Monthly Letters
Dear Investor,
The “September effect” of declining equity market performance did not carry over to crypto, as the Nasdaq Crypto Index rose 2.4% during the month. Whether or not crypto assets experience another “Uptober” this month remains unclear, but the fourth quarter is off to a strong start.
Low volatility for crypto assets and high uncertainty in the economic outlook were two key themes in recent weeks. Our Research Team wrote about the link between bitcoin’s volatility and outsized returns while Head of Product Dramane Meite covered five ways crypto is benefiting from this environment.
Ether futures ETFs began trading this week in the US, another signal of a slowly improving US regulatory environment for crypto. In his Notes from the CIO, Samir Kerbage uncovers why he’s never been more bullish on Ethereum, while Research Analyst Lucas Santana evaluated the impact of The Merge, one year later.
As always, our team is here to answer any questions you have about these markets.
- Your Partners at Hashdex
Market Review
The “September effect” in equity markets goes back many decades and 2023 was no exception. Both the S&P 500 and the Nasdaq 100 recorded declines of around 5%, making September the worst month of 2023 so far for both indices. Factors contributing to this decline include the rise in oil prices, which is putting pressure on inflation, and the increase in future interest rates.
However, in the crypto asset market, September was a month of gains. The Nasdaq Crypto Index (NCI) rose 2.4%, breaking the sequence of declines in July and August. The month was characterized by low volatility, reflecting the absence of news significant enough to affect prices. The main exception was the news that assets that belonged to FTX could be sold in the markets. The fear that such an event could crash prices became a self-fulfilling prophecy, especially for lower-market-cap cryptos. The NCI fell nearly 5% on the 11th, but fears dissipated in the following days.
Among NCI constituents, the two largest ones, Bitcoin and Ethereum, saw increases of 2.8% and 1.1%, respectively. However, the highlight was Chainlink, which surged more than 38%. An important factor contributing to this result was the announcement of a partnership with the Swift network, used by financial institutions worldwide for executing financial transactions.
The Vinter Hashdex Risk Parity Momentum Index had a slightly higher increase than the NCI, thanks to Tron, the asset with the highest weight, which rose by 16.0%. Among the sectoral indices of CF Benchmarks, the best result came from DeFi, which saw a 10.0% increase, primarily driven by Maker (32.7%). The Smart Contracts and Digital Culture indices yielded returns of 0.7% and -4.0%, respectively.
Although 2.4% is not a substantial increase, it was significant given the context of traditional asset markets. As a side note, historically, October is a month of good returns for crypto assets, earning the nickname “Uptober.” We are optimistic about October and the fourth quarter, and our conviction for this asset class over the long term remains strong.
Top Stories
US lawmakers to Chair Gensler: approve spot bitcoin ETF ‘immediately’
SEC Chair Gary Gensler faced criticism from lawmakers on the classification of crypto assets, bitcoin ETFs, and his transparency with Congress in relation to his interactions with the crypto exchange FTX. As pressure mounts on the SEC, it’s becoming more clear that a spot crypto ETF in the US is only a matter of “when” not “if.”
PayPal rolls out its stablecoin to Venmo users
The company revealed its exciting plans to introduce the PayPal USD (PYUSD) stablecoin to Venmo in “the coming weeks,” allowing tens of millions of users access to the stablecoin for payments.
Franklin Templeton joins spot bitcoin ETF race
Franklin Templeton, one of the world’s largest asset managers, is following other leading institutions aiming to attract substantial institutional investment and potentially inject trillions into the crypto market. This news reassures our view that institutional adoption continues at full steam.
Deutsche Bank gets into crypto custody, tokenization
Deutsche Bank has announced a strategic collaboration with Taurus, a Swiss digital asset infrastructure provider, to create a solution for crypto custody and tokenization. The company joins other traditional financial institutions like Standard Chartered, BNY Mellon, and Société Générale, all of which have already ventured into offering crypto custody.
G20 moves forward with international crypto framework
The leaders of the 20 biggest economies in the world are moving forward to implement a cross-border framework for crypto assets, another sign of the current effort by policymakers worldwide to establish clear regulatory standards for digital assets.
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