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Deal or no deal…stability will be restored
ETFS Multi-Asset Weekly – Deal or no deal…stability will be restored
Highlights
Grains post strong gains.
Is correction territory a buying opportunity for China?
Swedish and Swiss central banks go on the currency war offensive.
Defensive assets are likely to benefit from the uncertainty in Greece. The ‘No’ vote in the referendum yesterday received more than 60% of votes. Failure to make progress in debt negotiations elevates the risk of a default on the €3.5bn that is owed to the ECB on 20th July. Another default would almost certainly lead to the emergency liquidity assistance (ELA) being switched off and throw Greek banking system into an untenable position. While there is near term risk of greater volatility and downside equity risk, evidence of continued growth in the Eurozone and the US should help restore stability once the initial ‘event’ risk
Commodities
Grains post strong gains. Deteriorating growing conditions and lower acreage sown for corn and wheat saw the grains sector significantly outperform the broader commodities market. While Soybeans rode the grains momentum higher despite a record crop being planted in the US. Sugar also posted solid gains as the Indian monsoon season has begun to deteriorate. Compared to historical averages, rainfall was 14% lower than normal in June, potentially threatening the crop from the world’s second largest producer. An intensification of the El Niño could further exacerbate the disruption of crops, providing further price support. Soy is the likely exception, with an El Niño assisting growing conditions in South America. Meanwhile, the first increase in the US oil rig count has prompted crude price weakness, something that could gather momentum in the weeks ahead, if, as we expect oil production remains elevated and moves higher as rigs come back online.
Equities
Is correction territory a buying opportunity for China? Further stimulus by the People’s Bank of China last week was followed up by an easing in its crackdown on margin lending for equity market investments. The sharp slide in A-shares that the changes to margin lending rules has brought about has authorities concerned and policymakers are justifiably wary over excessive volatility and the potential threat to social stability. Policymakers are attempting to smooth the transition to market transparency and financial liberalisation and will likely continue to be supportive with fresh policy measures. The continuing Greek debt crisis prompted sharp losses across most European bourses last week and in early trading this week, as the Greek government defaulted on an IMF repayment and Greek Prime Minister continued to urge citizens to vote ‘No’ at last weekend’s referendum. Citizens duly responded, with 60% of the vote. Expect more downside risk and volatility or equity markets.
Currencies
Swedish and Swiss central banks go on the currency war offensive. Currency wars continue to be waged in the background, as the Greek crisis takes the headlines. The lack of clarity surrounding the fate of Greece has given investors no respite from currency volatility. The Swedish Riksbank cut rates further into negative territory (4th cut in 2015) and coupled with additions to its QE program, is keen to keep any currency gains in check (because long end rates remain elevated). The reason long-end rates are high is because of the lack of liquidity – a problem that larger central banks pursuing QE (the Fed, the ECB and BOJ) have not had to contend with. As a consequence, another issue is that the currency has strengthened more than expected, and hampers any benefit for the local economy. We expect the Riksbank will more closely target its currency in the future, as long as its QE program remains ineffective.
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ETF Securities Research team
ETF Securities (UK) Limited
T +44 (0) 207 448 4336
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The impact of US tariffs continues to dominate market sentiment and risk assets, including crypto, struggled with this uncertainty throughout the month. The Nasdaq Crypto Index™ (NCI™) fell 4.46% in March as the S&P 500 and Nasdaq 100 dropped 5.63% and 7.61%, respectively.
Despite the macro uncertainty from Washington, US policymakers are continuing to embrace crypto in an unprecedented way, including launching a Bitcoin Strategic Reserve, Digital Asset Stockpile, and engaging in expansive work at the regulatory agencies and in Congress.
Our team spent the last week of the month in Washington, meeting with regulators to share our experiences and views on what’s most important for crypto investors in the US. In his latest Notes from the CIO, Samir Kerbage shares what he learned from these meetings and how investors should be thinking about the new regulatory regime in the US.
As always, we are greatly appreciative of your trust in us and are here to answer any questions you may have.
