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December was a rough month for growth stocks and digital assets. Possible future market catalysts for crypto include industry restructuring, government regulation, and industry bankruptcies.
December was another tough month for both growth stocks and digital assets as Bitcoin (BTC-USD) fell 3%, Ethereum (ETH-USD) -7%, the Nasdaq Composite -9%, and the MVIS Smart Contract Leaders Index -17%.
Notably, Bitcoin’s 30-day volatility is now lower than S&P 500 volatility. We think that’s unsustainable. Possible upside catalysts include a pre-packaged DCG/Genesis bankruptcy or restructuring with new equity financing, an announcement from Saudi Arabia formalizing Bitcoin mining, regulation & licenses, or a Ripple (XRP-USD) court victory or settlement. Possible downside catalysts include a disorderly DCG bankruptcy, CFIUS blocking BinanceUS’s acquisition of $1B of Voyager crypto assets, hot inflation prints, or a Ripple loss.
On the positive side, we also note the recent strength of the Chinese RMB amidst a CCP U-turn on COVID-19 and other redistributive policies. Historically, sturdier relative economic performance in China has coincided with a strong RMB, less onerous capital controls, and resilient BTC. We think this correlation is something to watch this year.
CNY vs. BTC (inverted): Falling Lines = Strengthening
Sources: Bloomberg as of 12/31/2022.
Past performance is not indicative of future results. Not a recommendation to buy or sell any of the names mentioned herein.
Lastly, as we hope for better digital assets performance in 2023, we would like to highlight three “huge” opportunities that Ethereum founder Vitalik Buterin mentioned in a recent blog:
- Mass wallet adoption: The development of wallets that are easy for everyday people to use and capable of onboarding billions of users.
- Inflation-resistant stablecoins: The creation of stablecoins that can withstand all types of conditions, including hyperinflation, and…
