April 3, 2023
Positive Momentum into Q2
Weekly Market Review
For educational and illustrative purposes only. This is not a solicitation to buy or offer cryptocurrency or securities. Investments may be speculative, illiquid and there is a total risk of loss of principal. There is no guarantee that any specific outcome will be achieved. Past performance is not indicative of future results.
ON-CHAIN COMMENTARY
- Bitcoin vastly outperformed the S&P 500 and Nasdaq 100 in Q1
- Bullish continuation based on technicals remain a possibility into Q2
- Since the SVB collapse, USDC has had $10B in outflows, USDT $8B of inflows
Another quarter comes to a close and in true form, Bitcoin saw dramatic quarter-over-quarter price movement. Historically, the relative price action seen by Bitcoin has closely followed three-month cycles, with very few quarters ending with less than a 10% price change. Since 2013, Q2 and Q4 have held the most positive performance with Q1 and Q3 experiencing the most negative periods. This historical pattern makes Q1 2023s strong positive performance slightly unusual. Bitcoin has also rarely had back to back positive quarters when Q1 closed above +15%. Nevertheless, Q2 has historically been the best performing quarter for all cryptocurrencies.
The Bitcoin and Ethereum price continued to hold relatively flat throughout last week in the face of low time frame technical chart patterns suggesting reversal attempts. After a multi-month consolidation, Bitcoin remains in range expansion territory with a bullish target in the $30,000 range. Ethereum remains within a multi-month range and carries at range expansion target in the $2,500 range. If further bullish rallies fail to materialize, technical support for Bitcoin and Ethereum based on high timeframe moving averages, sits near the $25,000 range and the $1,500 range, respectively.
Reverberations from the Silicon Valley Bank fiasco continue for Circle’s USDC. Despite the stablecoin being fully backed by short-dated US treasury and cash, USDC has seen over $10B in outflows since March 10th. According to Circle’s website, the reserves are custodied by The Bank of New York Mellon and managed by Blackrock. Tether has gained just over $8.0B in the same time period. Tether’s dominance relative to the entire stablecoin circulating supply now sits at 61%, which should continue to grow as BUSD will only be redeemed and not issued.
Real-time inflation projections remain below the current Fed funds rate and PCE
Bitcoin has its strongest Q1 in two-years with a strong lead against the S&P & Nasdaq
On-Chain Commentary: Source: Valkyrie Investments, Inc.
Chart 1: Rate Probabilities Suggest One More 25 bp Hike Before a Series of Cuts : Source: Valkyrie Investments, Inc., FRED, Truflation.com, CME
Chart 2: Bitcoin Closes a Strong Q1 and Outperforms Ethereum: Source: Valkyrie Investments, Inc., TradingView
Chart 3: The Aggregate Stablecoin Circulating Supply Remains Above $130B Despite Volatility Events Since January 2022: Source: Valkyrie Investments, Inc., TradingView
Coin Prices, Market Capitalizations, and Returns: Source: Valkyrie Investments, Inc., TradingView, Messari. All returns represent total return for stated period. Coin Logos: Source: cryptologos.cc
Annualized Issuance and Staking Yield: Source: Valkyrie Investments, Inc., StakingRewards.com. ETH staking rewards values are representative of the network post-Proof-of-Stake transition.
“Indicies” prices and returns: Source: Valkyrie Investments, Inc., MarketWatch. “S&P 500” provided by Standard & Poor’s and is a stock market index tracking the performance of 500 large companies listed on stock exchanges in the United States, “Nasdaq 100” provided by NASDAQ OMX Group and includes 100 of the largest domestic and international non-financial companies listed on the Nasdaq Stock Market based on market capitalization. “Russell 2000” provided by FTSE Russell and is a small-cap stock market index that makes up the smallest 2,000 stocks in the Russell 3000 Index. “Dow Jones Ind.” provided by S&P Dow Jones Indices and is a price-weighted measurement stock market index of 30 prominent companies listed on stock exchanges in the United States. “Gold” provided by NYMEX — CME Group and is a continuous futures product. All returns represent total return for stated period.
“Commodities” prices and returns: Source: Valkyrie Investments, Inc., Wall Street Journal. Bloomberg Commodity Index provided by Bloomberg and tracks prices of futures contracts on physical commodities on the commodity markets. All returns represent total return for stated period.
Valkyrie’s Alternative Layer 1 Index: Source: Valkyrie Investments, Inc., CoinGecko. Includes Layer 1 protocols
traded on at least 2 of the following 4 U.S. exchanges: Coinbase, Gemini, Kraken, or Binance US. Excludes BTC, ETH, stablecoins, and exchange tokens. Weightings using year 2050 MCAP (FDV), value struck at 8PM EST daily, rebalanced quarterly.
Past performance is not indicative of future results. Investments may be speculative, illiquid and there is a risk of total loss. There is no guarantee that any specific outcome will be achieved. There is no guarantee that any specific outcome will be achieved. This is not an offer to buy or sell securities. We do not offer legal, tax or financial advice. Information is purported to be as of the time period provided therein. Charts/graphs are for illustrative purposes only.
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Authors:
Steven McClurg, CIO
Bill Cannon, Portfolio Manager
Sean Rooney, VP Research and Trading
Josh Olszewicz, Head of Research
