Dear Investor,
October was a peculiar month. While US inflation has been the main driver of asset prices this year, core indicators released during the month — more inflationary than expected — didn’t lead to negative results for risk assets like equities and crypto. In this month’s letter, we review some of the reasons for this dichotomy in the current environment.
Early in the month, Morgan Stanley released a report on the global crypto ETP landscape, which supports our belief that access to crypto investment products remains a high priority for many investors. You can read our perspective on the report here.
October ended with the 14th anniversary of the Bitcoin whitepaper. We remain as bullish as ever on the world’s first cryptocurrency and recently updated our BTC investment case, which can be found here.
Next week, our monthly investor call will be a look back over 2022, exploring the fundamental leaps crypto has made this year — despite the ongoing crypto winter — and how investors should be thinking about these developments going into 2023. You can register for the call here.
As always, our team is here to answer any questions you might have about these markets.
-Your Partners at Hashdex
NCI PERFORMANCE (USD) YTD -56.6%
OCTOBER NCI PERFORMANCE 7.6%
October: Positive month in spite of negative inflation news
October was a peculiar month. Inflation in the US has been the main driver of asset prices in 2022. Three core indicators released in October were more inflationary than expected by the market: higher CPI, lower unemployment and stronger GDP growth (3rd quarter). Under these circumstances, many would bet on a negative result for the equities but it didn’t happen. S&P 500 rose 8.1%, nearly offsetting the losses from September, while Nasdaq 100 returned 4.0% due to some negative earnings announcement from major companies such as Meta and Google.
This apparent dichotomy was partially explained by inflation itself. In spite of the numbers announced, some analysts argue that there are some reasons to believe that inflation will drop soon, based on some slowing down signs from housing. Some others point that the possibility of recession will limit the strength and duration of the tightening cycle. Apart from inflation, substantial buybacks and relevant technical points were among the reasons presented for the positive month.
In this environment, cryptoassets also had a good performance, with the Nasdaq Crypto Index growing 7.6% Most of this result was mostly built in the final days of the month, lagged compared to equities. Among the idiosyncratic facts of the crypto environment that helped pushing prices up, we can mention the new regulation in the UK that recognizes crypto as financial instruments and a clearer guideline from Apple on how crypto and NTFs will interact with AppleStore.
Another highlight is the surge of Ethereum (16.6%), being the top performing constituent of the NCI and closing the gap relative to Bitcoin (4.0%) since The Merge. NCI outperformed all the three sector benchmark indexes followed by Hashdex products: CF DeFi (7.5%), CF Smart Contracts (1.0%) and CF Digital Culture (-2.1%). The worst performing asset in the NCI was Axie Infinity, plunging more than 27%, which highly impacted the CF Digital Culture Index. Year to date, NCI has dropped.56.5%.
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