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Bargain Hunting Drives Demand for Energy ETPs
- Commodity ETP Weekly Bargain Hunting Drives Demand for Energy ETPs
- Long WTI ETPs see highest fortnightly inflows since 2012.
- ETFS Leveraged Natural Gas attracted a further US$10.7mn.
- A 3.4% spike in silver prices prompted US$11.4mn of profit taking from ETFS Daily Leveraged Silver (LSIL).
- ETFS Agriculture (AIGA) sees outflows on profit-taking.
Oil and natural gas continue to see the highest inflows in the commodity complex as investors view current prices as increasingly attractive. WTI and Brent oil respectively fell a further 10.3% and 8.6% this week as both the IEA and OPEC cut demand forecasts for 2015 to the lowest level since 2002. However, underlying the cut to OPEC demand was an increase in non-OPEC oil supply, conceding some loss in market share. Many ETP investors believe that such low prices are unsustainable and this cut in demand forecasts is likely to be followed by a tightening in OPEC supply in 2015.
Long WTI ETPs see highest fortnightly inflows since 2012
Long WTI ETPs saw a further US$33.2mn of inflows last week on top of the US$45.7mn the week before. That contrasts the continued outflows from long Brent ETPs which saw a further US$0.5mn of outflows last week. WTI has fallen below US$60/bbl and Brent is trailing not far behind. At these prices, close to 20% of crude oil and condensates production from the United States are unprofitable according to the EIA. If prices remain persistently low, production will likely be reduced by higher cost producers. Although price weakness is likely to continue through the first half of 2015, continued economic growth in the US and China, combined with a reduction in oil supply, will eventually bring the oil market back to balance, with prices returning to trade around the US$90/bbl level towards the end of 2015. We believe the reduced demand forecasts from OPEC are a precursor to supply cuts.
ETFS Leveraged Natural Gas attracted a further US$10.7mn on top of the US$27.8mn the week before
With a larger-than-expected storage withdrawal confirmed on Wednesday, natural gas prices staged a small recovery mid-week, but closed down on the week as a whole. Despite the relatively warm US winter expected by NOAA, ETP investors believe that current prices remain very low for the peak heating season and given the unpredictability of weather, the risks remain to the upside for demand and price.
A 3.4% spike in silver prices prompted US$11.4mn of profit taking from ETFS Daily Leveraged Silver (LSIL)
Marking the highest outflows from the leveraged silver product since 2011, investors took the opportunity to lock in profits before the year’s end. Over 50% of silver demand comes from industrial applications, with China and the US accounting for over 40% of global fabrication demand. Continued growth in these large economies in 2015 should see demand for silver increase, helping support prices.
ETFS Agriculture (AIGA) sees outflows on profit-taking. Despite the marginally bearish WASDE report out on Wednesday, wheat, corn and soy prices increased as rumours of Russian exports restrictions rattled the market. While not confirmed, prices were up strongly on Thursday only to ease on Friday as decent snow coverage in the US will help the 2015 wheat crop after a record 2014. ETP investors took profit to square their positions before the end of year.
Key events to watch this week. The Federal Open Market Committee’s last meeting for 2014 will be closely watched for cues on policy tightening to come in 2015. US CPI inflation data out on the same day as the central bank’s meeting, should attract attention as investors gauge the capacity for the Fed to maintain loose policy for longer. Gold prices are closely linked to the US interest rate path and indications of tighter policy could hurt precious metals. Consensus expectations are for HSBC’s Chinese PMIs to fall below the 50 mark, indicating a contraction in industrial activity from last month. Should they remain above 50, we could see renewed optimism in the Chinese growth outlook and their subsequent demand for commodities.
Video Presentation
Nitesh Shah, Research Analyst at ETF Securities provides an analysis of last week’s performance, flow and trading activity in commodity exchange traded products and a look at the week ahead.
Important Information
This communication has been provided by ETF Securities (UK) Limited (”ETFS UK”) which is authorised and regulated by the United Kingdom Financial Conduct Authority.
