- Bitcoin decouples from
Global tech stocks as longer duration bond yields rise
- Bitcoin has become the
tech-CFO Kingmaker
- European asset managers
are the last of the three major markets to embrace crypto
Bitcoin Price Performance
April
|
12 Month*
|
-3.64%
|
543.68%
|
Past performance is no guarantee
of future performance.
Source: XBT, HANetf
XBT Index
in USD. *12 Month figures based on 30.04.20 -30.04.21.
Ether Price Performance
April
|
12 Month*
|
42.46%
|
1205.00%
|
Past performance is no guarantee
of future performance.
Source: XET, HANetf
XET
Index, in USD. *12 Month figures based on 30.04.20 -30.04.21.
Litecoin
Price Performance
April
|
12 Month*
|
9.14%
|
465.77%
|
Past performance is no guarantee
of future performance.
Source: XLCUSD, HANetf
XLCUSD
Index, in USD. *12 Month figures based on 30.04.20 -30.04.21.
Industry News
April saw a 3.6% fall in the Bitcoin Price. This is a
modest contraction in comparison to recent performance and leaves Bitcoin still
up 95.9% Year-to-date and over 485.0% since inception. Ethereum stole the
limelight amongst digital assets and Ether posted a stellar +42.4% on the month
as the blockchain’s daily transaction volumes went parabolic. Ethereum currently settles c.$12bn in
transaction daily, almost a third more than Bitcoin.
ITI
believes that Bitcoin has long-since won the Digital Gold mantra whereas
Ethereum is increasingly perceived as the ‘Operating System’ of the
decentralised future. Decentralised Finance (DeFi) continues to garner
mainstream interest and one of the use-cases is allowing traditional savers to
switch into stablecoins which can be farmed to generate a meaningful yield on
deposits – a distant memory from before the Global Financial Crisis. The potential reach and scale of this and
other use cases is spurring fresh mainstream interest in Ethereum and hence
ZETH.
April
was a broadly constructive month for risk assets. The second quarter got off to
a strong start as the US 10 year Treasury yield contracted from the 1.75% ‘line in the sand’ for
the first three weeks but then rallied again in the final week as inflation
fears resurfaced. The dovish Fed continued to signal that they
were relaxed to let the economy ‘run hot’ whilst anchoring front-end
rates. The DXY Dollar index retraced
much of its Q1 rally. In equities, the
Q1 earnings season got off to a strong start.
By
month-end c.60% of the S&P had reported with 85% of those beating expectations by a median
15%. Tech stocks had closed much of the
performance gap on the S&P as yields declined but lost ground again as yields
rose and the ‘Great Rotation’ narrative resumed. Amongst traditional assets,
commodities were the outperformers. Oil was strong and Copper made new 10-year
highs, reflecting both the Reopening of the economy as well as positioning for
the ESG megatrend via electrification infrastructure investments. The ratio of Copper-to-gold made a record
high which was interpreted by some as another warning flag of market euphoria
and complacency. Agricultural commodities
rallied 13% with corn up over 30%, the strongest rise since 1988. Grains are a larger component of Asian
inflation baskets and rising prices fuel the cultural grass-roots need to
protect against inflation, reinforcing demand for Bitcoin.
As
yields rise, physical gold is constrained by its strong inverse correlation to
real interest rates. A number of
strategists have echoed Blackrock CIO comments that gold’s inflation protection
characteristics are most relevant over very long periods of time. ITI believes that this narrative is gaining
traction amongst multi-asset investors who are increasingly turning to Digital
Gold for that inflation hedge.
Introducing ETC Group’s Physical Litecoin ETC (ZETH)
One of the more intriguing things about the long-term
bullish growth of the cryptoasset market is the rise of highly liquid large-cap
altcoins. Altcoin is portmanteau of ‘alternative’ and ‘coin’ and refers to
every other cryptoasset than Bitcoin. The most enduring of these is Litecoin
(LTC).
Once released, it quickly rose to prominence and has
remained popular ever since. As of May 1st 2021, Litecoin has amassed a market
cap of $18.1bn.
Litecoin is now one of the most recognised and utilised blockchain-based
payment networks in the world. It is one of only two blockchains, the other
being Bitcoin, that can boast 100% network uptime since its creation and
lasting for a decade or more. This kind of longevity has been crucial to its
incorporation onto all of the largest cryptoexchanges including Binance,
Coinbase and Huobi Global, as well as mainstream recognition from major global
payment processor Paypal.
