Betashares Crypto Innovators ETF (ASX: CRYP) is a newcomer to the ASX.
When CRYP hit the boards on 4 November, the exchange traded fund (ETF) broke all the records for a managed investment fund on its first day of ASX trading, finishing with net buys of $39.7 million.
While the early days delivered some handsome gains to investors, CRYP has struggled over the past week.
Why is CRYP down 15% this past week?
At this morning's opening bell, the ETF was down 18% over the past week. With today's intraday gain of 4.14%, the CRYP share price still remains 16% in the red.
So what's going on?
Part of the answer lies in the falling price of the world's top cryptocurrency.
Bitcoin (CRYPTO: BTC) sold off alongside other risk assets this past week, and remains down 13% over the past 7 days. One Bitcoin is currently worth US$50,501 (AU$72,141), according to data from CoinMarketCap.
Bitcoin is up 3% in the past 24 hours, however, likely tying into the lift in the CRYP share price today.
The other part of the puzzle lies in the fact that the ETF doesn't invest directly in Bitcoin or indeed in any altcoins.
Instead, the ETF works to track the performance of an index of companies deeply involved in crypto activities.
CRYP currently has 32 holdings. Its top 5 holdings as of this morning are:
- Silvergate Capital Corp (12.3%)
- Marathon Digital Holdings Inc (10.3%)
- Coinbase Global Inc (10.2%)
- Galaxy Digital Holdings Ltd (9.9%)
- Microstrategy Incorporated (9.5%)
A quick review of the above companies' share price performance over the past week reveals they're all deeply in the red, down anywhere from 15% to as much as 20%.
So, now we know why CRYP was down 18% at market open this morning, and remains down 16% over the past week.
But what can ASX investors expect in the year ahead from the ETF.
What's next for the crypto ETF?
The performance of CRYP, as we looked at above, is linked to the performance of the crypto-related companies that the ETF invests in. And the performance of those companies, in turn, is closely tied to the performance of Bitcoin and the wider world of altcoins.
So what's ahead for 2022?
For some insight into that question, we turn to Josh Gilbert, crypto analyst at multi-asset investment platform eToro.
According to Gilbert:
2021 was a remarkable year for cryptoassets, from the retail surge in Q1 with new all-time highs to market corrections and new all-time highs in Q4. Global adoption of cryptoassets is accelerating at an extraordinary pace and we can expect this trend to continue well into 2022.
Looking ahead to what could spur Bitcoin and other cryptocurrencies onwards in 2022, Gilbert added:
DeFi [decentralised finance] is anticipated to play a more significant role than we've ever seen before, with the continued growth from NFTs [non-fungible tokens], the metaverse and Web 3.0. Although some of these trends may take a while to reach their full potential, 2022 will certainly act as a sounding board for their acceleration.
DeFi, among other things, can deliver smart contracts via cryptocurrency blockchains.
The growth of smart contracts, Gilbert said, "could help to facilitate more innovative shipping and logistics processes, and merchants could have the ability to sell to customers in more countries with less friction".
Gilbert also drew a parallel to the past 2 bull runs for Bitcoin and other cryptocurrencies, saying the current bull market looks to have some legs left in 2022. Which would offer some steady tailwinds for the CRYP share price.
According to Gilbert:
In 2013 and 2017 we saw crypto bull markets and have now experienced this again in 2021. Nevertheless, I don't think we've yet to see the dramatic price action we saw during these periods. If history is anything to go by, this could mean that we haven't quite seen the peak for crypto yet and 2022 could be a key year.
In a nod to the historic volatility of cryptocurrencies, Gilbert added, "In the same breath, investors should remember that we may then experience a 'crypto winter'."
