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How Markets Reacted to New US Credit Rating: What Happened in Crypto Last Week?

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Consumer prices in the U.S. rose by 3.2% year-over-year in October, down from 3.7% in September, but still above the Fed’s 2% benchmark. Moody’s Investors Service has cut the US credit outlook from stable to negative. In response, long-term yields soared, which is not only an indication of investor confidence in the U.S. economy but also a proxy used by many to gauge mortgage rates and risk-on assets such as equity and crypto.

Consumer prices in the U.S. rose by 3.2% year-over-year in October, down from 3.7% in September, but still above the Fed’s 2% benchmark. Moody’s Investors Service has cut the US credit outlook from stable to negative. In response, long-term yields soared, which is not only an indication of investor confidence in the U.S. economy but also a proxy used by many to gauge mortgage rates and risk-on assets such as equity and crypto.

Bitcoin and Ethereum are down by 1.54% and 7.82% over the past week, respectively. Biggest winners of last week were Solana (27.56%), Avalanche (66.56%), and Optimism (3.45%). In this report, we’ll walk you through the top 4 trends to remember in markets this week: what drove Ethereum’s price to break the $2K mark before retracing after a bumpy downhill from August 15? We’ll also break down the new developments on Bitcoin that might bring streaming to the network, Kraken’s new Layer 2 blockchain, and Lido decentralizing its node-infrastructure operations.

Figure 1: Weekly Price and TVL Developments of Cryptoassets in Major Sectors

Source: 21Shares, CoinGecko, DeFi Llama. Close data as of November 16, 2023.

4 Things to Remember in Markets this Week:

Ethereum Rejoins the Race

The world’s largest asset manager, BlackRock, officially submitted an application for its iShares Ethereum Trust as a Delaware statutory trust on November 9, joining a handful of firms, including ARK Invest and 21Shares, who were the first to submit their application back in September. With BlackRock’s $8.6 trillion in assets under management, the news spurred optimism in the market, making Ethereum jump by 12.54% overnight, but fundamental developments should also be credited. Increasing base fees and burn rate have returned Ethereum to its June levels, signifying a revival of on-chain activity. As shown in the figure below, Ethereum has become deflationary over the past week, strengthening its worth. However, on November 10, around $41M worth of ETH was lost in over a $100M exploit on a crypto wallet belonging to the crypto exchange Poloniex. Crypto forensics firm Arkham Intelligence showed that the hacker had close to ~$42M on Friday night. In terms of market impact, it would take ETH $8M to move upwards or downwards by 2%. Therefore, the Poloniex hack could yield short-term selling pressure on ETH of about 10%, if the hacker liquidates their looted holdings instantaneously.

Figure 2: Ethereum’s Annualized Inflation Rate and Daily Change in Supply

Source: 21.co on Dune Analytics

Streaming on Bitcoin

Bitcoin developer Robin Linus introduced BitStream, a decentralized file hosting on Bitcoin, where users can upload unique files, enabling anyone to monetize their excess bandwidth and data storage capacities without relying on trust or heavy-weight cryptography. BitStream’s pay-to-download approach solves the problem of bandwidth costs that could skyrocket beyond the initial download revenue. It allows the server to charge for each download, ensuring that the revenue scales with the popularity and demand for the media, creating a balanced and profitable ecosystem. According to the whitepaper, the uploaded files would be fraud-proof, by splitting them into fixed-sized chunks and then hashed into a Merkle tree to derive a unique fileId. This development is yet another expansion to Bitcoin’s burgeoning use cases and would onboard a diversified audience. With BitStream’s promise, Bitcoin can capture the total addressable market of data storage, which stands at at least $230B. Although BitStream’s pricing scheme is not clear yet, decentralized data storage solutions, like Filecoin and Arweave, have been proven to be a lot cheaper than Google Cloud, Amazon S3, and its other centralized peers, varying by usage, as shown in the figure below.

Figure 3: Cost of decentralized storage vs. centralized storage in 2023

Source: State of Crypto issue 9, Coingecko

Kraken Looks to Build Their Own Blockchain

In their pursuit, Kraken is exploring potential partnerships with Polygon Labs, Matter Labs, or the Nil Foundation to establish a Zero-Knowledge-powered network, setting themselves apart from Coinbase. This move isn’t surprising, given Coinbase’s Base accrued ~$5.4M in profit since its launch, equating to around $20 million in annualized profits. Further, despite a recent decline in Base’s sequencer revenue and a 30% drop in AUM over the past weeks, the network still outperforms the rest of ETH scaling solutions in terms of hosting new applications, as shown in Figure 4, indicating a robust developer ecosystem posed to generate diversified income streams. While exchanges launching their networks is not new, the current trend of building atop Ethereum eliminates the necessity for launching a token, which strategically avoids regulatory scrutiny in the current environment. In light of this, we anticipate compliant exchanges to emulate this model and seize the opportunity to capitalize on a diversified income source in the upcoming cycle.

