Crypto Market Dips Amid Environmental Concerns

May 18, 2021

Market Outlook

The crypto asset market faced a tough week due to growing environmental concerns of the proof of work mining mechanism used by Bitcoin, which has especially been brought into the spotlight due to tweets by Tesla founder and digital asset advocate Elon Musk. Bitcoin was down -9.2% over the last five days, compared to a drop of -7.2% for Ethereum, and -10.4% for BNB in response to the concerns.

As we have mentioned in both our Bitcoin and Ethereum research primers, it is clear that the environmental impact of cryptoassets will continue to be a pressing concern. There are a number of efforts to reduce the impact through technical means such as transitioning to using “Proof of Stake” — which Ethereum is doing — or by increasingly using renewable energies which may already make up over 70% of Bitcoin’s energy mix.
We will likely see ESG become an increasingly important part of cryptoasset investing in a similar way to it has for investing in the traditional finance world. We have already seen a pattern of more traditional finance funds and entities entering into the market, such as Millennium, Matrix and Point72 dipping their toes in the decentralized finance (DeFi) sector, and this new capital will come with higher expectations of the industry.

This presents an opportunity for both Bitcoin infrastructure to transition to solely renewable means and for innovation around alternative ways to facilitate decentralized finance — with Ethereum’s upcoming “ETH 2.0” product being the leader on this front.

The fundamental adoption of Ethereum is real and numbers speak for themselves with a +2,000% increase year-on-year in transaction volumes on the Ethereum network and a 7,000% rise in the capital within decentralized financial applications.

At 21Shares, we believe this trend will continue with the coming ESG-driven switch to proof of stake and the various solutions to reduce congestion and high gas fees in the Ethereum network. In addition, the Bitcoin community will likely begin to make progress on this issue due to pressure both from the market and potentially from regulators in the coming years on ESG grounds.

Weekly Returns

The returns of the top six crypto assets over the last week were as follows — BTC (-23.17%), ETH (-21.07%), BNB (-23.52%), ADA (15.31%), XRP (1.52%), and DOT (0.05%).

Monthly ETP Returns

The performance of our line of ETPs over the last 30 days is as follows: ABTC (-19.99%), AETH (57.68%), ABCH (20.24%), AXRP (13.99%), ABNB (4.63%), AXTZ (-8.14%), HODL (3.31%), ABBA (-6.50%), KEYS (-1.96%), SBTC (17.61%), and ADOT (11.38%).

Media Coverage

Cathie Wood’s investment in our company and her addition to the board was further covered in Business Insider this week. In addition, our co-founders, Ophelia Snyder and Hany Rashwan had a blast chatting with Vicky Ge Huang of Business Insider’s about our company. They talked about what we’ve built in Europe, our international upbringing, and what we’re most excited about in the industry.

It’s going to be a bright summer for crypto in general and our company in particular. We can’t wait to soon share more on what our team is up to. You can read the full article here. The news of Cathie Wood’s investment and board seat was also covered in other news outlets such as NZZ.

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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