Over the past 7 days, the FS CryptoFX Agg Index decreased by 18.9%, compared with a 0.3% decrease for the S&P 500 (Slide 6). Primarily impacted by the negative news from China, Bitcoin’s price fell below $7,000 for the first time since last summer. According to a quote from BitStamp, Bitcoin fell 4%, 6%, 5%, and 9% on Monday, Thursday, Friday and Sunday, respectively. In the end, it traded 18% lower from the prior week. This is also the second-worst week of the year following the “disappointing” launch of Bakkt at the end of September.
Within the FS CryptoFX size-based indices, FS CrypoFX 40 mid-cap index underperformed the most (-20.3%), while the FS CryptoFX 250 small-cap index, underperformed the least (-18.0%).
Within the sector-based index group, the FS CryptoFX Exchange index (-26%) gave up the most primarily due to negative news in China and its impact on the two China-related exchanges – Binance Coin and Huobi Token, while FS CryptoFX Commodity(-18.2%) underperformed the least.
Cryptocurrencies in China
Bitcoin has lost all its gains since October. In the past two weeks, a few local governments in China have issued regulatory guidance and warnings on digital currency trading and investigated or closed the crypto trading platform. We are not at all surprised by this. As early as the end of October, when many investors were still focused in the news that China is reopening the cryptocurrency door, we noted that “Based on China’s capital control policy, we don’t expect China will ease the cryptocurrency trading restriction in the short term.”
However, we believe that the Chinese government’s positive view of blockchain technology is more meaningful to the whole community than whether it allows cryptocurrency trading. Why? 1) China itself has a large number of research teams that could support crypto/blockchain projects; 2) Unlike the western countries, thanks to this top-down push, blockchain projects are easier to roll out in China and prove their feasibility.
The China Financial Stability Report just released by PBoC also confirms our point of view. On the one hand, this report points out the Chinese FinTech industry is introducing the blockchain technology in traditional payment clearing, credit management, asset custody, etc., and uses smart contracts to simplify risk management and increase transparency. On the other hand, it also mentioned that China had shut down 173 crypto exchanges and token issuing platforms.
Crypto Indices by Fundstrat Global Advisors
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