With multiple macroeconomic factors converging, the current entry point in the asset class appears appealing. As highlighted in our latest CIO note, ”Are We Entering a Bull Market?”, we may be approaching a pivotal moment for crypto assets:
• US Election Impact: The 2024 US election could accelerate regulatory clarity, potentially driving increased institutional participation.
• Fed Rate Cuts: Anticipated Federal Reserve rate cuts in late 2024 may boost liquidity, making risk assets like cryptos more attractive as traditional investments lose appeal.
• Bitcoin’s Market Cycle: Bitcoin is transitioning from a recovery phase, with signs pointing toward a potential bull market fueled by institutional inflows and growing ETF adoption.
These factors suggest now could be a compelling entry point for investors looking to capitalize on the next phase of crypto market growth.
Hashdex Crypto Index ETPs: performances (USD) as of end of September 24
• Beta Index ETP – Nasdaq Crypto Index ETP (HASH or HDX1) (largest Crypto Index ETP in Europe): September +9.8%, YTD +35%, 12m +115%.
• Smart-Beta Index ETP – Crypto Momentum Index ETP (HAMO or HDXM): September 5.2%, YTD 3%, 12m +98%.
Market Update – September 24
After a tough August, September saw crypto markets rebound. The month started with some volatility following a weak US jobs report, leading to uncertainty over the Fed’s next move. Stocks fell, with the S&P 500 down 4.2% and Nasdaq 100 dropping 5.9%. The Nasdaq Crypto Index (NCI) mirrored this with a 9.3% decline.
Mid-month, sentiment shifted with a 50bps Fed rate cut on September 18, boosting both traditional and crypto markets. The NCI recovered, finishing the month up by more than 9%. Meanwhile, the S&P 500 gained 2.1%, and Nasdaq 100 rose 2.6%. Altcoins outperformed, leading the recovery.
Despite renewed turbulence from Japan late in the month, crypto assets remained resilient. Bitcoin posted a 7.9% gain, while altcoins in the NCI outshined, marking September as Bitcoin’s strongest since 2012. With upcoming US elections and more monetary easing expected, the outlook remains positive for the crypto market.
Nasdaq Crypto Index (NCI) relative to other asset class in September 24
Source: Hashdex, as of 30/09/24.
Performance attribution
Nasdaq Crypto Index (NCI)
The Nasdaq Crypto Index recorded positive returns for most of its constituents, with Bitcoin (+7.9%) and Ethereum (+5.6%) contributing positively to the overall performance. Altcoins such as Uniswap (UNI) and Avalanche (AVAX) were the top performers, with 26.0% and 23.4% gains, respectively. Polygon’s MATIC was the only constituent with a negative return, as the network transitions to its new token structure.
Source: Hashdex, as of 30/09/24.
Crypto Momentum Factor Index
The Crypto Momentum Factor Index gained 5%, driven by strong performances from several altcoins. Although Tron (TRX) posted a slight decline of 0.6%, other assets within the index more than offset this, contributing to the positive monthly performance.
Source: Hashdex, as of 30/09/24.
Correlation (3m) to traditional asset classes
Source: Hashdex, as of 30/09/24. NCI for Nasdaq Crypto Index.
Recent market movements reinforce the investment case for crypto index investing and we believe that now is the time to build a long crypto exposure via the Nasdaq Crypto Index (NCI) (or to boarden the exposure vs. a single asset Bitcoin ETF position).
Here are some commentaries from our Research:
• NCI surges +18% last week (Nov 3 to 10) while Bitcoin was up +15%: driven by market optimism following Trump’s election and a 25 bps rate cut by the Federal Reserve
• Bitcoin breaks new highs: Closed the week above $80k for the first time, leading a market rally
• Outperformance across NCI constituents:
o Smart contract platforms led gains:
Cardano: +72.6%
Avalanche: +31.4%
Ethereum: +27.2%
Solana: +25.4%
o All constituents (except LTC) outperformed Bitcoin’s gains, see below for last week:
• BTC Dominance tested 60% and retraced: Historically, this has either signaled the end of Bitcoin outperformance or the start of a powerful Altseason
• Strong performance outlook: Momentum in NCI’s broad diversification positions it well for potential long-term gains as macro and regulatory conditions improve
Nasdaq Crypto Index – Constituents performance Nov 3 – Nov 10:
Evolution of Bitcoin dominance:
Why consider Nasdaq Crypto Index (NCI) now?
• Diversification beyond Bitcoin: Capture both Bitcoin’s strength and the upside potential of emerging crypto assets in one allocation.
• Positioning for Altseason: NCI provides targeted exposure to key market segments poised to benefit from broader market growth.
Den börshandlade fondens TER (total cost ratio) uppgår till 0,40 % p.a. HSBC Global SukukUCITSETF C är den enda ETF som följer FTSE IdealRatings Sukuk-index. ETFen replikerar resultatet för det underliggande indexet genom samplingsteknik (köper ett urval av de mest relevanta indexbeståndsdelarna). Ränteintäkterna (kupongerna) i ETFen ackumuleras och återinvesteras.
