Cryptocurrency Corner: June 2021

ETF Report takes the pulse of the cryptocurrency space, including the performance of leading cryptocurrencies and the top related news items

Cryptocurrency News

Ethereum Leads Crypto Fund Demand
Digital asset investment products saw inflows totaling US$373 million, highlighting a resurgence in demand during the week ended May 7. Some providers continue to see outflows in what we believe is continued profit-taking behavior. Unusually, we saw inflows across the full spectrum of digital assets.

As usual, Bitcoin received the lion’s share of the inflows, which totaled US$290 million. The positive momentum for Ethereum continued, with inflows of US$60 million during the week ended May 7, with total AUM reaching a new record of US$16.5 billion. Bitcoin achieved this level of AUM management only in December 2020.

Both Bitcoin and Ethereum saw outflows in some individual products, but they represented a negligible 0.27% and 0.1% of total AUM.

New investment product entrants, Cardano and Litecoin got off to a good start, with inflows of US$6.6 million and US$3.6 million, respectively. This brings total AUM to US$10.8 million for Cardano and US$12.5 million for Litecoin.

Trusted exchange trading volumes for Bitcoin averaged US$10.5 million during the week ended May 7, with Bitcoin investment products higher than recent weeks and total trading volumes of US$6.1 billion.

James Butterfill is an investment researcher at CoinShares.
He can be reached at [email protected].

Musk Statement Rattles Bitcoin Price
It’s been no secret that Tesla founder Elon Musk is a huge fan of cryptocurrencies. In February, he disclosed a $1.5 billion position in bitcoin and, more importantly, said Tesla would begin accepting bitcoin as payment for its cars. The enthusiasm for the cryptocurrency only grew from there, even though no one can actually confirm whether a Tesla has ever been purchased with bitcoin.

Then, on May 12, Musk posted a tweet that basically said the environment is now his biggest concern and Tesla would not be accepting bitcoin as payment for its vehicles going forward.

Bitcoin prices dropped 10% in early trading on May 13. Newshounds and social media chatter tried to make sense of this sudden change in sentiment. However, there are no indications currently that Musk is selling any of his bitcoin.

Some argued this move was warranted and signaled influencers such as Musk were finally taking seriously the environmental impact of bitcoin mining, especially in this era of sustainable mandates and environmental concerns.

Others called the move a media stunt aimed at increasing the popularity and prices of other cryptos, such as Dogecoin, of which Musk is known to be a fan.

How Close Is The 1st Bitcoin ETF?
Expectations for a successful launch have arguably never been higher despite it being eight years since the first filing for a bitcoin ETF. There are a few reasons for that. One, the cryptocurrency ecosystem has matured a lot in the past few years. As of this writing, bitcoin has a market capitalization that hovers around $1 trillion; bitcoin futures have traded on the CME for over three years; and many reputable platforms, like PayPal and Fidelity, offer bitcoin trading and/or custody services.

Two, there have been a number of successful bitcoin ETF launches around the world—including Canada—suggesting that regulators may be coming around to the idea that cryptocurrencies are an investable asset class.

Third—and perhaps most importantly as it relates to a U.S.-listed bitcoin ETF—Gary Gensler, the new SEC chairman, is seemingly much more supportive of cryptocurrencies than his predecessor. Up until his nomination to be SEC chairman, Gensler taught classes on blockchain and cryptocurrencies at MIT. However, more recently he has said he would like to see more legislation to protect investors around cryptocurrency markets.

Currently, eight firms have filed to launch their own bitcoin ETF: Galaxy Digital, Kryptoin, FD Funds, First Trust, WisdomTree, NYDIG, Valkyrie and VanEck. 

Source: CoinMetrics; data as of 4/30/2021