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Jun 14, 2022

Market update: Fundamentals remain strong as crypto volatility persists

Market volatility can be unsettling. 

 

The crypto markets are experiencing another large drawdown period as investors across financial markets continue to move away from risky assets, with inflation expectations, recession concerns, and other macro factors creating an uncertain investment environment.  

 

Crypto is no exception to the current sentiment, and because the asset class remains in its early stages, crypto assets will remain susceptible to large price swings for the foreseeable future. Additionally, crypto is subject to idiosyncratic factors—such as the current liquidity concerns with centralized lending platform Celsius—that will remain as the asset class develops.

 

Nothing, however, has changed regarding the long-term fundamentals for bitcoin and many other crypto assets. There has been significant progress on regulation and scalability solutions, as well as continued interest in NFTs from traditional media and DeFi from traditional financial institutions. The crypto ecosystem is as fundamentally strong today as it has ever been, and we believe the long-term outlook for crypto has never been more promising. 

 

Our team at Hashdex has been investing in crypto for a long time, and we've seen many similar periods of high volatility. For example, in the last 10 years bitcoin has experienced seven drawdowns of more than 50%.[1] However, the price of bitcoin has increased more than 43,000% over this 10-year period [2] and tripled in value in the last two years alone. [3]

 

Crypto’s extraordinary price growth is not common, of course, but does help put into context the nature of crypto’s volatility profile. By comparison, in the first 10 years of its existence, the Nasdaq Composite stock market index declined 10%.[4] 

 

We have a saying at Hashdex: “In volatility we trust.” 

 

This statement is not meant to diminish the challenges and stresses that volatile markets can present. Rather, it is meant to underscore our core belief that crypto investors with a long-term horizon will continue to be rewarded for their patience. This is one of the reasons we co-created the Nasdaq Crypto Index, and is why our feet remain firmly on the ground as these markets continue to evolve.   

 

#InVolWeTrust

References

[1] https://www.visualcapitalist.com/bitcoin-historical-corrections-from-all-time-highs/

[2] Bitcoin’s price was ~$5.50 on June 10, 2012 and ~$24,000 on June 13, 2022. Source: Messari

[3] Bitcoin’s price was ~$5,820 on March 22, 2020 and ~$24,000 on June 13, 2022. Source: Messari

[4] Based on month-end closing values in Feb. 1971 and Jan. 1981. https://www.macrotrends.net/1320/nasdaq-historical-chart


 

This material is intended for information purposes only, and does not constitute investment advice, a recommendation or an offer or solicitation to purchase or sell any securities to any person in any jurisdiction in which an offer, solicitation, purchase or sale would be unlawful under the securities laws of such jurisdiction. The opinions expressed are as of February 2022 and are subject to change without notice. Recipients should consult their own advisors, including tax advisors, before making any investment decision.
This material is not an offer to sell or the request of an offer to buy the securities or other instruments mentioned. If any offer and sale of securities is made, it will be in accordance with the confidential offering memorandum (the “OM”) of the respective fund and only in jurisdictions where permitted by law. The OM describes risks related to an investment in the fund (including loss of the entire investment) and will qualify and supersede the information presented in this letter. Investors should refer to the OM for more complete information about the fund, including certain investment risks, management fees and fund expenses. This letter does not constitute part of any OM or other offering document. Investment in any fund is highly speculative and is not intended as a complete investment program. It is designed only for sophisticated persons who can bear the economic risk of the loss of their entire investment in the fund and who have limited need for liquidity in their investment. There can be no assurance that the mentioned funds will achieve its investment objective or return any capital. Certain information contained herein has been obtained from third-party sources and have not been independently verified by Hashdex, which assumes no responsibility for the accuracy thereof.

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