-Your Partners at Hashdex
Market Review
March was marked by the tariff dispute triggered by the Trump administration. Back-and-forth fiscal policies, threats, and retaliations dominated the month’s agenda. The uncertain macroeconomic environment put investors into a defensive stance and negatively impacted crypto assets. The Nasdaq Crypto Index™ (NCI™) closed the month down -4.46% after a period of high volatility. Major market indices, the S&P 500 and Nasdaq-100, also recorded steep declines of -5.63% and -7.61%, respectively. These concurrent drawdowns across equities and crypto underscored March’s broad market caution, as trade war uncertainty prompted investors to flee risk assets.
During times of uncertainty, it is common to observe increased correlation among different classes of risk assets. This pattern played out in March: the 6-month rolling correlation of monthly returns between the NCI™ and the Nasdaq-100 surged to roughly 0.91 (see chart below), its highest level since 2021, indicating that crypto assets were moving almost in lockstep with tech stocks. This spike in correlation confirms that crypto was behaving like a high-beta extension of the tech sector—an amplified version of the Nasdaq-100. The lack of clarity in the global landscape leads investors to reduce their risk exposure and seek protection, a movement known in financial markets as “risk-off” allocation.
6-Month Rolling Correlation of Monthly Returns between the Nasdaq Crypto Index and Nasdaq-100 (Apr 2021–Apr 2025).
The chart illustrates how this correlation has been increasing since the American elections in November 2024 and spiked to approximately 0.91 in the most recent period—a multi-year high. This visual evidence reinforces the view that crypto assets have been moving closely in tandem with tech stocks, effectively acting as a high-beta version of the Nasdaq-100 during the March risk-off phase.
Following this trend, risk reduction was evident within the crypto asset class. Among the NCI’s constituents, Bitcoin (BTC) posted a decline of -1.93%, withstanding the downturn far better than other constituents such as Ether (ETH, -17.4%) and Litecoin (LTC, -34.6%). BTC’s relatively mild drop in this sell-off aligns with the idea that it increasingly trades like a high-beta proxy for large-cap tech. It still declined, but less severely, whereas smaller-cap crypto assets behaved more like speculative growth stocks and suffered outsized losses. The only exception to the negative results was Cardano (ADA), which surprised with a positive return of 3.88% despite no significant protocol developments during the month.
Thematic indices also faced a challenging environment. As highlighted in previous letters, smaller capitalization assets tend to suffer more during periods of market stress, mirroring how speculative small-cap stocks are hit hardest in equity sell-offs. The biggest negative highlight was the Digital Culture Index, which dropped -17.45%, followed by the Decentralized Finance (DeFi) and Smart Contract Platform (Web3) indices, which fell -16.73% and -12.07%, respectively. The Vinter Hashdex Risk Parity Momentum Index recorded a negative result of -8.26% but outperformed the three other thematic indices, benefiting from its high allocation in BTC and TRX (which gained 4.68%). The heavy weighting in BTC – the more resilient large-cap crypto – helped cushion this index, underscoring the relevance of the momentum factor in a well-diversified strategy during times of market stress.
The market remains on the lookout for the outcome of the fiscal policy discussions, hoping for a reduction in uncertainties and an end to the tariff war. That would likely mark the moment when investors regain their appetite for risk assets, including crypto assets. The U.S. government has also signaled interest in advancing the crypto agenda, a development that could drive the asset class to a new level of adoption. We remain confident in our positive outlook for the rest of the year and the long term.
Top Stories
US creates Bitcoin Strategic Reserve and Digital Asset Stockpile
The Bitcoin Reserve will be capitalized with BTC owned by the Department of Treasury, which could further increase via new budget-neutral acquisitions. The stockpile will also include assets owned by the Treasury. This marks a major milestone, with the US government starting to integrate major crypto assets and continues the new administration’s work to lead the global crypto economy.
Stablecoins surpass $230 billion in market value
The total stablecoins market capitalization surpassed $230 billion amid institutional demand for dollar-backed digital assets. This showcases one of the most successful applications for crypto technology enhancing traditional financial payments. It could also pave the way for new use cases that require a strong and reliable global payment system.
FDIC eases banks’ ability to engage in crypto activities
The FDIC has rescinded previous guidelines which prevented financial institutions from engaging with crypto activities without prior sign-off. By removing bureaucratic hurdles, banks may more readily over crypto-related services, potentially leading to broader adoption and integration of digital assets into the financial system.
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