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Central Banks to Continue to Drive Sentiment
ETF Securities Commodity ETP Weekly Central Banks to Continue to Drive Sentiment
WTI ETP investors become more polarised.
ETFS Platinum Trust (PPLT) sees US$11.5mn of inflows while ETFS Palladium Trust (PALL) sees US$11.8mn of outflows.
Coffee ETPs attract US$5.3mn in a volatile week of trading.
US$24.6mn of redemptions from ETFS Copper (COPA) followed China’s lowering of target growth.
A better-than-expected labour market reading in the US released late last week should set the tone for cyclical optimism this week. However, the initial impact was a sell-off in gold and some cyclical assets as the market took the strong numbers as cue for the hawks at the Fed to start raising rates sooner than previously expected. With the ECB commencing its quantitative easing programme this week and further policy easing expected from a number of other countries, we believe that cyclical commodities will be able to shake off the recent bout of pessimism.
WTI ETP investors become more polarised. While inflows into long WTI continued for the 23rd week in a row, we saw a pick-up in flows into short WTI ETPs. Flows into the long products amounted to US$17.1mn (a three-week low) while flows into the short products amounted to US$9.1mn (a three-week high). A 5.4% gain in WTI led the longs to be victorious this week. US crude inventories continue to rise despite rigs being shut off. The glut in supply could continue for longer than many initially expected, driving the demand for WTI shorts. Additionally with the WTI futures curve in contango, investors in the short products will benefit from positive roll yield. Long Brent ETPs inflows of US$5.9mn reached the lowest level in four weeks.
ETFS Platinum Trust (PPLT) sees US$11.5mn of inflows while ETFS Palladium Trust (PALL) sees US$11.8mn of outflows. US investors appear to be switching between from palladium to platinum as its price is at historically attractive levels. The ratio of platinum to palladium price has fallen to 1.7 down from over 5.5 in 2009. While palladium has risen 6.4% in the past year, platinum has fallen 19.9%. As supply of the both metals tighten this year with a number of South African mines cutting back on production, platinum has the potential to make catch-up gains. Anglo American Platinum Ltd last Monday confirmed its plans to divest its Union and Rustenburg mines by selling or listing them as stand-alone companies.
Coffee ETPs attract US$5.3mn in a volatile week of trading. Coffee fell 6.6% on Tuesday and then rose 6.2% on Wednesday in a particularly volatile week. Continued rain in Brazil, the key producer of Arabica coffee, and increasing production in Colombia drove the price weakness. However the sharp rebound on Wednesday came amidst an interest rate hike by the Brazilian central bank. Prior Brazilian Real weakness contributed to stock off-loading by Brazilian coffee farmers. The Real appreciation that followed the rate rise could help tighten supply. The drastic decline in coffee prices in the past month appears overdone given the damage to coffee bushes had largely taken place in 2014 and the recent rain can do little to reverse that.
US$24.6mn of redemptions from ETFS Copper (COPA) followed China’s lowering of target growth. With China consuming approximately 40% of total global copper supply, its new growth target of around 7% from around 7.5% last year, has been seen to hurt demand for copper. However, we believe tightening supply will mitigate that potential loss of demand.
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.
2024 was a landmark year for bitcoin, solidifying its role as a fully institutionalised asset class.
Institutional inflows into physical bitcoin exchange-traded products (ETPs) reached nearly $35 billion globally, signalling a major shift in how traditional investors view crypto. As bitcoin continued to enhance portfolios’ risk-return profiles, more institutional investors followed suit, reshaping the financial landscape.
Looking ahead, 2025 promises to bring exciting developments across the crypto ecosystem. Here are the top five crypto trends to watch.
Fear of being left behind
The era of bitcoin as a niche investment is over. Institutional adoption is creating a ripple effect, forcing hesitant players to reconsider. Portfolios with bitcoin allocations are consistently outperforming those without, highlighting its growing importance.
