Bitcoin Monthly Report | March
- Despite the largest pull-back in Bitcoin prices
in recent times amidst macro turmoil, we continued to see inflows into our
- The rate of institutional adoption of Bitcoin
continues to accelerate
Past performance is no guarantee
of future performance.
Source: Bloomberg, Solactive, HANetf
Index, in USD. 12 Month figures based on 28.02.20 -26.02.21.
Bitcoin saw another surge February with a 31.84% rally
following the 19.5% rise in January and 49.6% gain in December, taking the
total gain to 388.8% since June 2020 when the Bitcoin ETC launched.
The Bitcoin price ranged between a max of $55,620 on 19th
of February to a minimum of $33,665 on 1st of February, a growth of 65.2%.
At the end of February, the Bitcoin ETC stands at $846m of
assets under management.
February saw a dramatic 26% correction in the underlying
Bitcoin market in the last week of the month on the confluence of a comment
from influential Elon Musk that the ‘price seems high’ and remarks from Janet
Yellen, the US Treasury Secretary, that Bitcoin was ‘highly speculative’ and
‘inefficient’ for transactions.
The main driver of
the recent correction in bitcoin was the escalation of concerns about the US
bond market as yields began to rise in the 10 Year and longer maturities as
expectations rose for the $1.9bn fiscal package. Investors are getting
increasingly worried that accelerating inflation could trigger a pullback in
monetary policy support that has fueled gains in risk assets during the Great Corona
Recession. Federal Reserve Chairman Jerome Powell reiterated that higher
Treasury yields reflect optimism on the outlook for growth and officials have
stressed that the central bank has no plans to tighten monetary policy, the
motive force behind the asset price inflation. The move in yields also
led an acceleration of the Great Rotation in equities where the growth / tech
stocks in the Nasdaq with greater share price sensitivity to forward interest
rates suffered a c.7% drawdown from peak whilst the value / cyclical sectors
held up well into the month-end. The
multi-asset volatility extended across energy, metals and agriculture with
confidence growing in a nascent commodity super-cycle.
BTCE Performance Table
As of 28.02.21
*BTCE inception was on 08/06/2020
**Bitcoin price is based off XBT daily performance from
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. Source: Bloomberg / HANetf. Data as of 28/02/2021
As markets head into March, the uncertainty in the bond
market is likely to prevail with a consolidation required following the sharp
moves in the US 10 year yield where the market perceives the ‘line in the sand’
at 1.75% level whereby large multi-asset investors are expected to accelerate
reallocations out of equities and back into bonds. Blackrock, the world’s
biggest fixed income manager, shifted towards a more pro-growth allocation,
increasing exposure to equities and going underweight government bonds as
inflation expectations rise sharply. Last year, renowned economists and
strategists were quick to look forward to the spectre of rising inflation and
the challenges navigating those financial conditions. There are few asset
managers operating today with experience of navigating true inflation.
With front-end rates firmly anchored on the floor for the foreseeable future,
expectations are mounting that the Fed will have to apply Yield Curve Control
in longer-end bonds. Whilst turmoil in the biggest asset markets of
government bonds and equities will inevitably lead to amplified short-term
drawdowns in Bitcoin, the longer-term outlook for Bitcoin continues to
build. Blackrock’s CIO and CEO themselves are among those citing
Bitcoin’s place in portfolios. Short-dated correlations increased again
between Bitcoin and Tech stocks – increasingly caught up as the tech behemoths
continue to invest their treasury cash-piles in Bitcoin, supported by
influential asset managers like ARK’s Cathie Wood or FundStrat’s Tom Lee – one
of the most accurate investors since the onset of the Pandemic. It also
reflects growing institutional adoption when short-dated correlation increases
during episodes of market stress. This was the case when gold fell c.30%
during the GFC
and Bitcoin fell 63% last March.
Both then went on to multiply in value when the investment case returned to the
fore and investors horizons looked forward. There has been speculation
that a collapse in premium of the popular US closed-end trust on Bitcoin would
lead to a break-down in Bitcoin. ITI disagrees with this hypothesis as
arbitrageurs of that premium have to unwind short-positions in Bitcoin or
Bitcoin futures so the net impact on supply is flat. ITI believes that
the primary driver of the compression of the premium on such vehicles is due to
the rising popularity of BTCE as more investors realise that they don’t need to
pay a premium or suffer a lock-up on their investment. As the debate
about inflation begins to intensify, ITI believes that there will be increased
flows into BTCE from institutions seeking the most fiduciary responsible way to
gain exposure to Bitcoin.