Fineqia International (CSE:FNQ) (OTC:FNQQF) analysis of global exchange traded products (ETP) pegged to cryptoassets displayed an 11 per cent drop during August in the value of the assets under management (AUM).
Once thought to be a potential hedge against inflation, the rise of interest rates by central banks to combat inflation as the fallout from the COVID-19 pandemic have reduced demand for cryptocurrencies and other adjacent assets.
“There are red and green signals in the crypto markets, a short-term nervousness, and a long-term confidence. Despite a decline in capital inflows into traded crypto products, the actual number and variety of products being introduced in the market is still on the rise. Investments in private blockchain technology companies have continued in this down market,” said Bundeep Singh Rangar, CEO of Fineqia.
Fineqia’s focus has been providing a platform to support issuances of securities and manage administration of debt securities. The company is presently building its alternative finance business and holds a portfolio of blockchain, fintech and cryptocurrency technology companies.
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Cryptoassets under stress
The value of crypto asset denominated ETPs declined greater than the broader cryptocurrency market so far in 2022. The total AUM fell by 57 per cent, similar to a 55 per cent drop in the broader crypto market, and this is despite a 42 per cent rise in the number of ETPs.
Total AUM dipped from USD$28.5 to $25.4 billion in the month of August. Fineqia derived the data from 155 listed EPTs, including exchange traded funds (ETFs) and exchange traded notes (ETNs). ETPs holding Bitcoin (BTC) dropped 12 per cent to $16.7 billion from 19 billion in the same period. That dip correlated with the 13 per cent dip in the price of Bitcoin, which dropped to approximately $20,000 on September 1 compared to $23,000 a month earlier.
The direct correlation between the price of the underlying asset and its ETPs doesn’t extend to Ethereum (ETH). ETH backed ETPs dipped two times more than ETH price did during that period. This was because of the strong investor confidence facilitated by the September 15 move to a proof of stake consensus mechanism during the ETH 2.0 migration. Ethereum’s ETPs total AUM only lost 8 per cent to $6.7 billion from $7.3 billion, while ETH itself only declined 2.6 per cent in August.
Bitcoin and Ethereum aren’t the only cryptoassets being considered as ETPs. So far in 2022, 46 new ETPs have been released with a number of different cryptocurrency assets. Only four of these were backed by BTC or ETH. In January, the AUM of crypto ETPs declined to $25.2 billion. The total value of the cryptocurrency market was below $1 trillion by September, compared to $2.2 trillion in January.