Figure 1: Bitcoin in a multi-asset portfolio
| 60/40 Global Portfolio | 1% Bitcoin Portfolio | 3% Bitcoin Portfolio | 5% Bitcoin Portfolio | 10% Bitcoin Portfolio | MSCI AC World | Bloomberg Multiverse | Bitcoin | |
| Annualised Return | 5.77% | 6.46% | 7.83% | 9.20% | 12.57% | 9.07% | 0.56% | 56.24% |
| Volatility | 8.79% | 8.86% | 9.14% | 9.62% | 11.42% | 13.94% | 5.05% | 67.28% |
| Sharpe Ratio | 0.48 | 0.55 | 0.68 | 0.79 | 0.96 | 0.54 | -0.20 | 0.81 |
| Information Ratio | 1.01 | 1.01 | 1.01 | 1.00 | ||||
| Beta | 70% | 71% | 73% | 75% | 81% | 100% | 24% | 181% |
Source: Bloomberg, WisdomTree. From 31 December 2013 to 30 November 2024. In USD. Based on daily returns. The 60/40 Global Portfolio is composed of 60% MSCI All Country World and 40% Bloomberg Multiverse. You cannot invest directly in an index. Historical performance is not an indication of future performance and any investment may go down in value.
With bitcoin’s ability to noticeably improve portfolios’ risk-return profiles, asset managers face a clear choice: integrate bitcoin into multi-asset portfolios or risk falling behind in a rapidly evolving financial landscape. In 2025, expect the competition to heat up as clients demand exposure to this powerhouse cryptocurrency.
Expanding crypto investment options
In 2024, regulatory breakthroughs opened the doors for physical bitcoin and ether ETPs in key developed markets. This marked a critical step towards making cryptocurrencies mainstream, providing seamless access to institutional and retail investors alike.
Figure 2: Global physical crypto ETP assets under management (AUM) and 2024 net flows
Source: Bloomberg, WisdomTree. 02 January 2025. Historical performance is not an indication of future performance and any investment may go down in value.
In 2025, this momentum is expected to accelerate as the crypto regulatory environment becomes more friendly in the United States and as key developed markets follow Europe’s lead and approve ETPs for altcoins such as Solana and XRP. With their clear utility and growing adoption, these altcoins are strong candidates for institutional investment vehicles.
This next wave of altcoin ETPs will expand the diversity of crypto investment opportunities and further integrate cryptocurrencies into the global financial system.
The maturing of Ethereum’s layer-2 ecosystem
Ethereum’s role as the backbone of decentralised finance (DeFi), non-fungible tokens (NFTs), and Web3 is unmatched, but its scalability challenges remain a hurdle. Layer-2 solutions—technologies such as Arbitrum and Optimism—are transforming Ethereum’s scalability and usability by enabling faster, cheaper transactions.
In 2025, Ethereum’s recent upgrades, such as Proto-Danksharding (introduced in the ‘Dencun’ upgrade), will drive layer-2 adoption even further. Innovations like Visa’s layer-2 payment platform leveraging Ethereum for instant cross-border transactions will underscore the platform’s evolution.
Expect Ethereum’s layer-2 ecosystem to power real-world use cases ranging from tokenized assets to decentralised gaming, positioning it as the infrastructure of a truly scalable digital economy.
Stablecoins: bridging finance and blockchain
Stablecoins are becoming indispensable to the global financial system, offering the stability of traditional assets with the efficiency of blockchain. Platforms such as Ethereum dominate the stablecoin landscape, hosting stablecoin giants Tether (USDT) and USD Coin (USDC), which facilitate billions in daily transactions.
Figure 3: Key stablecoin chains
Source: Artemis Terminal, WisdomTree. 05 January 2025. Historical performance is not an indication of future performance and any investment may go down in value.
As we move into 2025, stablecoins will increasingly interact with blockchain ecosystems such as Solana and XRP. Solana’s high-speed, low-cost infrastructure makes it ideal for stablecoin payments and remittances, while XRP Ledger’s focus on cross-border efficiency positions it as a leader in global settlements. With institutional adoption rising and DeFi applications booming, stablecoins will serve as the backbone of a seamless, interconnected financial ecosystem.
Tokenization: redefining ownership and revolutionising finance
Tokenization is set to redefine how we think about ownership and value. By converting tangible assets like real estate, commodities, stocks, and art into digital tokens, tokenization breaks down barriers to entry and creates unprecedented liquidity.