Figure 4: Deployment of New Applications Across ETH Scaling Solutions

Source: Artemis

Lido is Decentralizing its Node-Infrastructure Operations

Lido DAO, the largest non-custodial staking provider, approved two proposals to adopt Distributed Validation Technology. DVT refers to a mechanism spreading out key management and signing responsibilities across multiple parties to reduce single points of failure and increase validator resiliency. That said, Lido will integrate DVT modules with Obol and SSV protocols, which is set to introduce a more diverse profile of node operators beyond its current list of 38 Validators and help address a key concern around centralization. This is a key development as Lido stirred a debate since it’s close to accounting for a third of staked ETH (see Figure 5),; it could have undesired influence over the network’s validation process and block production. Thus, this implementation is crucial to ensure the diversification of the protocol’s node operators and increase their reliability in case of validator failures or attempts of censorship. Conversely, SSV and Obol networks represent new primitives, so it’s essential to remain vigilant regarding any unforeseen vulnerabilities they could introduce.

Figure 5: Dominance of Entities Staking on the Ethereum Network

Source: 21co at Dune

What You Should Pay Attention To

US Credit Outlook: From Stable to Negative

Citing political polarization and fiscal deficits, Moody signals negative indicators for the U.S. economy, lowering the credit rating from stable to negative. 10 and 30-year Treasury yields rose on Monday, taking a toll on investor portfolios and making it more expensive for the government to borrow more money. In the case that the U.S. government doesn’t honor its federal debt of $33.7 trillion, the country might be paving its way to a recession. Although the bull run of Bitcoin can be likely triggered due to speculation around a potential spot ETF in the U.S., the weakening of credit ratings and sticky inflation strengthens Bitcoin’s narrative as a hedge against currency debasement.

Figure 6: 30-Y Treasury Bill Yields Plotted Against Bitcoin’s Performance (YTD)

Source: Yahoo Finance

NEAR Announcing Multiple Partnerships Aimed at Closer Alignment with Ethereum

First, Near Foundation unveiled a collaboration with Polygon Labs, marking a significant stride in building a zkWASM prover. In other words, the partnership enables WASM-based networks to validate their settlements on Ethereum, tapping into its battle-tested security guarantees. For context, WebAssembly (WASM) is an alternative operating system to Ethereum’s EVM, offering data efficiency and a versatile toolkit supporting languages like Rust and C++, and powers platforms like Solana, Cosmos, and Near.

This collaboration is pivotal as it provides developers on Polygon CDK with expanded choices for building customizable networks beyond Ethereum’s EVM constraints and using technologies like sharding that are not yet feasible on Ethereum. Finally, the integration facilitates access to Ethereum’s robust liquidity via Polygon’s shared layer, offering a strategic advantage to external non-EVM entities lacking this capability. In essence, this implementation fosters interconnectivity and interdependence between incompatible blockchain operating systems. The synergy also has the potential to propel Polygon’s ZK-EVM user base, enabling it to bridge the gap with both Ethereum and Near networks, as shown below in Figure 7.

Figure 7: Active Daily Users of Near vs Polygon ZK-EVM vs Ethereum

Source: Artemis

Near also revealed its NEAR DA, a new data availability solution offering ETH scaling networks (L2s) like Arbitrum and Optimism, a cost efficient means for posting data. For context, traditional blockchains combine all key functions such as settlement, consensus, execution and data availability, which make networks inefficient as they grow in size. Thus, the modular approach instead focuses on separating few intensive processes, like posting data on Ethereum to prove their validity, in order to help L2 streamline their operations.

In the case of Near, it’s expected to be 8000x cheaper to post data on the network than on Ethereum, specifically it would cost rollups ~$26 to post 100KB of call-data on Ethereum versus $0.0033. Near is now the second protocol offering the modular approach after Celestia announced their mainnet deployment at the end of October. This is a crucial development to help scale the Ethereum ecosystem further and diversify away from the monolithic architectures that are more complex and less flexible.

Comparatively, Near inked a partnership with EigenLabs, the company building the re-staking primitive on top of Ethereum. As a refresher, restaking refers to repurposing staked ETH to validate the security of other applications and networks. With this in mind, Near is building a fast-finality rollup solution, powered by Eigen’s Active Validator Service (AVS), or restakers, to enable near-instant transaction finalization, surpassing the current time frames of hours or days, and is 4000X cheaper than current options. This would ensure that rollups can inherit the security of Ethereum via re-staking, while benefiting from Near’s faster settlement guarantees and help address the fragmentation of liquidity amongst ETH L2s with a cross-rollup communication system in the process. These key developments align with our thesis of a multichain future, with projects seamlessly utilizing various networks in a trustless manner for their distinctive benefits, making infrastructure imperceptible to end-users, while Ethereum continues to wield significant influence in fueling the ecosystem.

