On Thursday, 24 October, the who’s who of the Swiss financial industry gathered within the historic walls of the NZZ Bellevue building in the heart of Zurich. The elite among issuers had been attracted there for the prize ceremony for the Swiss ETF Awards 2024, which honour top-ranking performances and innovations in the domestic ETF and ETP world as chosen by an independent jury. This year Leonteq once again picked up one of the highly prestigious awards. While last year it was the Leonteq USD Overnight Return Index ETP+ that was crowned the best newcomer in the ETP sector, in 2024 Leonteq carried off the trophy for the best ETP. The prize went to the exchange-traded product on the Adaptive Downside Control Bitcoin ETF Index, which was only launched at the start of the year.
Before we examine the structure of the innovative index in more detail, let’s consider for a moment what underlies the strategy: Bitcoin. The most valuable crypto asset in the world has been particularly in the spotlight this year. There are various reasons for this. For one thing, the first exchange-traded funds on the asset were licensed for trading in the USA in January. The ETFs have enjoyed huge inflows, with these about 75% responsible for Bitcoin cracking the USD 50,000 barrier in February. The value of the digital asset has since appreciated markedly again – as has demand. Figures from Bloomberg indicate that on 17 October US Bitcoin ETFs crossed the USDbn 20 mark in net inflows, reckoned to be “most difficult metric to grow” for ETFs. According to analyst Eric Balchunas, gold ETFs needed almost five years to reach this same milestone.
In addition to the successful launch of the BTC spot ETFs, spring saw another huge technological event catch the attention of the crypto world: the halving. This is a mechanism whereby the reward for mining the tokens, which are limited to 21 million in total, is halved. The event takes place roughly every four years. The 2012, 2016 and 2020 halving cycles were all followed by increases in value. Six months after the first halving in 2012, the price of Bitcoin had jumped from USD 12 to USD 126. Following the second halving in 2016, the crypto pioneer climbed from USD 654 to USD 1,000 within seven months, while in 2020 it grew from USD 8,570 to USD 18,040 over the same length of time. This year, too, there has been a sharp appreciation in value, with the cyber currency now more than 60% more expensive than it was at the turn of the year.
To date the halving has also coincided with another important date in the USA: the presidential elections. The outcome of the vote can likewise have an effect on Bitcoin. The cyber currency could benefit from a tailwind, especially in the case of victory for the Republican candidate, Donald Trump. Trump, who styles himself the “crypto president”, would even like to invest some of the national reserve in the asset should he return to the White House. Some experts reckon that the USD 100,000 mark would then come into view for Bitcoin. Last but not least, the Federal Reserve also has an influence on the crypto market. Falling interest rates play into its hands, because they make risky investments more attractive again. While the ECB has already turned on the money tap three times this year, the Fed initiated a turnaround in interest rates in September with an XL move of 50 basis points. According to the CME FedWatch Tool, the upcoming monetary policy meetings on 7 November and 18 December are likely to lead to a further reduction in the base rate by 0.25 percentage points in each case.
In the second part of our biweekly, we highlight a clever way for investors to share in the rise in the value of Bitcoin while protecting their nerves at the same time.
Source: Refinitiv