Welcome to the Crypto.comMonthly Research Roundup Newsletter!
1. Market Index
In April, the price index grew by +9.90%, while the volume and volatility indices dropped by -5.51% and -21.88%, respectively.
2. Charts of the Month
Bitcoin supply on centralised exchanges reached a three-year low of 2.49 million BTC on 25 April, according to CryptoQuant. This represents a drop of 252,560 BTC year-to-date. A decline in bitcoin exchange reserves can potentially be interpreted as the movement of assets to private wallets, which may suggest long-term holding.
The Ethereum ecosystem is seeing growing adoption, with Layer-2 (L2) active addresses reaching new highs. The number of unique addresses interacting with L2 networks increased by 74% in the week of 27 April compared with the previous week, peaking at 13.66 million.
3. Monthly Feature Articles
The Rise of Crypto Treasury
The adoption of cryptocurrencies, particularly bitcoin (BTC), as treasury reserve assets by corporations emerged as a transformative financial strategy in 2020.
This report examines the conceptual framework, global adoption trends, and stock performance of companies embracing crypto treasuries.
Key Takeaways:
Driven by goals like inflation hedging, portfolio diversification, and brand differentiation, this trend has gained momentum despite regulatory and market volatility challenges.
Globally, over 90 public companies now hold Bitcoin on their balance sheets, with the United States leading in both corporate and government adoption.
The stock performance of companies with crypto reserves shows a mixed picture. The crypto treasury reserve strategy’s impact on stock prices varies, influenced by both crypto market dynamics and broader business factors.
Bitcoin’s volatility, regulatory uncertainties, and need for secure custody solutions pose challenges. Despite these, the growing acceptance of Bitcoin in traditional finance (TradFi), as evidenced by endorsements from financial institutions and governments, suggests a maturing market. BTC’s outstanding performance in the past 10 years highlights the potential for significant long-term financial performance during high inflation periods.
Crypto.com has partnered with Trump Media & Technology Group (TMTG) and Yorkville America to launch TMTG-branded exchange-traded funds (ETFs). By positioning itself as the technology and custody backbone for high-profile ETF launches, Crypto.com is directly targeting the growing demand from state and sovereign funds for secure, regulated, and scalable crypto exposure.
Market liquidity refers to the ease with which assets can be quickly bought and sold in the market at stable prices. Compared to TradFi, which has benefitted from decades of infrastructure development, crypto assets trade across centralised and decentralised exchanges characterised by more fragmented liquidity with more innovation.
Although the overall liquidity in TradFi markets is significantly higher than the crypto market, BTC’s liquidity is comparable with some popular investment TradFi instruments, including the spot, futures, options, and ETF markets. This report compares liquidity between popular TradFi assets and major crypto assets, and delves into the development of crypto exchanges.
Key Takeaways:
Market liquidity refers to the ease with which assets can be quickly bought and sold in the market at stable prices. Indicators of liquidity include trading volume, bid-ask spread, market depth, and number of exchanges.
In the spot market, the US equities’ average daily trading volume (US$655 trillion in the past 12 months) was much larger than crypto’s $62 billion, reflecting the gaps in market maturity and adoption. However, Bitcoin had a higher volume-to-market cap ratio than Apple Inc. (AAPL) in the past year, indicating stronger trading activity.
Derivatives market showed different trends between TradFi and crypto markets:
The daily volume of crypto futures and options was $183 billion and $3 billion, respectively, over the past year. The daily open interest (OI) averaged $86 billion and $16 billion, respectively, during the same period.
For popular TradFi vehicles (e.g., S&P 500 Index), the average daily notional value of volume for E-mini S&P 500 futures and options was around $520 billion and $334 billion, respectively, in the past month. The average daily notional value of OI for E-mini S&P 500 futures and options was $594 million and $3,378 billion, respectively.
The liquidity gap between crypto options and futures is primarily attributed to the complexity of options trading, as well as the high demand for short-term directional trading and leverage in the crypto market. However, with the acceleration of institutional crypto adoption, liquidity could improve in the crypto options market.
For exchange-traded funds (ETFs), the most popular TradFi ETFs (e.g., SPY) generally had higher fund flows than crypto ETFs. However, crypto ETFs have seen a growing interest from institutional investors, with BlackRock’s IBIT ranking as the 15th most-traded ETF by volume.
Crypto.com has built a robust ecosystem that offers various financial products to users and enhances market liquidity, including crypto trading, expansion into TradFi products, and the upcoming launch of a stablecoin, and ETF.
As regulatory frameworks evolve globally, along with an increase in institutional adoption, there is potential for crypto to rival TradFi in terms of accessibility and liquidity while maintaining its unique characteristics of bringing efficiency and transparency at lower costs.
This institutional-focused report dives into macro trends, market-neutral pairs, style-factor screens, and events. Read the full Alpha Navigator report here.
Asset performance was mixed. Bitcoin and Gold led the price increase..
BTC’s 1-month performance correlation turned negative with most benchmarked asset classes including Gold.
We present to you our latest issue of Research Roundup, featuring our deep dives into ‘The Rise of Crypto Treasury’ and ‘Wall Street On-Chain Part 3: Trading & Liquidity’.
