Monthly Cryptocurrency Market Report | April
- ETC Group listed the ETC Group Physical Ethereum ETC (Ticker: ZETH) on
Tuesday 9th March, the first time an Ethereum exchange traded product (ETP) is listed on the Deutsche
- Bitcoin decouples from Global tech stocks as
longer duration bond yields rise
- European asset managers are the last of the
three major markets to embrace crypto
Past performance is no guarantee
of future performance.
Source: XBT, HANetf
Index, in USD. 12 Month figures based on 31.03.20 -31.03.21.
Bitcoin remains a volatile
store of value and March saw a 19% drawdown in Bitcoin. However this was
less than February’s 27% mid-month drawdown or the 31% decline mid-January. These
consolidations are considered healthy price action as they afford the market
opportunities to ‘clear’ and find the ‘right price’. ITI observes that
three-quarters of Bitcoins have not changed hands since the price reached $10,000
per Bitcoin– testament to the concentration amongst long-term
investors. This indicates a much more mature market structure than as
recently as a year ago when the highly-leveraged and unregulated retail
platforms commanded a larger portion of the trade and were better able to
manipulate the price action as they liquidated overly leveraged small players
during periods of lower liquidity.
Our bitcoin ETC saw another surge in
March with a 28.86% rally following the 27.91% rise in February taking the since
inception gain to 497.79% since launch in July 2020. Bitcoin is now up
over 100% Year to Date in US Dollar terms and continues to gain growing
institutional adoption as the ‘scarcity Asset’ of choice amongst institutional
multi-asset investors. One of the more striking characteristics of the
Bitcoin price action has been the relative decoupling from technology stocks
since yields have started to move markedly higher first in the longer end and
then the belly of the US Treasury curve.
The US 10 Year yield has
continued to dominate macro and multi-asset investors’ attention. Last
month, we highlighted the focus on the psychologically important 1.75% level,
hitherto taken as a line in the sand that could trigger an acceleration back
out of equities and higher-risk assets into the bond market.
However, this narrative has
evolved over the month and the outlook is generally considered more
constructive for a variety of reasons.
ITI observes that the biggest
force in markets remains the monetary policy of the Federal Reserve and the
rest of the G4 central banks. Fed Chairman Powell signalled clearly to
markets that the front end of the curve was firmly anchored until 2024 before
there would be any hike in rates despite mushrooming expectation for fiscal
stimulus to reflate the US economy.
Expectations are quickly
building for a pipeline of multi-trillion fiscal packages that extend far
beyond the Great Corona Recession on the promise of ‘Building Back Better’ and
investing in a ‘sustainable future’. Long gone, is the moral hazard of
debating the ethics of bailing out the banks – the dynamic that tempered
enthusiasm for marginal extraordinary policy action after the Great Financial
Reassured by this
double-barrelled support rather than an ‘either-or’ assumption of monetary
versus fiscal stimulus, uncertainty abated across markets and the VIX made a
new era-low as confidence returned to US equities. The Nasdaq suffered a 12% drawdown from its peak
mid-February into the first week of March and ended March 41bp higher, a net gain
of 2.78% for Q1 21. Eighty-five percent of US households received a
stimulus cheque for $1400 on average which is attributed to helping support the
popular tech stocks and digital assets, long popular with retail investors.
Introducing ETC Group’s Physical Ethereum ETC (ZETH)
While much investor interest in cryptoassets to date has
been hyper-focused on Bitcoin, it is the second largest
cryptoasset by market cap and daily trading volume , Ethereum, that is now
attracting greater attention.
Ethereum uses a native currency called Ether (ETH) which can
be transferred or traded just like bitcoin (BTC). But the true genius of
Ethereum is that it is not simply another Bitcoin clone. The growing conviction
around Ethereum as an asset class relies on its utility.
In terms of the technology, we can think of Ethereum’s
blockchain as a base layer upon which a whole host of computing functions and
programmes can be built. The key analogy here is that of the TCP/IP tech stack
that underpinned the creation of the internet, along with all the various
protocols that were built on top of it.
Ethereum’s broad practical application as a foundational
computing framework means that investors are now looking to Ethereum as a potentially
more valuable asset to track.
ETC Group launched the Ethereum ETC on 9 March
2021 to offer a simple and easy-access investment vehicle giving investors
exposure to this important asset class. ZETH has its primary listing on
XETRA, providing investors with a central counterparty-cleared
investment product on a recognised, regulated international stock exchange. All
of the Ethereum in the ZETH ETP is professionally custodied with the
institutional digital asset manager BitGo, which removes the need for investors
to custody their own cryptoassets, or hold or manage cryptographic keys. Units
of ZETH are fully redeemable for the underlying ETH currency. Its management
fees are 1.49%. For more information, please refer to the Prospectus. For
professional investors only. When trading ETCs your capital is at risk.
BTCetc- ETC Group
Physical Bitcoin ETC Performance Table
As of 31.03.2021
* Bitcoin price is based off XBT daily performance from Bloomberg
Performance before inception is based on XBT daily performance from
Bloomberg. Past performance of XBT does not represent actual performance and
should not be interpreted as an indication of actual or future performance.
Past performance for XBT is in USD. The performance calculation is based
on USD. If the currency in which the past performance is shown
differs from the currency of the country in which you reside, you should be
aware that due to exchange rate fluctuations, the performance shown may
increase or decrease if converted into your local currency.
Past performance is not an indicator
for future results and should not be the sole factor of consideration when
selecting a product. It is provided for illustrative purposes only.
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 these
products. Source: Bloomberg / HANetf. Data as
There is much focus on the
correlations over various time frames between Bitcoin and other asset classes. ITI observes that the recent decoupling from tech
stocks is a very constructive phenomenon and should incentivise multi-asset
investors. So too, the divergent fortunes of physical gold and ‘Digital
One of the fundamentals of
multi-asset portfolio construction is the persistent inverse correlation
between gold and real interest rates (nominal rates adjusted by
inflation). Gold bugs are quick to highlight its store of value for
thousands of years across human civilisation. However, institutional
investors really only were able to allocate to gold since futures started
trading in 1976.
Retail investors were only
able to allocate portfolio investments to gold from 2003 with the advent of the
first ETF on the precious metal. ITI believes those are more relevant
way-markers to frame the evolution of investing in gold. And as such the
advent of access to investing in Digital Gold suddenly seems of greater significance.
‘Bitcoin is better at being
gold than gold’ for many reasons but one of the central reasons is the
accessibility to the asset with the peace of mind that there is no dependency
upon an administrator’s spreadsheet to record entitlement nor requirement to
physically visit the vault.
In Emerging Markets, the
challenges of wealth preservation have been top of mind since WWII with the
spectres of sovereign defaults, rampant inflation or financial repression never
far away. ITI observed that many core EM countries like Turkey, Brazil and
Russia saw new all-time highs in their local currencies long before the USD new
highs. As rising yields and a resurgent US Dollar represent a new double
headwind to EM central banks, ITI expects to see a reacceleration of Bitcoin
demand across its core emerging markets.
Meanwhile, closer to home,
the ‘Great Taxation’ threatens to be a more durable trend than the Great
Rotation as those challenges of wealth preservation come to Developed Markets
paying back their stimuli. This promises to keep demand robust with retail
and institutional investors alike. ITI observes that BTCE is the most
fiduciary responsible way for institutions to access the Bitcoin
ecosystem. Europe is the last of the three major markets to embrace crypto
and therefore BTCE, which is the leading
BTC equity product in terms of AUM
Download the report here.
Learn more about our Ethereum ETC here.
Learn more about our Bitcoin ETC here.