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[17-24 November 2023] DigitalX Weekly Crypto Update: Market Trends and Analysis
DigitalX Limited (ASX:DCC)
Transparent investment management at the intersection of technology and finance #Web3 #DigitalAssets
Weekly Price Action
*All figures below are in USD unless otherwise specified.
Market commentary
Year to date inflows into digital asset investment products amounted to US $1.32 billion as of last week, with ETP volumes now representing 11% of total digital asset volume. For context, the long-term historical average for digital asset investment products has previously been representative of 3.4% of total volume. Sentiment continues to remain strong following the announcement that Binance had reached a settlement with the Department of Justice for violations which included a US $4.3 billion fine and Changpeng Zhao stepping down as Binance CEO. So far this has had a positive impact on the overall DeFi sector, as the total value of all DeFi token projects has jumped to a 14 month high of US $58 billion according to data from TradingView. Similarly, according to data from DeFiLlama Total Value Locked (TVL) amongst DeFi protocols is up over 20% over the past month, totalling US$ 53 billion as at the time of writing.?
This week Fidelity followed BlackRock’s lead for a second time, filing an application for a spot Ethereum ETF to complement their existing application for a spot Bitcoin ETF. A K33 research report released this week addressed the key benefits of an approval of spot Bitcoin ETFs in the United States. The report stated that spot ETFs would simplify access to Bitcoin exposure. Bitcoin spot ETF applications continue to receive further delays by the US Securities and Exchange Commission who has recently delayed both Hashdex and Franklin Templeton's proposed ETF applications.
CEO Comment
The Gap between Bitcoin and the S&P 500 rose slightly this week, with equities markets continuing to pick up. It is worth noting that Grayscale’s Bitcoin Trust discount has fallen below 10% for the first time in over two years. Although the closing of this discount, or premium to net asset value, has different drivers affecting its gap, it remains a testament to how quickly these gaps can close. We also note from last week that the Second Gap between Bitcoin and the broader digital asset market continues to fall as altcoin's attempt to close their all time high gap relative to Bitcoin’s.?
As for the shift list, which we define as the major events and announcements facilitating the broader market's transition to Web3 financial rails or the internet of value, the top three for this week include:
In our DigitalX Digital Asset Fund we continue to apply a sound institutional investment process to investing in the top digital asset opportunities within the sector. Some of our key thematics include identifying the most reputable and innovative networks working on identity and data validation (Zero Knowledge proofs and rollups), data storage, infrastructure plays, and many others as well as other tangential opportunities the scaling of Real world assets brings. We are encouraged by the sheer volume of real world asset tokenisation activity that also underpins these thematics and believe 2024, will be the year this market scales up.?
Lisa Wade (she/her), CEO DigitalX
Week in review
The Shift List
Market Updates
领英推荐
Macro/ Regulatory Environment
In the spotlight
JPMorgan blockchain arm Onyx has collaborated with a suite of industry startups to create a proof of concept that could show how tokenization can help better manage financial assets.
The tests were carried out under the Monetary Authority of Singapore’s Project Guardian and was designed specifically to enable fund managers to tokenize their portfolios on chosen blockchains.
Wealth managers could also purchase and rebalance their positions across these different interoperable blockchain networks.
The blockchain stacks chosen for this proof of concept include Provenance Blockchain, JPMorgan’s own Onyx Digital Assets and Avalanche. Cross-chain communication protocol Axelar and issuance-slash-trading platform Oasis Pro also contributed to the initiative.
?itcoin (BTC)
The ongoing amendments to Bitcoin ETF proposals by various fund issuers signal an approval could be coming, industry watchers have said. Ophelia Snyder, the president of bitcoin ETF hopeful 21Shares, said Monday that engagement with regulators indeed has a different feel this time around. “Right now everyone’s watching this race on a minute-by-minute, day-by-day basis...is it today, tomorrow?” she noted during an interview on Bloomberg TV. “I think that’s a challenging way of looking at this. I think the clearest indication is that we’re in a pattern break.” The US Securities and Exchange Commission has never allowed a spot bitcoin ETF to come to market — despite repeated attempts by fund issuers over the last decade.
Approval of Bitcoin spot ETFs in the United States would simplify access to Bitcoin exposure, helping to reduce traditional 60/40 portfolio risk by diversifying into the digital asset, according to the latest K33 Research report. “We expect diversification and risk-adjusted outperformance to be key go-to-market strategies from the various ETF providers,” Senior Analyst Vetle Lunde and Vice President Anders Helseth said. Since 2020, bitcoin has proven its worth as a powerful tool for portfolio diversification, the analysts argued. An investor with 1% exposure to bitcoin in a traditional 60/40 portfolio would have outperformed a portfolio without bitcoin exposure by 3.16%. The traditional 60/40 portfolio is a classic investment strategy that involves allocating 60% to stocks and 40% to bonds. Despite a muting of the bitcoin diversification narrative during 2022's crypto market turmoil, bitcoin exposure this year would have improved risk-adjusted returns in a traditional portfolio due to softening correlations and solid upside, the analysts added.
Wintermute Asia, a crypto derivatives trading arm of the algorithmic trading firm Wintermute Group, said Tuesday that it executed its first options block trade through CME Group. The BTC/USD block was traded between Wintermute Asia and TP ICAP and was cleared by ABN AMRO Clearing Bank, Wintermute said in a statement. "In such a fast-growing and exciting market, it is fantastic to see crypto-native firms such as Wintermute accessing traditional products and services, solidifying our belief that the maturation of this market is building momentum," Sam Newman, TP ICAP's digital assets head of broking, said in the statement.
Ethereum (ETH)
Asset management giant Fidelity has filed for a spot ether ETF, in the footsteps of its spot bitcoin ETF application. "To this point, approval of a Spot ETH ETP would represent a major win for the protection of U.S. investors in the crypto asset space," the filing states, claiming that investors are facing significant risk without such products as they seek alternative, riskier ways to get exposure. The filing noted the recent Grayscale court ruling where the court said the SEC had failed to find a coherent reason why it should reject spot crypto ETFs when it had allowed futures-based products. In June, Fidelity filed for a spot bitcoin ETF, shortly after BlackRock entered the race. The Block broke the news ahead of the filing.
The SEC has delayed its decision on the Hashdex Nasdaq Ethereum ETF, which would include both spot ether and futures, until January 2024. The SEC's delay, citing the need for more time to consider the proposal and related issues, also affected a decision regarding a Hashdex bitcoin futures ETF application.
About DigitalX
DigitalX Ltd (ASX:DCC) is a leading ASX-Listed Bitcoin and digital asset funds management business. The Company has a 9 year track record mining Bitcoin, blockchain and smart contract development. DigitalX Asset Management is the investment manager of digital asset investment products that provide qualified investors with highly secure and streamlined access to digital asset exposure. To learn more contact the team at [email protected] or visit our website https://digitalx.fund/.
Disclaimer
DigitalX Asset Management Pty Ltd is a corporate authorised representative (CAR) of Boutique Capital Pty Ltd (AFSL 508011), and True Oak Investments Ltd (AFSL 238184). To the extent to which this document contains advice it is general advice only and has been prepared by the CAR for individuals identified as wholesale investors for the purposes of providing a financial product or financial service. The information herein is presented in summary form and is therefore subject to qualification and further explanation. The information in this document is not intended to be relied upon as advice to investors or potential investors and has been prepared without taking into account personal investment objectives, financial circumstances or particular needs. Recipients of this document are advised to consult their own professional advisers about legal, tax, financial or other matters relevant to the suitability of this information. Past performance is not indicative of future performance.