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Is Volatility Here to Stay?
ETF Securities Commodity ETP Weekly Gold Haven Demand Eerily Absent. Is Volatility Here to Stay?
Platinum group metals see outflows amid price declines.
Bargain hunting drives inflows into agricultural commodities.
Long oil ETPs see first net inflows in 12 weeks.
Next Thursday, we are hosting the webinar: ”Sentiment vs Fundamentals, What Happens Next?” taking a look at what may happen when prices realign with fundamentals.
The market took the Fed’s post-meeting comments to be dovish, leading the US Dollar to slip 1% percent. Gold gained 2% in US dollar terms as USD weakness and Greek financial woes lent support to the haven asset. The complete stalemate in debt negotiations could see gold prices rise further. With Greece facing a number of payment deadlines this month, the country’s financial situation is looking more precarious than ever. However for now financial market are optimistic that a deal will be struck today. A sharp re-pricing of risk could materialize if such a deal is not reached. Gold is likely to reassert its traditional role of a hedge asset in such event, but for now demand has been surprisingly muted.
Platinum group metals see outflows amid price declines. Last week we saw US$8.7mn of outflows from long platinum ETPs and US$5.0mn of outflows from long palladium ETPs as prices fell 1.8% and 2.9%, respectively. While auto sales growth may not be as brisk as it was a year ago, falling energy prices should bode well for sales, especially of larger vehicles which require higher platinum and palladium loadings in their autocatalysts. Additionally, as we enter the notorious “strike season” in South Africa, mine supply of the metals could become constrained. We believe that sentiment is excessively negative and that there is a tactical opportunity for those who have the resolve to weather the near-term volatility.
Bargain hunting drives inflows into agricultural commodities. Three of the top 5 five inflows were into agricultural commodities last week. A depreciating Brazilian Real pushed coffee and sugar prices down 2.5% and 3.4%, respectively, while favorable weather (for now) is helping the Brazilian harvest. After rallying earlier in the month due to excess rain in the US, wheat fell 3.2% as more favorable weather materialised. Weather remains the key for fortunes in the agricultural space. The increased probability of El Niño lasting to the end of this year, raises the risk of weather-related crop damage and a number of investors have used this price dip as a tactical entry point. We saw US$5.4mn of inflows into long wheat ETPs (6-week high), US$4.9mn into long sugar ETPs (13-week high) and US$5.1mn of flows into long coffee ETPs (4-week high). Flows into broad basket agricultural ETPs hit US$9.6mn, a 5-week high, highlighting the broad-based interest in the asset class which has seen considerable price pressure over the past year.
Long oil ETPs see first net inflows in 12 weeks. While marking the first (long) inflows across the sector in 12 weeks, all the inflows were into WTI (US$5.6mn), and Brent ETPs continued to see redemptions (-US$0.3mn). Brent fell 1.3% last week, while WTI staged a more modest decline of 0.5%. We believe that oil prices will fall in the very short term as over-optimism about the pace of supply tightening gets reality check. Eventually as high cost producers outside of the US make credible cutbacks to production, we see the price recovering.
Key events to watch this week. The evolving Greek debt saga will continue to be the focus of investor attention next week. The rising threat of an accident could crystalize fears of a Grexit which should be gold price positive. Elsewhere US durable goods and Chinese manufacturing PMIs will provide gauge for how the world’s largest economies are faring and likely demand for cyclical 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.
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.
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