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Market Pulse - Q2 2023


Executive Summary


The second quarter of 2023 witnessed a more subdued yet positive performance in the crypto markets following a strong rally in the first quarter. The Nasdaq Crypto Index (NCI) experienced a 6.3% quarterly increase (74.3% YTD), with bitcoin leading the way by rising 7.0% during the period (83.2% YTD). Ether also performed well, albeit slightly less impressively, with a 5.4% quarterly increase (59.9% YTD).

Additionally, other risky asset classes displayed continued positive performance, driven by a robust rally in technology stocks, particularly those associated with Artificial Intelligence, exemplified by the remarkable capabilities of large language models like ChatGPT. The Nasdaq 100 closed the quarter with a 15.2% increase (38.8% YTD), the S&P 500 rose by 8.3% (15.9% YTD), and gold, which performed strongly in the first quarter of 2023, experienced a 2.5% decline in the second quarter (5.2% YTD) as markets shifted slightly towards risk-on mode again.

Although these performance highlights provide a glimpse into the quarter's developments, it is essential to pinpoint some major events that transpired. In April, Ethereum began the quarter positively with the successful activation of Shanghai, significantly de-risking its investment case as stakers are now capable of unstaking their holdings at any time. May was relatively subdued, but June brought action back with the US Securities and Exchange Commission (SEC) pressing charges against Coinbase and Binance, triggering a decline in crypto prices. However, the semester ended on a positive note with the news that BlackRock (followed shortly after by Fidelity, Invesco, WisdomTree, VanEck, Nasdaq, and Ark) had applied for a spot bitcoin ETF in the US. This initiated another rally in crypto blue-chips as traditional institutions made clear that the asset class can no longer be disregarded.

This edition also delves into various fundamental aspects, such as the new wave of Ordinals and Inscriptions on the Bitcoin network, the surge in new staking deposits on Ethereum following the Shanghai update (as predicted in our previous report), and an intriguing projection of the combined market capitalization of bitcoin and ether using logarithmic regression.

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