New data confirms that the U.S. leads in the market share of Bitcoin network hash rate by a wide margin
On the cusp of a bitcoin futures-based ETF listing, new registration statements for bitcoin funds continue to pour in
Risk assets have fallen from their early September peak, but bitcoin continues to rise, demonstrating its low correlations
New Data Shows the U.S. Leads in Crypto Mining
Recently updated data from the Cambridge Centre for Alternative Finance indicates that the U.S. leads in global market share of Bitcoin network hash rate following the ban in China. Geographic data from Cambridge was last updated in April, before the May crackdown in China. However, this new data extends through August, highlighting the severity of China’s actions. Before the ban on mining, China accounted for 65% of the network hash rate, but as of August, Cambridge shows that China’s share of hash rate is down to 0%. We think this likely overestimates the impact of the ban as some hash rate in China is likely still online. For example, the hash rate associated with Germany and Ireland, a combined total of 9% of the global hash rate, likely comes from IP addresses redirected with VPNs and could be based in geographies like China.
ETF Registrations Continue to Pour in
With the industry on the verge of potentially getting the first bitcoin ETF listed in the U.S. on Monday, registrations for new futures and spot-based bitcoin ETFs continued to be filed with the SEC at an astonishing pace. The past 7 days alone saw registrations filed for ETFs from BlockFi, Bitwise, and ARK. By our count, there are currently 13 ’33 Act spot-based ETFs and 11 ’40 Act futures-based ETFs with active registration statements. This does not include various equity ETFs, which propose to invest in publicly traded miners, exchanges, and blockchain infrastructure companies. While the outcome of a potential bitcoin futures ETF listing is still unknown, the financial industry is excited about the potential to expand access to the asset class through various fund formats.
Risk Assets Fall as Bitcoin Rises
The value of the S&P 500 peaked on September 2nd and since that time there has been a growing divergence in performance with bitcoin. Through Wednesday, the value of the S&P 500 is down 3.8%, while the price of bitcoin is up 16.1%. We point this out not to tout the returns of bitcoin, but to point out an important financial property of bitcoin, its low correlations with traditional assets classes. Even though bitcoin’s 90-day rolling correlation with U.S. equities has risen amidst the performance diverged, on an absolute basis correlations are still low at 0.26. This is an important property of bitcoin for multi-asset managers, who can use bitcoin to enhance returns and diversify risks. We believe that bitcoin is driven by unique fundamental factors, such as user adoption, network traffic growth, and growing daily usage.
Market Update
Bitcoin continued its torrid October, rising another 7.2% on the week. Equities rose as well, with the S&P 500 up 0.9% and Nasdaq Composite up 1.2%. Gold was up as well on the week, rising 2.1%. Bonds rose, with Investment Grade Corporate Bonds up 1.0%, High Yield Corporate Bonds up 0.4%, and Long-Term U.S. Treasuries up 2.1%. Real yields fell and inflation expectations rose slightly.
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