In 2025, tokenization will expand dramatically, empowering investors to own fractions of high-value assets. Platforms such as Paxos Gold and AspenCoin are already showcasing how tokenization can revolutionize markets for gold and luxury real estate. The integration of tokenized assets into DeFi will unlock new financial opportunities, such as using tokenized real estate as collateral for loans. As tokenization matures, it will transform industries ranging from private equity to venture capital, creating a more inclusive and efficient financial system.
For the avoidance of any doubt, tokenization complements crypto by expanding the use cases of blockchain to include real-world applications.
Looking ahead
2025 is set to be a defining year for crypto, as innovation, regulation, and adoption converge. Whether it is bitcoin cementing its position as a portfolio staple, Ethereum scaling for mainstream use, or tokenization unlocking liquidity in untapped markets, the crypto ecosystem is poised for explosive growth. For investors and institutions alike, the opportunities have never been clearer or more compelling.
This material is prepared by WisdomTree and its affiliates and is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed are as of the date of production and may change as subsequent conditions vary. The information and opinions contained in this material are derived from proprietary and non-proprietary sources. As such, no warranty of accuracy or reliability is given and no responsibility arising in any other way for errors and omissions (including responsibility to any person by reason of negligence) is accepted by WisdomTree, nor any affiliate, nor any of their officers, employees or agents. Reliance upon information in this material is at the sole discretion of the reader. Past performance is not a reliable indicator of future performance.
On January 20, 2025, bitcoin (BTC) reached a new all-time high, surpassing $109,000, and this milestone coincided with Donald Trump’s inauguration for his second term as U.S. President.
Historical trends show that BTC has performed exceptionally well in the 12 months following the past three U.S. elections. If history repeats, this could signal another bullish phase. With Trump’s pro-BTC stance and a U.S. Congress aligned on favorable digital regulation, the outlook for the coming months appears highly promising.
Source: Hashdex Research with data from Messari (from November 6, 2012 to January 19, 2025).
MARKET HIGHLIGHTS | Jan 13 2025 – Jan 19 2025
Bitcoin-backed loans enabled on Coinbase’s L2
• Now customers can borrow USDC in the new base’s lending protocol by using bitcoin as collateral.
• This underscores the importance of onchain innovations as the pillar for future adoption of blockchain technology, in this case enhancing personal finance to be more decentralized and intuitive in a permissionless etho..
ETF filings reiterate bullish regulatory tailwinds
• As Donald Trump’s inauguration approaches, several asset managers have filed applications for new crypto ETF products, including those focused on assets like LTC and XRP.
• This reflects optimism for 2025’s crypto regulations and their potential to transform the regulated products landscape.
Trump to make crypto top priority in US agenda
• U.S. President-elect Donald Trump allegedly plans to issue an executive order making crypto a national policy priority and establishing an advisory council.
• The announcement signals that crypto has gained political importance. Even if not all promises are met, crypto has already crossed the chasm.
MARKET METRICS
The Nasdaq Crypto Index™
This week saw a significant rise in digital assets as the market awaits Trump’s inauguration, with the NCI™ (+15.3%) outperforming all traditional asset classes. The NCI™ (+13.2%) also outperformed BTC (+12.1%), highlighting the value of diversification in a volatile market. The performance was positively impacted by SOL’s strong 46.3% gain, while ETH’s underwhelming 3.0% growth had a dampening effect.
Source: Hashdex Research with data from CF Benchmarks and Bloomberg (from December 31, 2024 to January 19, 2025).
It was a strong week for the NCI™ , with SOL leading the pack (among others, like XRP and LINK), surging 46.3%, while BTC (12.1%) and ETH (3.0%) lagged behind. This price action seems driven by excitement around Trump’s inauguration and the crypto-friendly environment his promises suggest.
Source: Hashdex Research with data from Messari (from January 12, 2025 to January 19, 2025).
Indices tracked by Hashdex
Source: Hashdex Research with data from CF Benchmarks and Vinter (from January 19, 2024 to January 19, 2025).
5 crypto trends to watch in 2025
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