Bookmarks

• Insights from our last newsletter were featured on CoinDesk.

• In collaboration with ARK Invest, 21Shares is listing 5 products in the Chicago Board Options Exchange.

• Get a digital copy of State of Crypto issue 10!

Next Week’s Calendar

These are the top 3 events we’re monitoring for next week.

• November 17: UK Retail Sales, European Central Bank’s President Christine Lagarde speaks

• November 21: FOMC Meeting Minutes

• November 23: Flash manufacturing and services PMI data for Germany, France and the UK.

Source: Forex Factory

Research Newsletter

Each week the 21Shares Research team will publish our data-driven insights into the crypto asset world through this newsletter. Please direct any comments, questions, and words of feedback to research@21shares.com

Disclaimer

The information provided does not constitute a prospectus or other offering material and does not contain or constitute an offer to sell or a solicitation of any offer to buy securities in any jurisdiction. Some of the information published herein may contain forward-looking statements. Readers are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties and that actual results may differ materially from those in the forward-looking statements as a result of various factors. The information contained herein may not be considered as economic, legal, tax or other advice and users are cautioned to base investment decisions or other decisions solely on the content hereof.

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HANetf lanserar Indo-Stillahavs-ex-Kina försvars-ETF

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Den nya ETFen, med fokus på att vara en Indo-Stillahavs-ex-Kina försvars-ETF, riktar sig mot exponering mot regionala försvars- och säkerhetsföretag. Med denna lansering kompletterar HANetf sitt utbud av försvarsstrategier.

Den nya ETFen, med fokus på att vara en Indo-Stillahavs-ex-Kina försvars-ETF, riktar sig mot exponering mot regionala försvars- och säkerhetsföretag. Med denna lansering kompletterar HANetf sitt utbud av försvarsstrategier.

HANetf har meddelat den planerade lanseringen av en ny Indo-Stillahavs-ex-Kina försvars-ETF, som utökar sitt utbud av tematiska investeringsprodukter som svar på ökande geopolitiska spänningar och regionala militära uppbyggnader. Den nya ETFen, som förväntas noteras i juli 2025, kommer att följa Indo-Stillahavs-noterade företag som är verksamma inom försvar, flyg- och rymdfart och säkerhet.

Denna lansering kommer att utöka HANetfs befintliga försvarsfokuserade utbud, vilket inkluderar Future of Defence UCITS ETF (ASWC) med mer än 2,6 miljarder dollar i förvaltat kapital, och Future of European Defence UCITS ETF (8RMY), som för närvarande förvaltar över 130 miljoner euro. Med detta drag strävar HANetf efter att ge investerare den bredaste tillgången till försvarsinvesteringsverktyg i Europa.

Regionala försvarsutgifter accelererar i Indo-Stillahavsområdet

Indo-Stillahavsområdet bevittnar en betydande förändring i försvarsställningen, vilket speglar utvecklingen i Europa. I ett tal vid Shangri-La-dialogen i Singapore uppmuntrade USA:s försvarsminister Pete Hegseth sina allierade i Asien att efterlikna Natos försvarsutgiftsstrategi. ”Nato-medlemmar lovar att spendera fem procent av sin BNP på försvar – till och med Tyskland”, sa han och underströk omfattningen av Europas upprustningstrend.

Mot bakgrund av ökande geopolitiska spänningar ökar länder som Indien, Japan, Sydkorea och Taiwan snabbt sina försvarsbudgetar och driver på för större självförsörjning inom vapentillverkning. Viktiga händelser inkluderar:

• Indien fördelar 75 procent av sin försvarskapitalbudget till inhemska företag.

• Japan planerar sin största militära uppbyggnad sedan 1950-talet, med målet att spendera 2 procent av BNP på försvar senast 2027.

• Sydkorea siktar på att erövra 5 procent av den globala vapenmarknaden senast 2027 genom utökad export.

• Taiwan ökar försvarsutgifterna med nästan 50 procent sedan 2015, inklusive investeringar i inhemska drönar- och motdrönarsystem.

Den kommande ETFen kommer att följa ett transparent, regelbaserat index och investera i företag med säte i Indo-Stillahavsområdet som genererar betydande intäkter från försvarsrelaterad verksamhet.

Indo-Stillahavsområdet håller snabbt på att bli det geopolitiska tyngdpunkten för 2000-talet. Från Taiwan till Indiska oceanen driver ökande spänningar och en förskjutning mot försvarssjälvförsörjning en historisk upprustningscykel. Precis som våra NATO- och europeiska försvars-ETFer har hjälpt investerare att få tillgång till den nya realiteterna inom global säkerhet, erbjuder denna strategi riktad exponering mot företag inom Indo-Stillahavsområdet” sade Hector McNeil, medgrundare och VD för HANetf.

