In June, the Nasdaq Crypto Index posted its most negative return since its inception in December 2020, down 41.7%.  It was also the second highest-returning month in absolute terms in the index's history, behind its inaugural month (up 44.9%). 

Although June was a bad month for risky assets in general (e.g., S&P 500 and Nasdaq 100 were down around 9%), most of the loss in the crypto market was driven by internal factors. Negative news about the financial health of some relevant players in the crypto ecosystem drove the prices down. The main company involved in these issues was crypto lending platform Celsius, which suspended redemptions and transfers on the 13th, as we reported in our Research Commentary. Another case that was broadly repercuted was the insolvency of the hedge fund Three Arrows Capital.

The damaging impact of both internal and external shocks was amplified by liquidations of margin positions, mostly in Bitcoin and Ethereum. This was the main reason why these two cryptoassets, which are the largest in market cap and tend to be more resilient than the others during stress seasons, were among the worst performers in the month, alongside Bitcoin Cash and Axie Infinity. For example, on the day of the Celsius shutdown, the worst day of the month for the NCI, Ethereum and Bitcoin had the two biggest losses among constituents, with 18.4 and 16.0% respectively. A similar situation happened on Saturday, the 18th, the second worst day of the month, with the NCI falling 11.2%. Ethereum was the worst performing asset, with a 12.8% loss, followed by Chainlink and Bitcoin, virtually tied with a 10.9% drop.

Under these circumstances, the other indices followed by Hashdex products outperformed the NCI. The best of them was the CF Digital Culture, with a drop of 32.7%. Next we had CF Smart Contracts (-33.7%) and finally CF DeFi (-34.4%). The best performing NCI constituent was Uniswap which surpassed Ethereum in fee income. NCI dropped 63.5% in the first half of the year.

Despite the challenging short term scenario, both internally and externally, we remain confident in the fundamentals of the main crypto investment  theses in the long term.