Continued descent of markets in September

In September, markets continued to fall when the U.S. Federal Reserve announced its decision to raise the interest rate by 75 bp. That led to a collapse in the price of cryptocurrencies, with Bitcoin and Ethereum down 4.77% and 15.9% in September (as of the 28th).

Major markets still in the red

In September, the exogenous macroeconomic effects heavily affecting European and U.S. financial markets, with widespread declines across all listings, also weighed heavily on cryptocurrency markets, with Bitcoin and Ethereum retracing below key support levels at $19,000 and $1,300. 

These are the findings from the company CryptoCompare’s newly released report covering the crypto markets for the month of September:

“As central governments around the world announced more conservative measures to curb inflation, Exchange Traded Products (ETPs) followed the downward trend of the rest of the markets, with trading volumes

dropping below $100mn for the first time since September 2020. Average daily volumes have fallen 79.9% from this year’s high recorded in Jan 2022.”

Short Bitcoin Products, whose performance inversely replicates the daily performance of the Bitcoin futures index, saw an increase in AUM (Assets under Management) in September. The ProShares Short Bitcoin Strategy ETF (BITI) saw its AUM increase by a sizable 43.9% to $98.8 million, while 21Shares Short Bitcoin ETP (SBTC) recorded a 25.4% increase in AUM to $18.9 million. Both Short Bitcoin products recorded their all-time highs just this September.

“As macro-conditions worsen and the price of major crypto assets continues their downward trend, investors will likely move towards short bitcoin products to profit or to hedge their cryptocurrency holdings. 21Shares SBTC were the only exchange-traded product that saw positive 30-day returns this month, rising 5%.”

21Shares SBTC, according to data from the report, appears to have been the only exchange-listed product that posted positive 30-day returns, up 5%.

Short products on Ethereum

But it is on Ethereum-related products that investors’ bearish pressure would be most focused, according to the report. Ethereum-based digital asset products have, in fact, witnessed one of their toughest months of the year, with all products down more than 10% over the past 30 days, with Grayscale ETHE, VanEck’s VETH product, and 3IQ’s QETH product leading the decline in monthly returns with negative performances of 21.4%, 14.2%, and 13.7%, respectively. 

The fall coincided just at the time of the launch of the long-awaited Merge update with Ethereum’s transition from Proof of Work to Proof of Stake consensus. 

As CryptoCompare points out earlier this month, when Merge had not yet gone live, there was a rise in the stock, driven by speculation. But as often happens in such cases, the “drugged” rise by rumors and indiscretions was followed by a sudden descent as soon as the upgrade went live.

As for the data on funds under management, or AUM, the drop as far as Bitcoin-based digital asset products are concerned was 10.7% to $15.6 billion, with the market share dropping to 69.4%. 

Meanwhile, the AUM of digital asset products based instead on Ethereum fell 19.3% to about $5.49 billion, 24.5% of the total AUM. AUM of products based on products other than BTC and Ethereum declined, accounting for 8.48%, to $1.03 billion and $343 million. 

Grayscale leads the way 

Grayscale products continue to account for the vast majority of AUM at $16.6 billion (74.0% of total), followed by XBT Provider products at $1.24 billion (5.54% of total) and 21Shares at $942 million (4.20% of total).

In terms of product type, AUM in trust products fell 12.5% to $17.3 billion (76.9% of total AUM). AUM represented by ETFs also fell in September, down 21.1%.

Digital asset ETFs now account for 10% of the market share, continuing the decline from its high of 11.5% in June. 

Finally, the figure for digital asset trust products, in which Bitcoin Grayscale (GBTC) takes the lion’s share of the market, with 69.3% of the market, also saw a decline of more than 10% to $12 billion under management. Meanwhile, Grayscale ETHE’s AUM, which accounts for 22.9% of the market share, fell 17.6% to $3.95 billion.