Litecoin was created in 2011 by the MIT-educated software
engineer Charlie Lee, who helped develop some of the early iterations of Chrome
OS and Youtube at Google, before going on to become the Director of Engineering
at Coinbase, leaving in 2017 to develop Litecoin full-time.
ETC Group launched the Litecoin ETC on 22 March 2021 to
offer a simple and easy-access investment vehicle giving investors exposure to
this important asset class. ELTC has its primary listing on Deutsche Börse
XETRA, providing investors with a central counterparty-cleared investment
product on a recognised, regulated international stock exchange. All of the
Litecoin in the ELTC product is professionally custodied with the institutional
digital asset manager BitGo Trust Company, which removes the need for investors
to custody their own cryptoassets, or hold or manage cryptographic keys. Units
of ELTC are fully redeemable for the underlying ELTC currency. Its TER is
2.00%.
Crypto Performance Table
As of 30.04.2021
|
1M
|
3M
|
6M
|
YTD
|
12M
|
SI
|
Bitcoin* (Net)
|
29.09%
|
103.34%
|
450.67%
|
103.34%
|
809.69%
|
507.66%
|
Ethereum** (net)
|
42.46%
|
113.15%
|
612.15%
|
273.90%
|
1205.00%
|
80.29%
|
Litecoin*** (net)
|
9.14%
|
108.56%
|
374.68%
|
114.74%
|
465.77%
|
9.14%
|
* Bitcoin price is based off
XBT daily performance from Bloomberg
** Ethereum price is based off
XET daily performance from Bloomberg
*** Litecoin price is based
off XLCUSD daily performance from Bloomberg
Past performance of XBT, XET and XLCUSD does not represent actual
performance and should not be interpreted as an indication of actual or future
performance. Past performance for XBT. XET and XLCUSD 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
of 30.04.2021
Outlook
The 10-year yield continues to be the benchmark macro yardstick with
expectations growing that it will rise to 2% by the end of 2021 based on 8%+
expectations for US GDP growth; the biggest gap on record between ISM data and
the 10-year yield together with the Fed forecast to buy just a third of net
bond issuance. Hence ITI believes that
bond markets will likely come under renewed pressure later in the year. Yields will likely be driven primarily by
inflation expectations. The Fed remains
very dovish, reflecting the desire to seek ‘maximum employment’ with the real
unemployment rate currently triple the pre-pandemic level. The Fed will likely tolerate core CPI rising
to c.3% and will also be careful to avoid another ‘taper tantrum’. Real bond yields need to be engineered around
current levels to stabilise government debt and allow unemployment to
fall. The greater the degree of
inflation uncertainty, the more investors will pay to hedge it and dare to
explore new ways to protect portfolios from its erosion of wealth.
ITI believes this will continue to draw increasing numbers of
traditional multi-asset investors into Bitcoin, ‘better at being gold than
gold’. Many traditional allocators are
understandably deterred by Bitcoin’s volatility. However as prices have consolidated in recent
weeks, the volatility of BTC has fallen markedly and it is becoming
increasingly pallettable to institutional portfolio managers. ITI believes that Bitcoin has established
itself as the ‘Tech CFO Kingmaker’, having transformed the fortunes of several
leading tech titans. Tesla reported a
greater Q1 revenue from its Bitcoin investment than selling cars. ITI believes that as yields rise, challenging
the terminal valuation of these growth-focused tech titans, more tech company
will feel that the risk-reward lines cross in favour of allocating treasury
reserves to BTC.
Speculation continues to build about investments from Apple, Amazon,
Facebook and others. There is growing
focus on Central Bank Digital Currencies as the geopolitical race between
China’s digital Renmimbi and western nations intensifies. A digitalised fiat currency allows
direct-to-consumer deposits from the central bank – as well as the ability to
tax every stage of every transaction.
This is attractive to governments in need of clawing back the trillions
in stimulus and will become increasingly apparent to citizens as the ‘Great
Taxation’ begins to bite. Whilst a
number of strategists have written bearish predictions for the impact on
Bitcoin, ITI believes the opposite is true; that the exponential network effect
and clamour for wealth preservation will fuel fresh demand for Bitcoin.
Visit the Bitcoin ETC Fund Page for more information
Visit the Ethereum ETC Fund Page for more information
Visit the Litecoin ETC Fund Page for more information