by André Dragosch, Head of Research
- Market is still dominated by ongoing contagion fears after the FTX insolvency
- Our proprietary Crypto Sentiment Index has improved marginally last week coming from very bearish levels the week prior
- Underlying crypto ETP flows and on-chain indicators suggest ongoing accumulation among institutional investors at these lower prices
Chart of the Week
Last week was still dominated by an ongoing fear of financial contagion within crypto markets due to a possible collapse of Genesis – a major cryptoasset lending desk which is highly-interconnected within the institutional crypto borrowing & lending business.
Accordingly, cryptoasset prices were still largely under pressure last week from the reverberation of the FTX fallout. Among the major cryptoassets, TRON, Bitcoin, Shiba Inu and XRP were the relative outperformers. Cryptoassets also underperformed global equities and bonds last week.
Our proprietary Crypto Sentiment Index has improved marginally last week coming from very bearish levels the week prior. Obviously, cross asset sentiment held up quite well and was rather unaffected by the recent developments in crypto markets. On a positive note, Altcoin outperformance has picked up recently – a sign of returning risk appetite within crypto markets. However, judging by the Crypto Fear & Greed Index, the market remains overall in an “extreme fear” mode.
Interestingly enough, crypto ETP fund flows continued to be positive (+4.7 mn USD net), although fund flows were smaller than during the week when FTX collapsed. Based on the crypto ETPs that we track on a daily basis, the bulk of money flew into BTC-based products (+14.3 mn USD) and Basket & Thematic Crypto products (+8.2 mn USD) while ETH-based products and other Altcoin-based products experienced net outflows last week (-7.8 mn USD and -10.0 mn USD, respectively).
On a similar note, global macro hedge funds might have increased their exposure to cryptoassets lately judging by the increase in their 1-month rolling Beta to Bitcoin.
The reversal in the deep NAV discount of the biggest Bitcoin fund in the world, Grayscale Bitcoin Trust, is emblematic for a return in buying interest in the last week, although there has been slight decrease in the discount in the last days.
A major highlight among on-chain indicators was the fact that Bitcoins continued to flow out of exchanges on a net basis – usually a positive signal as it implies increased investments and subsequent transfers into cold-storage. What is more, is the fact that these net outflows occurred majorly into wallets of larger investors with wallet sizes of 10 mn USD or more. This is consistent with the abovementioned fact that crypto ETP fund flows also held up quite well during the last week. The smallest and biggest investor cohorts (below $10k USD and above $10mn USD) were among the biggest buyers based on these net exchange outflows. We have generally noticed a significant pick-up in small investor cohort buying interest after the FTX collapse which appears to have continued last week.
In this context, we have seen the lowest Bitcoin exchange balances since mid-2018 – a sign of continuing accumulation. The same can be said for Ethereum, were exchange balances also reached a fresh 4-year low.
The stabilization in cryptoasset prices has led to an overall decline in uncertainty within the derivatives space: Bitcoin implied volatilities have declined, and the option skew is less biased towards puts than during the week prior. Nonetheless, the level of uncertainty remains relatively high based on the absolute levels of implied volatility. However, perpetual funding rates and the futures basis rate have returned to positive levels – a sign that derivatives traders are slightly more optimistic about the price outlook. Nonetheless, the level of anxiety among derivatives traders remains high which can also be seen in the increased relative trading volume of Bitcoin put options vs call options which has recently picked up significantly. Investors are apparently still hedging against potential downside risks.
Bottom Line: Overall cryptoasset market sentiment has improved marginally last week coming from very bearish levels the week prior. Nonetheless, the level of uncertainty remains relatively high based on the signals from Bitcoin derivatives markets. On a positive note, money continued to flow into crypto ETP funds and out of exchanges into small and larger investor wallets on a net basis.
About Deutsche Digital Assets
Deutsche Digital Assets is the trusted one-stop-shop for investors seeking exposure to crypto assets. We offer a menu of crypto investment products and solutions, ranging from passive to actively managed exposure, as well as financial product white-labeling services for asset managers.
We deliver excellence through familiar, trusted investment vehicles, providing investors the quality assurances they deserve from a world-class asset manager as we champion our mission of driving crypto asset adoption. DDA removes the technical risks of crypto investing by offering investors trusted and familiar means to invest in crypto at industry-leading low costs.
Recent News and Articles
- Institutional Crypto Adoption: Why & How Institutions Are Going Crypto
- Crypto Portfolio Composition: How Different Portfolios Have Performed During the Recent Bull and Bear Markets
- How to Invest in Ethereum (ETH): A Guide for Professional Investors
- The Case for Actively Managed Investment Strategies in the Crypto Markets
- How to Invest in NFTs: A Guide for Professional Investors
- Why Bitcoin’s Volatility Shouldn’t Scare You
- How accurate is the Bitcoin Stock-to_Flow Model?
Deutsche Digital Assets in Press
- ETF stream: White-label issuers in Europe quietly tripled in a week
- Das Investment: Kryptowährungen kommen 2022 im Mainstream an
- Private Banking Magazin,Bitcoin – das perfekte Beispiel für ein ESG-Investment?
- Institutional Money,Krypto-Manager steigt bei Family Office ein
The material and information contained in this article is for informational purposes only. Deutsche Digital Assets, its affiliates, and subsidiaries are not soliciting any action based upon such material. This article is neither investment advice nor a recommendation or solicitation to buy any securities. Performance is unpredictable. Past performance is hence not an indication of any future performance. You agree to do your own research and due diligence before making any investment decision with respect to securities or investment opportunities discussed herein. Our articles and reports include forward-looking statements, estimates, projections, and opinions. These may prove to be substantially inaccurate and are inherently subject to significant risks and uncertainties beyond Deutsche Digital Assets GmbH’s control. We believe all information contained herein is accurate, reliable and has been obtained from public sources. However, such information is presented “as is” without warranty of any kind.