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Commodity turning point echoed by commodity basket inflows
Commodity ETP Weekly – Commodity turning point echoed by commodity basket inflows
- A shortened trading week saw oil and most industrial metals prices increase as investors become more confident that we are close to the trough in the commodity market. Flows into our commodity baskets echo this sentiment.
- Gold, viewed a defensive asset that performs poorly in higher real rate environments, saw a second consecutive week
of outflows. We believe that such pessimism for the metal could be misplaced. - Despite some optimism expressed in the market last week, we doubt OPEC will change course at its meeting on
Friday.
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More investors return to commodity markets. ETFS Longer Dated All Commodities GO UCITS ETF (COMF) received US$24.2mn last week in an indication that more investors are convinced that commodities have hit a turning point. Year-to-date inflows into diversified commodity baskets have risen to US$429.2mn this year, compared to US$206.1mn in 2014, US$53.5mn in 2013 and an outflow of 21.6mn in 2012. We have observed clear signs that a turning point is in sight for the beleaguered asset class. The prolonged period of underperformance has driven miners, smelters, drillers and other resource extractors to cut capital expenditure (capex), sowing the seeds for supply tightness in years to come. The cuts to capex are already biting into supply and it is a matter of time before there is a price-response.
Gold ETP outflows rise to US$75.5mn, marking a 15-week high. As the first Federal Reserve rate hike in nine years approaches, many investors are turned off the metal given its historic negative relation with long-term US Treasury yields. However, we would caution that tightening short-term interest rates may not simply translate in higher long-term nominal rates given the role of Treasuries as a policy tool, which could limit the downside for prices. Inflation on the other hand could rise more rapidly than widely expected. The simple rolling out of the base-effect from lower commodity prices a year ago is likely to push headline inflation from 0.2% in October 2015 to 1.5% by January 2016. Real Treasury yields could therefore remain depressed. We have observed that in previous rate hiking cycles (when rates are increased from very low levels) that the US Dollar actually depreciated (contrary to conventional thinking). If history is any guide to the future, gold and commodities in general could perform well when rate rise fears crystalise.
Oil ETPs see continued inflows ahead of OPEC meeting. We received a further US$16.8mn of inflows into long Brent and WTI oil ETPs. WTI gained 6.2%, while Brent gained 2.9% as Saudi Arabia softened it tone on encouraging the world’s high cost producers to cut back on production. However, we don’t read its recent comments as an indication it will push for OPEC supply cuts this week. In fact we believe that Saudi Arabia won’t end the price war until it sees non-OPEC supply cut severely (which will be price positive) or it has run out of fiscal might (the latter will be some time in 2018).
Key events to watch this week. We will see if Draghi delivers on recent rhetoric about further loosening when the ECB meet this week. Meanwhile US payrolls numbers and Yellen’s testimony to congress will likely consolidate rate rise expectations set for the December 15/16 FOMC meeting. China manufacturing PMIs will be closely watched as a barometer for commodity demand. The RBA and BoC policy meetings this week could shed light on how the commodity exporting countries are faring under the strain of low prices.
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Like Bitcoin, Dogecoin uses a proof-of-work (PoW) consensus mechanism but runs on its own blockchain, originally forked from Litecoin. It uses the Scrypt hashing algorithm, which is less resource-intensive than Bitcoin’s SHA-256, making mining more accessible to everyday users with consumer-grade hardware. Due to merged mining with Litecoin, Dogecoin benefits from shared infrastructure, with hashpower recently reaching all-time highs of 2.7 petahashes (quadrillion hashes) per second, making the network increasingly difficult to attack.
Dogecoin’s design is built for speed and utility, has no maximum supply, and confirms blocks every minute (10x faster than Bitcoin). Moreover, it maintains ultra-low transaction fees, which is ideal for tipping, microtransactions, and everyday use.
More than a meme
Although its supply is technically unlimited, Dogecoin’s issuance model is clear and predictable. Approximately 10,000 DOGE are mined every minute, adding up to around 5.25 billion new tokens each year. As the supply base expands, this fixed issuance creates a natural disinflationary trend that has cut nearly in half over the past decade while ensuring network security through consistent miner rewards.
Dogecoin’s technology fosters an aligned ecosystem between users and miners. With sustainable economic incentives, it acts as a kind of “retail Bitcoin”, built not just for hoarding but for real-world use, too.
While Dogecoin began as a lighthearted experiment, its evolution has proven it to be far more than a meme. Thanks to its speed, low fees, and strong community backing, Dogecoin has grown into a functional digital currency with a range of real-world use cases. From payments and merchant adoption to infrastructure development and charitable giving, Dogecoin continues to demonstrate its staying power as a practical and accessible tool in the broader crypto ecosystem.
Dogecoin as a payment tool
Dogecoin has transformed into a widely accepted digital currency, embraced by major brands like Tesla, AMC, Newegg, and the Dallas Mavericks. With fast transaction speeds and low fees, even amid surging transaction volumes, it has become a practical option for everyday payments. Crypto payment processors like BitPay have further expanded its reach, enabling thousands of merchants worldwide to accept DOGE. Most recently, The Open House Group, a prominent Tokyo Stock Exchange-listed real estate firm, added Dogecoin to its supported list, making it one of the few digital assets accepted for property transactions.
Enhancing Dogecoin’s payment infrastructure
Initiatives like Dogebox and GigaWallet are simplifying DOGE integration for businesses, while its scaling solution, Laika, is making meaningful progress in improving transaction speed and reducing costs.
Meanwhile, RadioDoge is working to expand access by enabling offline transactions in remote regions through low-cost radio and Starlink technology, advancing global crypto inclusion. A rumored integration with Elon Musk’s X platform could extend Dogecoin’s utility across digital tipping and commerce. These efforts collectively reinforce Dogecoin’s growing relevance in real-world payments and its potential as a frictionless, decentralized transaction layer.
Do Only Good Every Day
As we’ve seen, community drives memecoins, and Dogecoin’s community shines the brightest. This global network not only thrives on memes but also channels that energy into social good. From funding clean water in Kenya to sending Jamaica’s Bobsled Team to the Olympics and raising over $1 million for Ukraine relief, DOGE’s community transforms internet culture into real-world impact. Low fees and fast transactions make it a favorite for grassroots giving, showing a coin born as a joke can leave a lasting legacy. Dogecoin is more than a digital asset—it’s a movement powered by a community that believes in doing good every day.
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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