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Payrolls Data Highlights Policy Divergence
ETFS Multi-Asset Weekly Payrolls Data Highlights Policy Divergence
- Freezing weather conditions support natural gas prices.
- Confirmation of QE sends gold miners lower.
- Divergent monetary paths pressures Euro.
This week will be dominated by the launch of the heavily anticipated quantitative easing program by the ECB. A strong US non-farm payroll reading on Friday underlined the stark contrast in circumstances for the Federal Reserve and the European Central Bank. As demonstrated on Friday, European and American economies are likely to continue to diverge in line with prospects for monetary policy. However, after the official Chinese growth target was lowered this week attention may shift to Chinese lending data due next week.
Commodities
Freezing weather conditions support natural gas prices. Snowfall and frigid temperatures in the eastern half of the US boosted heating demand for natural gas. A larger-than-expected withdrawal from natural gas inventories last week sent prices higher, with Henry hub gas ending the week up 5.3%. Reports that US crude stocks rose to a record 444.4mn barrels last week failed to prevent WTI prices climbing higher. The US crude benchmark was supported by a release of the Federal Reserve’s beige book which detailed the likely cut in capital expenditures by US oil producers in 2015 as the plunge in oil prices impacts the industry. Carbon prices fell 4.4%, as coal-reliant members of the European parliament posed a potential roadblock to negotiations towards the relief of the current oversupply of allowances in the emissions market.
Equities
Confirmation of QE sends gold miners lower. After reaffirming the launch of quantitative easing, Mario Draghi delivered a relatively upbeat assessment of the Eurozone’s economic prospects. The positive tone sent European bourses rising with the DAX 30 and FTSE MIB climbing 1.6% and 1.1%, respectively. The prospect of stimulus in Europe boosted sentiment and dented safe haven demand for gold resulting in its decline through the psychological US$1,200/oz level. The fall in gold prices caused DAXglobal® Gold Miners Index to fall 4.8%. The strong performance of European stocks pushed volatility lower and the EURO STOXX 50® Investable Volatility Index to its lowest level this year at 15.3. The MSCI China A Index fell 0.9% as the Chinese premier Li Keqiang reduced the official growth target to 7.0% from 7.5% as the country tackles structural and economic reform.
Currencies
Divergent monetary paths pressures Euro. Last week the prospect of the ECB’s QE programme launch caused the Euro to fall to an eleven and a half year low against the US dollar. These losses were extended on Friday as a strong US non-farm payroll reading increased the likelihood of US rate normalisation starting at the Fed meeting in June. Recent indications that the US economy continues to strengthen brings the timeline for higher interest rates forward. While in Europe the ECB plans to loosen monetary policy and various central banks have put negative interest rates in place to combat deflation. The differing outlooks have sent the Dollar and Euro in opposite directions against other major global currencies, a trend which only looks set to continue.
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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