It’s no secret the crypto industry needs more regulatory clarity, a topic we cover in detail in our 2023 Crypto Investment Outlook. The uncertainty driven by regulatory activity in February kept crypto prices suppressed, but the Nasdaq Crypto Index™ still outperformed equity markets, including the S&P 500 and Nasdaq 100.
We recently published two new perspectives on Bitcoin and its long-term investment case. You can read our Portfolio Manager João Marco Cunha’s views on the challenges in trying to time crypto investments here, and our CIO Samir Kerbage writes about Bitcoin’s budding recovery here. Samir was also featured in this Forbes article about bitcoin’s price trajectory.
As always, our team is here to answer any questions you have about these markets.
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NCI PERFORMANCE (USD) SINCE INCEPTION 39.5%
FEBRUARY NCI PERFORMANCE 0.9%
After a strong start to the year, February was relatively stable for crypto asset prices. The Nasdaq Crypto Index™ (NCI™) had a modest increase of 0.9%, while the S&P 500 and Nasdaq 100 stock indexes fell 2.5% and 0.4%, respectively. The correlation between the NCI™ and traditional assets decreased. For example, the correlation with the S&P 500 was 0.18 compared to 0.33 in January.
The main events that caused fluctuations in crypto asset prices were related to regulation and therefore did not affect traditional assets. This included news on the agreement reached between the SEC and Kraken, which resulted in the exchange paying a fine of US$30 million and ending staking for its clients. The announcement, made on February 9, caused apprehension among investors and pushed prices down. In the following days, the NCI™ reached its monthly low, falling 6.7%. Subsequently, with the dissipation of immediate fears about regulation, crypto assets recovered and ultimately generated a positive return for the month.
Among NCI™ components, the highlight was Filecoin, which rose 21.5% driven by the announcement of the launch of the Filecoin Virtual Machine in March, which will enable the creation of smart contracts on the network. Bitcoin and Ethereum registered slight gains of 0.9% and 1.5%, respectively.
The Vinter Hashdex Risk Parity Momentum Index had a small increase of 0.1%. Among CF Benchmarks sectoral indexes, the best performance came from DeFi, which had an increase of 4.5%, driven by lower-weighted assets such as Maker, The Graph, Synthetix, and Yearn.Finance, each with returns above 20%. The Smart Contracts Platforms and Digital Culture indices fell by 3.3% and 3.5%, respectively, but still have year-to-date performance above 60%.
January and February marked the first time since March 2022 that the NCI™ has registered two consecutive months of growth. Despite uncertainties, both external (i.e., the macroeconomic scenario) and internal (mainly on the regulatory front), the market shows signs of entering a recovery phase, as our CIO, Samir Kerbage, conjectured in a recent Forbes article. We remain optimistic.
Coinbase Launches Layer-2 Blockchain
Coinbase announced the launch of their own Layer-2, Base, aiming to “onboard the next billion crypto users.” Layer-2s are secondary blockchains that help improve the speed and scaling of Bitcoin, Ethereum, or other primary blockchains (Layer-1s).
Spotify is Testing Exclusive Playlists for NFT Owners
Spotify confirmed it is exploring using NFTs to unlock certain playlists for owners of these tokens. The firm has tested using NFT galleries on artist pages in the past. This type of adoption could accelerate the use of NFTs and the underlying networks that power them.
Kraken Agrees to Close US Crypto Staking Operations
US crypto exchange Kraken agreed to pay a $30 million fine and shut down its staking program in an agreement with the SEC. The controversial decision, which was opposed by SEC Commissioner Hester Peirce, has brought more attention to the need for regulatory guidelines.
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