HSBC Global SukukUCITSETF C är en mycket liten ETF med tillgångar på 1 miljoner GBP under förvaltning. Denna ETF lanserades den 7 september 2023 och har sin hemvist i Irland.
Investeringsmål
Fonden strävar efter att tillhandahålla regelbunden inkomst- och kapitaltillväxt genom att så nära som möjligt följa utvecklingen av FTSE IdealRatings Sukuk Index (totalavkastning) (indexet), samtidigt som sharia-principerna respekteras.
Investeringspolicy
Indexet består av globala islamiska räntebärande värdepapper, även känd som Sukuk. Fonden investerar i, eller får exponering mot US-dollar denominerade, Sukuk av investeringsgrad som är sharia-kompatibla och utfärdade på de globala marknaderna, som alla är indexbeståndsdelar. Indexets valuta är USD och avkastningen är osäkrad. Fonden förvaltas passivt och använder en investeringsteknik som kallas optimering, som syftar till att minimera skillnaden i avkastning mellan fonden och indexet genom att ta hänsyn till tracking error och handelskostnader vid konstruktion av en portfölj.
Fonden kommer endast att investera i Sukuk som uppfyller sharia-efterlevnadsprinciperna som tolkats eller godkänts av shariakommittén. Fonden kan investera upp till 10 % av sina tillgångar i kontanter och penningmarknadsinstrument upp till 10 % av sina tillgångar i Shariah-kompatibla fonder för effektiv portföljförvaltning. Kreditbetygen för investeringarna kan variera från tid till annan men kommer att vara minst Investment Grade.
One week after the US elections, bitcoin has been hitting new all-time highs. This price action reflects the fact that the results were an ideal outcome for bitcoin and other crypto assets—with both a pro-crypto president and Congress set to take the reins of the US government in January.
The support for crypto was overwhelming. There were 268 Congressional candidates and 19 candidates for the Senate that were elected and are considered pro-crypto, according to Stand with Crypto. This included the election of 50 of 58 candidates supported by the crypto industry.
But with change coming in 2025, what can investors take away from last week’s results? I think there are three things we know with certainty.
Crypto will continue to be a political force: The election outcome might be the strongest signal we have seen that crypto is an asset class here to stay given the pro-crypto stance of President-elect Trump and many newly elected policymakers. Trump has supported big and bold ideas in this space, including supporting the US holding bitcoin on its balance sheet and the creation of a crypto advisory council to create supportive rules for the industry.
But this election will have an impact far beyond last week’s results. The engagement from the crypto community and industry in this election will reverberate into the next elections and those that follow, as policymakers are now grasping that—like the internet—crypto is a technology that should not be caught up in partisan politics. There were already signs of bipartisan support for the industry this year, but with such a definitive victory for pro-crypto candidates, both Democrat and Republican, the idea that Congress should try and stop this technology from being incubated in the US has faded away.
The “generational shift” is happening: While there has been more support for crypto from Republicans than Democrats, I think this is a short-term dynamic that will not persist over time. What might be more important is the generational shift taking place, as younger generations of politicians embrace crypto while older generations remain skeptical. It’s not surprising that the most vocal critics of crypto tend to be relatively older, including Sen. Elizabeth Warren (75), Sen. Sherrod Brown (72), and Rep. Brad Sherman (70), while those who are embracing this technology—regardless of party affiliation—are much younger, including incoming US senators Tim Sheehy (38), Ruben Gallego (44), and Bernie Moreno (57). Over time, this generational gap might even become a more important distinction than partisan lines on this issue.
It’s still early: Even with bitcoin’s rise over $82,000 this week, this is an asset class that is still in its early stages of adoption. Many investment advisors, wealth managers, and large institutional investors are still conducting their due diligence, and we think the political and regulatory environment next year will help them accelerate these efforts.
But we are still so early. And, given the cyclicality of this asset class, there is tremendous potential for this current environment being an excellent entry point. For example, one year after the 2016 and 2020 elections, bitcoin had returned 916% and 354%, respectively.
This performance tracks well with post-halving performance as well as favorable macro factors, such as lower interest rates in the US and economic stimulus in China increasing global liquidity and benefiting risk assets. These factors, along with the ongoing institutional adoption and a dramatically improving regulatory outlook in the US is setting crypto up for a very strong 2025.
Crypto is the election’s big winner
The new administration, together with a Congress more crypto-friendly than any other point in history, is poised to act quickly to ensure that the US maintains its leadership in digital assets. While there will be many uncertainties in the coming weeks and months regarding specific policies and personnel, we are clearly at an inflection point. Crypto has made its case to US policymakers and they have embraced it with open arms. This is a key factor setting 2025 up for what we believe will be an incredible year for this space.
For investors thinking about how to act based on the election results, we continue to advocate for taking a long-term view and getting diversified exposure to this asset class. We’ll continue to face uncertainty and volatility, but investors who maintain an extended horizon will benefit, just as they have in the past.