November 2019 Market Commentary

Paul Cappelli, Portfolio Manager

December 1, 2019

November brought back a wisp of nostalgia for digital assets as price action, volatility, and resiliency contributed to an eventful month for the asset class. After an initial rally to start the month continued October’s momentum, negative news out of China, thin volumes, and leverage leaving the system sparked a sharp sell-off in the days ahead of Thanksgiving. Prices started their recovery going into the holiday weekend after revisiting lows not seen since this past April. The Galaxy Benchmark Crypto Index Fund finished lower this month -17.19%.

While price movements and volatility dominated market headlines, the industry’s infrastructure continued to make steady progress. Both Fidelity and NYSE/ICE’s Bakkt continued to broaden their offerings by adding institutional custody. Both received their much-coveted New York State Trust license, allowing them to serve as custody providers to individuals and businesses clients located in the Empire State. On the brokerage front, the world’s largest retail broker, Charles Schwab, agreed to purchase another top five firm in TD Ameritrade, which offers access to Bitcoin futures to clients. In the capital markets space, Silvergate Bank (NYSE: SI) and Canaan Inc. (NASDAQ: CAN) had their U.S. public market debut in November. Both companies are amongst the earliest in the digital asset space to tap the U.S. equity market. Silvergate is a full-service bank located in California focused on servicing the digital asset ecosystem, and China-based Canaan Inc. designs specialty software and digital blockchain computing equipment in the form of both software and hardware products.

November was a volatile month for bitcoin, as prices ranged from above $9,000 early in the month to just above $6,700 during its lowest point of the late month sell-off. As previously mentioned, thin volumes, news from overseas, and leverage being liquidated sparked the price movement. As the waters calmed and directional trades subsided, both prices and volumes began to recover, and bitcoin closed the month down 16.10%, for a final mark $7,710.34. One positive amidst the volatility was the healthy volumes in both spot and futures as billions traded. Additionally, Bakkt continues to see improved market share in the futures space with several record days as it grows as an exchange.

Looking at the other constituents in the Bloomberg Galaxy Crypto Index (BGCI), all five finished lower than their October close, as the selling pressure was highly correlated across the asset class. Web 3.0 platforms Ethereum and EOS fell 15.69% and 13.89%, respectively, while payment token XRP fell 22.41%, with a final mark of $0.2289. Bitcoin payment forks Litecoin and Bitcoin Cash were down 16.72% and 20.22%, respectively. Overall the largest, most liquid assets fell in tandem during the sell-off and recovered together going into the end of the month.

The BGCI finished down 17.43% for a final price of 321.70.

We’d like to highlight that this past month Galaxy Digital Asset Management added to our thoughtful passive product line up. On November 21st, we launched the Galaxy Bitcoin Funds, which provide institutionally-wrapped bitcoin exposure to accredited and institutional investors, with institutionally secure third-party custody and standard tax and financial reporting documents. For further information, please reach out to your Galaxy sales representative or visit www.galaxybitcoinfunds.com.