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End of FED’s Asset Purchase Program and Upside GDP Surprise Drives Rally
ETFS Multi-Asset Weekly A Turbulent Week for Investors – End of FED’s Asset Purchase Program and Upside GDP Surprise Drives Rally
Highlights
- Nickel rebounds
- Global equities cheer on upside US GDP surprise
- Stimulus from central banks remains a critical driver for FX performance
Even though the end to the Federal Reserve’s bond-buying programme was well anticipated, asset prices reacted strongly. Less dovish comments and the further emphasis on data underscore the market’s reaction. Gold and silver, widely viewed as alternative currencies fell, while stock markets rallied on better-than-expected US Q3 GDP results. US non-farm pay-rolls will be closely watched this week in an era of heightened data dependency.
Commodities
Nickel rebounds. Nickel bounced back 4.1% after excessive losses in recent months. With nickel trading significantly below its marginal cost, further price falls are untenable and we are likely seeing the beginning of a structural price rally that could be repeated across a number of industrial metals. Soybean meal and soybeans rose 4.9% and 3.0% respectively on reports of dry weather in Brazil, which could delay planting. Grain deliveries by railroad were down 2% according to the Association of American Railroads, accounting for some of tightness in the US despite record production. Corn rose 3.9% as a delay in US harvesting opens up the risk of crop damage if the corn remains in the ground too long. Gold fell 2.5% as the Fed ended its bond buying programme, dragging highly correlated silver and platinum down 1.7% and 1.4% respectively. Cocoa fell 5.4% with the “Ebola-premium” dissipating due to the absence of the virus in the key producer, Ivory Coast. Coffee also fell 3.0%, as prices moderate from the spike in September.
Equities
Global equities cheer on upside US GDP surprise. Led by the Russell 2000 small caps index, which rose 3.5%, most broad equity indices rose last week as investors upgraded their assessment of global growth. The IVSTOXX index fell 5.5% as recent equity market volatility got crushed. A key exception to the rally was the FTSE® MIB index, which fell by 1.0%, weighed down by structural challenges in Italy and Europe more broadly. The MSCI China A-Share index rose 3.0%, shaking off pessimism related to the delay in the opening of the Hong Kong-Shanghai Connect, as investors realise that it is a matter of ‘when’ and ‘not if’ the link opens. The ROBO-STOX® Global Robotics and Automation Index TR rose 1.9% as the robotics revolution, a megatrend to rival the industrial revolution and internet boom, gained traction.
Currencies
Stimulus from central banks remains a critical driver for FX performance, as evidenced by the moves in the Euro, Yen and US Dollar in recent weeks. This week the Australian dollar and the Euro move back into focus. Both central banks will be angling for a lower currency to help boost activity that is otherwise somewhat lacking, with the Reserve Bank of Australia likely to be more forthright in its signalling. As such the AUD could struggle this week. The FOMC began the subtle shift toward tighter policy with less dovish language, and the market viewed this as a positive result nonetheless. The key sentence that we highlighted in the FOMC preview was removed, with the Fed clearly indicating that the focus will be on the data – which has been robust in recent months. Meanwhile, the Committee currently anticipates that, even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the target federal funds rate below levels normal in the longer run. We remain bullish on the outlook for the USD as tighter monetary policy drives the currency higher against other G10 currencies..
Important Information
This communication has been issued and approved for the purpose of section 21 of the Financial Services and Markets Act 2000 by ETF Securities (UK) Limited (”ETFS UK”) which is authorised and regulated by the United Kingdom Financial Conduct Authority (”FCA”).
Please find below Hashdex monthly crypto market update and performance attribution for Hashdex Crypto-Index ETPs for October 2024.
With October often showing strong seasonality for crypto assets, this month’s results reflect a promising trend for Bitcoin, although gains were more limited across Altcoins. As outlined in our latest CIO note, “Beyond Trump and Harris: Five Congressional Races That May Impact Crypto’s Future”, several upcoming US congressional races could shape the regulatory landscape for crypto, with potential implications for institutional adoption and future price action. Bipartisan support for the asset class is expected to grow, depending on the results of key races.
We will share some updates during the week, if you need any inputs on US elections, feel free to reach out to us.
Hashdex Crypto Index ETPs: performances (USD) as of end of October 24
• Beta Index ETP – Nasdaq Crypto Index ETP (HASH or HDX1) (largest Crypto Index ETP in Europe): October +7.1%, YTD +45%, 12M +89%.
• Smart-Beta Index ETP – Crypto Momentum Index ETP (HAMO or HDXM): October -0.5%, YTD +1.2%, 12M +71%.