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EUEE ETF en aktivt förvaltad ETF för Europas aktiemarknader

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iShares Europe Equity Enhanced Active UCITS ETF EUR (Acc) (EUEE ETF) med ISIN IE00000EF730, är en aktivt förvaltad börshandlad fond.

iShares Europe Equity Enhanced Active UCITS ETF EUR (Acc) (EUEE ETF) med ISIN IE00000EF730, är en aktivt förvaltad börshandlad fond.

Den börshandlade fonden investerar minst 70 procent i aktier från Europa. Upp till 30 procent av tillgångarna kan placeras i private equity-instrument, värdepapper med fast ränta med investment grade-rating och penningmarknadsinstrument. Värdepapper väljs utifrån hållbarhetskriterier och en kvantitativ investeringsmodell.

Den börshandlade fondens TER (total cost ratio) uppgår till 0,25 % p.a. iShares Europe Equity Enhanced Active UCITS ETF EUR (Acc) är den enda ETF som följer iShares Europe Equity Enhanced Active-index. ETFen replikerar det underliggande indexets prestanda genom fullständig replikering (köper alla indexbeståndsdelar). Utdelningarna i ETFen ackumuleras och återinvesteras.

iShares Europe Equity Enhanced Active UCITS ETF EUR (Acc) är en mycket liten ETF med tillgångar på 10 miljoner euro under förvaltning. Denna lanserades den 31 juli 2024 och har sin hemvist i Irland.

Investeringsmål

Fonden förvaltas aktivt och syftar till att uppnå långsiktig kapitaltillväxt på din investering, med hänvisning till MSCI Europe Index (”Riktmärket”) för avkastning.

Handla EUEE ETF

iShares Europe Equity Enhanced Active UCITS ETF EUR (Acc) (EUEE ETF) är en europeisk börshandlad fond. Denna fond handlas på flera olika börser, till exempel Deutsche Boerse Xetra och London Stock Exchange.

Det betyder att det går att handla andelar i denna ETF genom de flesta svenska banker och Internetmäklare, till exempel DEGIRONordnet, Aktieinvest och Avanza.

Börsnoteringar

BörsValutaKortnamn
Euronext AmsterdamUSDEUEE
XETRAEUREUEE
London Stock ExchangeGBPEUEE

Största innehav

KortnamnNamnSektorVikt (%)ISINValuta
NOVO BNOVO NORDISK CLASS BHealth Care4.29DK0062498333DKK
ASMLASML HOLDING NVInformationsteknologi3.73NL0010273215EUR
NESNNESTLE SADagligvaror2.94CH0038863350CHF
AZNASTRAZENECA PLCHealth Care2.57GB0009895292GBP
NOVNNOVARTIS AGHealth Care2.54CH0012005267CHF
SHELSHELL PLCEnergi2.49GB00BP6MXD84GBP
MCLVMHSällanköpsvaror2.11FR0000121014EUR
SAPSAPInformationsteknologi2.10DE0007164600EUR
ROGROCHE HOLDING PAR AGHealth Care2.04CH0012032048CHF
SIESIEMENS N AGIndustri1.64DE0007236101EUR

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UBS noterar sin första aktiva ETF på Xetra

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BNP Paribas Easy € Overnight UCITS ETF följer resultatet för Solactive €STR Overnight Total Return Index. €STR återspeglar kostnaden för osäkrade eurolån över natten från banker med säte i euroområdet. Det är den genomsnittliga räntan för lån som tas ut under en dag.

BNP Paribas Easy € Overnight UCITS ETF följer resultatet för Solactive €STR Overnight Total Return Index. €STR återspeglar kostnaden för osäkrade eurolån över natten från banker med säte i euroområdet. Det är den genomsnittliga räntan för lån som tas ut under en dag.

UBS EUR AAA CLO UCITS ETF förvaltas aktivt och investerar huvudsakligen i europeiska CLOer (Collateralized Loan Obligations) med AAA-rating. Dessa är buntar av företagslån med rörlig ränta.

NamnISIN
Kortnamn
AvgiftUtdelnings-
policy
BNP Paribas Easy € Overnight UCITS ETF CapLU3025345516
EDEG (EUR)
0,05%Ackumulerande
UBS EUR AAA CLO UCITS ETF EUR accLU3028243122
CHSJ (EUR)
0,35%Ackumulerande

Produktutbudet inom Deutsche Börses ETF- och ETP-segment omfattar för närvarande totalt 2 483 ETFer, 202 ETCer och 261 ETNer. Med detta urval och en genomsnittlig månatlig handelsvolym på cirka 25 miljarder euro är Xetra den ledande handelsplatsen för ETFer och ETPer i Europa.

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