What a weekend. We have talked a lot about, “What happens when crypto markets crash in off-hours?” It’s part of our value proposition to investors and advisors for our SMA. We will be there. From Friday evening until the early hours of Saturday morning, we were there ready to act, and we did. Market structure and active management matters, especially in crypto.
This round-up is a hefty one:
- Crypto Markets Flash Crash
- Messari releases Crypto Theses for 2022
- Wisdom Tree creates 4 new Crypto Indices in the US and Europe
- FTX and MassMutual’s Flourish release their own versions of crypto regulatory framework
- Other Headlines: Wall Street Banks exploring BTC backed loans, India won’t ban crypto, SEC charges man for defrauding investors.
- Learning Opportunities: Onramp Year-End Crypto Tax Planning, Solana Deep Dive, Why Layer 2 will change the game for Ethereum
Weekend ETH Prices |
Weekend BTC Prices |
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ETH Wednesday at 5 pm: $4,345 ETH Weekend Low: $3,691 ETH Weekend High: $4,245 ETH Price as of posting: $4,047 Performance YTD: +455.16% |
Weekend BTC Prices BTC Wednesday at 5 pm: $55,024 BTC Weekend Low: $42,000 BTC Weekend High: $49,600 BTC Price as of posting: $48,401 Performance YTD: +64.72% |
Crypto Markets Flash Crash
Bitcoin fell below $42,000, making it the biggest one-day drop since May 15 when Bitcoin price momentarily came down to nearly $33,000. We are not at price levels not seen since September. Over the last 7 days, the Top 100 digital assets by market cap are all experiencing double-digit losses, upwards of 35%, with two exceptions: LUNA and MATIC, up 26% and 8% respectively.
So what happened? A combination of things.
Institutional actions: There appeared to be an institution that sold more than $500 million in bitcoin on Friday morning. From NYDIG, “On our desk, we have seen two-way flows today with 84% of the flows being buys on our trading desk excluding tax loss harvesting trades.”
A massive de-leveraging: That selling triggered liquidations in the crypto derivatives market. As reported by The Block’s Larry Cermak, “The BTC market saw more than $1.3 billion in long positions liquidated in the move from $51,000 to $42,000. Crypto total open interest in the derivatives markets also fell from $21.6 billion to $16.7 billion in less than an hour.”
Traditional Markets: While Bitcoin and crypto are historically un-correlated, in short periods of risk-off behavior, equities and crypto can be highly correlated as they both sell-off. The S&P 500 is down 2.27% and the NASDAQ Composite is down 4.14% over the last 5 days fueled by a weak jobs report, a potential faster tapering process by the Fed, and uncertainty on the impact of Omicron.
Are we in a bear market? In the traditional sense, no, but that doesn’t mean we aren’t heading into one. In September we went through something similar in crypto markets from a price standpoint. But we are seeing record investment, $3 Billion in November alone, in the crypto industry from VC funding. We will have to see how all the above play out.
Messari Releases Crypto Theses for 2022
As reported by Frederik Vold of Cryptonews.com, “CEO of crypto researcher Messari, Ryan Selkis, is once again out with his overview of nine major narratives and investment themes that are driving crypto adoption as we enter 2022. This year’s report follows a similar report from last year, where Selkis predicted, among other things, that ethereum (ETH) will be the platform to watch this year. In the first chapter of this year’s report, titled Crypto Theses for 2022, Selkis said that he sees the rise of crypto as “inevitable” in the world today. However, he also said that while bitcoin (BTC) still has further to run, hodlers still need to prepare for a new “soul-crushing” crypto winter.”
This report was dropped Friday just before the sell-off and had many wondering if this was the crypto winter he was describing. We will have the chance to go through this report today but highly encourage everyone reading this to download and read through it.
Wisdom Tree creates 4 new crypto indices
For US investors, Wisdom Tree has partnered with Ritholtz Wealth Management to create an index designed to offer retail investors exposure to the crypto market. The index has been licensed to Onramp Invest, an integration platform that provides access to crypto assets for advisors. It is available to financial advisors using its technology platform to manage separate accounts of clients. The custodian will be Gemini, which allows the direct ownership of crypto assets. The company became a qualified custodian chartered by the New York State Department of Financial Services (NYDFS) under Section 100 of the New York Banking Law.
From their announcement, “Each crypto-asset either plays, or has the potential to play, an important role within the crypto ecosystem and/or provides necessary services for the crypto ecosystem to flourish. In collaboration with Ritholtz Wealth Management, OnRamp, and Gemini, WisdomTree is allowing financial advisors to execute this strategy through a packaged direct indexing solution.”
In Europe, in addition to their Bitcoin and Ethereum ETP’s, Wisdom Tree launched three new crypto asset baskets: The WisdomTree Crypto Mega Cap Equal Weight (MEGA), WisdomTree WT Crypto Market (BLOC), and WisdomTree Crypto Altcoins (WALT) ETPs, each seeking to track the respective WisdomTree Crypto Index. Alexis Marinof, Head of Europe, “WisdomTree is committed to delivering investors—both individual and professional—the ability to access innovative and diversified crypto-asset exposures inside the transparent and efficient ETP wrapper. WisdomTree will continue to be an industry leader in the fast-growing and dynamic crypto market where investor demand for the asset class is high and likely to increase.”
The building continues and more options for advisors to help their clients with safe and secure exposure to digital assets is a good thing. Our value proposition remains the same. An indexing approach to crypto will not be for everyone, but it will be for some. During our consulting this gives us better optionality when helping advisors determine what is right for them and their business.
FTX and Flourish release regulatory framework
Reported by Casey Wagner on Blockworks, “The exchange argues for the creation of one central regulatory body, although not necessarily a new organization, with one set of rules for spot derivatives trading. The issue of jurisdiction over the digital asset industry has been at the top of mind for both regulators and industry leaders as officials struggle to determine how cryptocurrencies fit into the current system.”
“We expect that regulators likely will play an important role during that period and use the authorities they have to address the questions of how best to supervise the industry and its products,” Mark Wetjen, FTX US head of policy and regulatory strategy, told Blockworks.
The report is released just ahead of the House Financial Services Committee hearing titled “Digital Assets and the Future of Finance: Understanding the Challenges and Benefits of Financial Innovation in the United States,” where FTX head Sam Bankman-Fried is scheduled to appear. Bankman-Fried will be joined by executives from Paxos, Stellar, Coinbase and Circle on Dec. 8.
MassMutual’s crypto investment platform Flourish recently weighed in while also adding ETH to it’s offer. In response to the uncertain regulatory environment, Flourish partnered with Perkins Coie LLP, an international law firm specializing in the financial technology, blockchain and investment management space, on a whitepaper that discusses regulatory and compliance considerations for RIAs looking to engage with cryptocurrencies.
“If you think back to all the reasons that advisors cannot adopt crypto today, uncertain regulatory and compliance landscape is often one of the top three things on the list,” Cruikshank said. “Fortunately, we think there is certainly a path forward.”
Other Headlines
Learning Opportunities
Thank you for reading this all the way through. Be sure to take time away from normal routines this week to practice gratitude. Stay safe, healthy, and happy 😊
– Marc
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