Market Update – October 24
October, commonly known as ”Uptober” for its seasonally strong performance for Bitcoin, continued this trend in 2024. The month began with a volatile period, as the Nasdaq Crypto Index (NCI) initially gave back gains from September. All NCI constituents declined in the first ten days, with the exception of Uniswap, which announced plans for its own layer-two network on Ethereum.
Mid-month, the sentiment shifted, with a sharp rally that drove Bitcoin close to its all-time high by the 29th. The NCI ultimately closed the month up 7.1%, significantly outpacing traditional markets as both the S&P 500 and Nasdaq 100 declined slightly. This rally coincided with a sharp increase in former president Donald Trump’s odds in election betting markets, generating additional optimism around Bitcoin.
While Bitcoin posted a robust 10.6% gain, Altcoins generally underperformed. The notable positive exception among altcoins was Solana, which rose 9.0%. In contrast, Ripple declined 18.6% due to ongoing SEC litigation, and Polygon’s MATIC dropped over 20% as it migrated to a new token model (POL).
Nasdaq Crypto Index (NCI) relative to other asset class in October 24
Source: Hashdex, as of 30/10/24.
In comparison with traditional assets, the NCI’s 7.1% gain far outpaced the S&P 500 and Nasdaq 100, both of which posted slight declines. This performance underscores the potential for crypto assets to provide upside during periods of broader market uncertainty. The majority of this outperformance was driven by Bitcoin’s strength, underscoring its role as a cornerstone of the crypto asset class and its growing appeal as a macroeconomic hedge.
Performance attribution:
Nasdaq Crypto Index (NCI)
The NCI recorded positive returns for most of its primary constituents, with Bitcoin (+10.6%) leading the gains. Solana (SOL) also contributed positively, rising 9.0%. However, Ripple (XRP) and Polygon’s MATIC weighed on the index, with losses of 18.6% and over 20%, respectively. Ripple’s decline was largely attributed to ongoing legal issues with the SEC, while MATIC’s transition to the POL token created additional downward pressure.
Source: Hashdex, as of 31/10/24.
Crypto Momentum Factor Index
The Crypto Momentum Factor Index showed a slight monthly decline of 0.5% in October, reflecting the underperformance of altcoins in general. Although Tron (TRX) remained relatively stable, other altcoins in the index faced headwinds, leading to a small monthly loss for the index.
Source: Hashdex, as of 31/10/24.
Correlation (3m) to traditional asset classes
Source: Hashdex, as of 31/10/24. NCI for Nasdaq Crypto Index.
Hashdex Nasdaq Crypto Index ETP
Largest Crypto Index ETP in Europe, AUM ~$400m
ISIN: CH1184151731 / Tickers: HASH (SIX and Euronext) or HDX1 (Xetra) – tradable in USD, EUR, CHF and GBP
Hashdex Crypto Momentum Factor ETP
ISIN: CH1218734544 / Tickers: HAMO (SIX and Euronext) or HDXM (Xetra) – tradable in USD, EUR, CHF and GBP
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Microsoft considers bitcoin, UBS launches tokenized fund, and MicroStrategy will buy $42B in BTC
Crypto markets faced a volatile week as key macroeconomic events approached, with the upcoming US presidential election and anticipated Fed rate decision fueling uncertainty in risk assets. Bitcoin (BTC) rose 1.7%, ether (ETH) declined 1%, Solana (SOL) fell 8.2%, and the Nasdaq Crypto IndexTM (NCITM) was down 0.5%.
Microsoft to consider bitcoin investment starting December
According to a new SEC filing, Microsoft is considering the possibility of investing in Bitcoin as a hedge strategy against inflation despite opposition from its Board of Directors. This move, by one of the world’s largest companies, would mark a significant step in institutional adoption for Bitcoin.
MicroStrategy discloses plans to buy $42B of BTC
The firm announced bold plans to raise $42 billion over the next three years to acquire more bitcoin. This new wave of capital will be split equally, with $21 billion from equity issuance and $21 billion from debt offerings, in a project called the ”21/21” plan. This move, led by founder Michael Saylor, underscores bitcoin’s potential as a valuable hedge against inflation and highlights its appeal as a strategic investment option.
UBS launches its first tokenized fund on Ethereum
UBS Asset Management has launched its first tokenized fund, the USD Money Market Investment Fund Token (uMINT), a money market fund built on the Ethereum blockchain, available through authorized partners. The launch supports the growing demand for tokenized financial assets and leverages distributed technology to enhance fund issuance and distribution, as well as UBS’s broader strategy to expand its tokenization services.
Oct. 24 crypto market update & Performance attribution Hashdex Crypto Index ETPs
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