled that they would hold interest rates at higher levels for longer. Central banks in the UK[2], Switzerland[3], Canada[4], the EU[5] and Sweden[6] all raised rates in September — some by record amounts — giving traders the signal to discount risk assets.


Please remember that cryptocurrencies can be highly volatile, and your capital is at risk. Past performance is not indicative of future performance.


Bitcoin holders climb to all time high despite bear market

The number of addresses holding Bitcoin climbed to its highest level ever in September 2022. The figure has reached a total of 47 million; 9 million more than 12 months ago. [7]

Despite the bear market Bitcoin holders are clearly accumulating BTC and happy to hold out for better times ahead. As the ultimate inflation-proof asset, this should come as no real surprise.

In line with Metcalfe’s Law on the appreciating value of global networks, Bitcoin’s utility grows in line with its wider adoption. [8]

In short: as a technology akin to a social network (but for exchanging value, not data), the more users and holders the Bitcoin network has, the more useful it becomes.

Bitcoin addresses are not necessarily a straight 1:1 analogy to individuals holding Bitcoin, since anyone can create multiple Bitcoin addresses just as they can create multiple bank accounts, or social media profiles. However, we believe the overall trend is clear. More people are holding more Bitcoin, despite unit prices being some 70% cheaper than they were a year ago.


Governments move to capture massive Metaverse potential

Even amid the digital asset bear market, governments and global corporates are ramping up their Metaverse efforts.

The Ministry of Science and ICT in South Korea recently spoke of plans to sidestep existing laws surrounding virtual gaming and creating a new legal regime[9] to regulate its Metaverse industry.

The revised legal framework is expected to bolster the near-$200 million[10] the country committed to the development of its domestic artificial and augmented reality platforms earlier this year.

The European Union is also devoting time and resources to regulating the Metaverse and its decentralised virtual worlds. In a Letter of Intent[11] published on 14 September, the bloc highlighted: “We will continue looking at new digital opportunities and trends, such as the metaverse,” noting that expanding its legal regime to include the next-gen tech would be among its policy priorities for 2023.

This heightened attention toward the sectors encompassing the Metaverse industry: blockchain platforms, hardware manufacturers, and software providers comes amid rising flows entering Metaverse ETPs in Europe.

Catalysts for this surplus in institutional capital include the deepening popularity of NFTs and the broadening commitment of global consumer brands such as Disney to massively expand their retail activities in the Metaverse.

JP Morgan released a new research report[13] this month adding that China’s Metaverse-related economy could triple the country’s $44bn online gaming industry to $131bn. Digging into the detail of the bank’s paper, its analysts estimate a $4 trillion total addressable market for the metaverse in China from “converting offline consumption across physical goods and services”.

Writing laws to regulate the Metaverse – and the evolving shape it takes over the coming years – is a complicated ask for any government or enforcement agency. It is unmapped terrain and it is evident that applying existing laws to the space would be ineffective.

For one thing, solving intellectual property disputes is still a difficult obstacle to surmount. Digital assets like NFTs pose novel challenges regarding ownership and whether they can rightfully be duplicated or not.

Corporations and VCs have already doled out more than $120 billion on Metaverse acquisitions or other related activities in 2022 – more than double the amount spent in 2021.[14] Earlier this year, investment bank Citi’s Institutional Client Group forecast[15] that the global Metaverse economy could be worth $13 trillion and have 5 billion users by 2030. This would represent close to 60% of the world’s population by the end of the decade.

Today, approximately the same percentage of the population has access to the internet.[16] If user adoption models prove to be correct, the Metaverse will grow faster in the next eight years than the internet has since the 1990s.


Digital Assets Performance (As of 30.09.2022)








BTCetc - Bitcoin Exchange Traded Crypto














ETHetc - ETC Group Physical Ethereum







Ether (Ethereum)







ETC Group Digital Assets and Blockchain Equity UCITS ETF







Solactive ETC Group Digital Assets and Blockchain Equity Index NTR







ETC Group Global Metaverse UCITS ETF







Solactive ETC Group Global Metaverse Index







Please note that all performance figures are showing net data. Source: Bloomberg / HANetf. Data as of 30/09/2022 Performance before inception is based on back tested data. Back testing is the process of evaluating an investment strategy by applying it to historical data to simulate what the performance of such strategy would have been. Back tested data does not represent actual performance and should not be interpreted as an indication of actual or future performance. Past performance for the index is in USD. Past performance is not an indicator for future results and should not be the sole factor of consideration when selecting a product. Investors should read the prospectus of the Issuer (“Prospectus”) before investing and should refer to the section of the Prospectus entitled ‘Risk Factors’ for further details of risks associated with an investment in this product.


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BTCetc – ETC Group Physical Bitcoin

ETHetc - ETC Group Physical Ethereum

ETC Group Digital Assets and Blockchain Equity UCITS ETF

ETC Group Global Metaverse UCITS ETF

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