July and the first weeks of August provided a welcomed interlude from risk asset headwinds. However, later in August the release of several economic indicators shifted the overall mood for risk, a mood that was dimmed by Fed Chair Powell’s hawkish speech noting there will be “some pain” to address inflation.
While crypto assets were pulled down with this sentiment, there were a number of important developments for the long-term adoption of this asset class during the month. Most notable was the partnership announcement between BlackRock and Coinbase, which will allow more institutional investors access to crypto assets.
All eyes remain on Ethereum, as The Merge is set to occur mid month. Our research team recently wrote about potential risks of The Merge and our Research Center includes more information on what this transition means for investors.
As always, our team is here to answer any questions you might have about these markets.
-Your Partners at Hashdex
NCI PERFORMANCE (USD) YTD -57.4%
The good mood of the markets regarding the risky assets that prevailed in July set the tone for the first half of August. Toward the middle of the month, the Nasdaq Crypto Index (NCI) was up over 7%, operating above 1,550 points, while the S&P 500 and NASDAQ 100 were up 4.0% and 5.5%, respectively.
The key to the change in sentiment was the release of several negative indicators of production and inflation from G7 countries on the 19th, dragging the NCI below 1,350 points. The tension continued through the following week, as central bankers met at the Jackson Hole symposium and anticipation built around Fed Chair Jerome Powell’s speech on the 26th. The speech was hawkish and triggered another drop for risky assets’ prices. The NCI closed the month at 1,248 points, down 13.9%, while the S&P 500 and NASDAQ 100 were down 4.1% and 5.1%, respectively.
Ethereum’s imminent merge continued to influence the price of ether, which had the best relative performance among NCI constituents (-9.1%). Bitcoin (-15.7%) was only fourth best, behind Litecoin (-12.5%) and Stellar Lumens (-13.9%). CF DeFi, CF Smart Contracts, and CF Digital Cultures Indexes dropped 22.1%, 17.6%, and 14.0% respectively. The most prominent asset was Chiliz, a crypto asset associated with the sports fan tokens platform Socios.com. Boosted by FIFA World Cup buzz, Chiliz surged 63.9% in spite of the negative overall market condition.
Year to date, the NCI has fallen 57.4%. Despite the turmoil coming from the macroeconomic environment, there are still good examples of the dynamism of the cryptocurrency segment. This is one of the reasons why we believe that the crypto asset class is set up to recover vigorously once the macro scenario shows signs of improvement.
Coinbase announced a partnership with Blackrock, the world’s largest asset manager, allowing investors on Blackrock's Aladdin platform direct exposure to crypto assets. The announcement futhers the case that institutional interest in crypto remains strong.
Market intelligence platform Blockdata divulged a study showing that 40 of the world’s 100 largest public companies invested roughly $6 billion in blockchain companies between September 2021 and June 2022. The study reflects the growing interest from corporations in leveraging blockchain-based technologies.
Fed Chair Powell spoke about his concerns over inflation at the Jackson Hole symposium, noting that there will be “some pain” to help combat inflation. Many investors believe bitcoin’s unique characteristics and growth potential make it a promising alternative to the current tools used to hedge against inflation.