Dogecoin has outperformed other major cryptoassets over the past decade, while also exhibiting a low correlation to crypto and traditional assets. This creates a compelling argument for a portfolio allocation. We tested a Bitcoin-enhanced growth portfolio, which is a traditional 60/40 infused with 3% Bitcoin, and we introduced a modest 1% DOGE allocation. Since most prospective investors likely already hold Bitcoin, this offers a lens into how the two assets can complement each other.
Despite the small portfolio allocation, every approach delivered stronger returns. The benchmark returned 7.25% annually, while DOGE-enhanced portfolios reached as high as 8.95%. Sharpe ratios improved in almost all tests, indicating better risk-adjusted returns. Volatility did slightly tick up, but drawdowns remained largely contained. Even with no rebalancing, the max drawdown only deepened by a few percentage points, underscoring that even a 1% DOGE allocation adds meaningful punch without destabilizing the broader portfolio.
Rebalancing remains essential to capturing upside effectively. Without it, returns can plateau while risk quietly compounds. Monthly or weekly rebalancing offered the best balance, maximizing returns while keeping volatility and drawdowns in check, especially during periods of broader market stress, as we’ve recently seen. Given Dogecoin’s momentum-driven nature, a more strategic approach linked to broader crypto market cycles may offer even greater optimization beyond routine rebalancing.
With the right structure, a 1% allocation to Dogecoin isn’t reckless—it’s rewarding.
Bear Case
Despite strong fundamentals and a rich cultural legacy, Dogecoin’s recent rally, fueled by post-election memecoin mania, may have front-run its true cycle potential. As attention shifts to newer narratives, DOGE risks being seen as ’yesterday’s play,’ potentially underperforming even in a rising market. Still, that wouldn’t signal a flaw in its model, just a pause in a fast-rotating cycle.
Assuming a continued 10% compounded annual growth rate (CAGR) from its 2021 peak of $0.73, DOGE would be projected to land around $0.38 by 2025—still more than 2x from today’s levels but modest relative to past cycles. More notably, this would mark the first time Dogecoin fails to reach a new all-time high in a full market cycle.
Neutral Case
Dogecoin may not dominate headlines like it did at its peak, but it still holds cultural relevance and widespread recognition. In a scenario where the total crypto market cap peaks at $5 trillion this cycle and DOGE maintains a solid, albeit slightly reduced, market share of 3% instead of its previous 4%, this would result in a market capitalization of approximately $150 billion for DOGE.
At that valuation, DOGE would trade near $1 per coin, a ~5.5x gain from current levels around $0.185. This neutral case assumes Dogecoin retains its stature as the leading memecoin, despite increased competition, with stable adoption and renewed retail interest, but without the same euphoria of the last cycle.
Bull Case
If we take DOGE’s bottom price of $0.007 just before the last bull run began and fast-forward two years to the bottom of the current cycle at $0.0585, that move reflects a CAGR of 189%. If DOGE were to mirror this explosive growth, DOGE would reach approximately $1.42.
In this scenario, Dogecoin benefits from renewed memecoin mania, increasing real-world adoption, and stronger interest fueled by regulatory clarity and potential integration with major platforms like Elon Musk’s X. A full return of retail enthusiasm and broad cultural momentum could reestablish DOGE as the breakout asset of the cycle, potentially even doubling its all-time high.
Research Newsletter
Each week the 21Shares Research team will publish our data-driven insights into the crypto asset world through this newsletter. Please direct any comments, questions, and words of feedback to research@21shares.com
Disclaimer
The information provided does not constitute a prospectus or other offering material and does not contain or constitute an offer to sell or a solicitation of any offer to buy securities in any jurisdiction. Some of the information published herein may contain forward-looking statements. Readers are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties and that actual results may differ materially from those in the forward-looking statements as a result of various factors. The information contained herein may not be considered as economic, legal, tax or other advice and users are cautioned to base investment decisions or other decisions solely on the content hereof.
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