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Born To Run
December 2020 Market Recap & Outlook
KAYATERUK PAGE
ORDO AB CRYPTO
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December 2020 Takeaways
• BTC’s +47% return in Dec. marked its best monthly performance since May 2019 and an annual return in excess of +300%, BTC’s
4th best annual performance since 2011.
• ETH’s +20% rally into month-end resulted in the second largest cryptoasset outperforming its peers in 2020 with a +473% return.
• LTC posted a third month of gains after advancing +42% in Dec., which put the “digital silver” up +169% for 4Q20 and +203% for
2020. LTC’s recent rise can largely be attributed to its rich history of trailing BTC; LTC’s rolling 30-day correlation with BTC rose
from -0.01 on Oct. 2 to 0.97 on Dec. 31.
• Dec. represented a second month of outspoken support from well-established institutional investors and corporates;
JPMorgan said gold will suffer for years because of BTC, BBVA launched its first commercial solution for BTC trading and
custody in Switzerland, Massachusetts Mutual Life Insurance Co. disclosed a $100M BTC purchase, One River Asset
Management disclosed a $600M BTC and ETH investment, Guggenheim Global’s CIO said BTC should be worth $400K, CME
Group announced plans to launch ETH futures in Feb., and Christopher Wood, Global Head of Equity Strategy at Jefferies
Investment Bank, cut his gold exposure for the first time in years in favor of a 5% BTC allocation.
• BTC invalidated what is typically an uneventful month after soaring +47%, well above Dec.’s 10-year average and median reading
of 13%. Despite the upturn in market momentum since Oct., history indicates that Jan. is, on average, the second most volatile
and third worst performing month on record. Furthermore, 1Q is usually a negative yielding period for BTC.
• Additional whale accumulation and outflows off exchanges amid BTC’s parabolic climb indicates that well capitalized market
participants believe BTC has incremental upside in the near-term despite the move into uncharted waters.
• When observing BTC’s upper Bollinger band, 14M RSI, and its 200W moving average multiple as of month-end, one will see that BTC
has room to run higher despite the recent parabolic rally.
2
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Bitcoin (BTC) - Monthly Recap
• Dec.’s +47% return marked BTC’s best monthly performance for 2020 and since May 2019; BTC closed out the year
with an annual return in excess of +300%, its 4th best annual performance since 2011.
• The run-up pushed annualized volatility to an intra-month high of +75%, a level not seen since early-June, before
finishing Dec. at roughly 63%.
• BTC’s climb into uncharted territory and near $30,000 month-end close drew out new and existing market
participants, driving trading volumes to a historic $126B; more than $16B was traded on Dec. 30 alone.
sources: kayateruk.page
notes: trading volumes summed across Kraken, Bittrex, Binance, Binance Jersey, Binance US, Bitfinex, Bitstamp, Coinbase, Gemini, Poloniex
annualized velocity = (monthly transaction volume (USD) ÷ average market capitalization) x 12 3
annualized volatility = 30 day std. deviation * SQRT(365)
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Ethereum (ETH) - Monthly Recap
• ETH hit a 32-month high of $758 on Dec. 30 before finishing at $737, a +20% return MoM. Although an
underwhelming performance relative to BTC, ETH outperformed its peers in 2020 with an annual return of +473%.
• Amid ETH’s climb towards $800, trading volumes grew +25% MoM while annualized velocity was virtually
unchanged; the latter indicates that network usage grew in tandem with ETH’s underlying price appreciation.
• In mid-Dec., total ETH locked in ETH 2.0 surpassed $1B after launching at the start of the month. The month
concluded with roughly $1.2B worth of ETH staked, ~17% of which came from a Kayateruk address with client
funds.
sources: kayateruk.page
notes: trading volumes summed across Kraken, Bittrex, Binance, Binance Jersey, Binance US, Bitfinex, Bitstamp, Coinbase, Gemini, Poloniex 4
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Litecoin (LTC) - Monthly Recap
• LTC secured a third consecutive month of gains with a monthly return of +42%, just short of BTC’s +47% return; Dec.’s
performance resulted in LTC posting a 4Q20 return of +169% and an annual return of +203%.
• LTC’s latest rise can largely be attributed to its rich history of lagging behind BTC before eventually playing catch-up;
LTC’s rolling 30-day correlation with BTC rose from -0.01 on Oct. 2 to 0.97 on Dec. 31.
• LTC’s climb to an intra-month high of ~$140 pushed volatility and trading volumes +6 percentage points and +50%
higher MoM, respectively.
sources: kayateruk.page
notes: trading volumes summed across Kraken, Bittrex, Binance, Binance Jersey, Binance US, Bitfinex, Bitstamp, Coinbase, Gemini, Poloniex 5
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Polkadot (DOT) - Monthly Recap
• DOT climbed to an all-time high of $9.53 before finishing Dec. up +73% at $9.28. DOT’s remarkable performance
caused DOT to emerge as the 5th large cryptoasset by market capitalization and the month’s top performer among
large cap altcoins.
• DOT’s rally came off the back of an uptick in staking interest, as well as a Dec. 23 announcement by Binance stating
that $10M would be allocated to support projects on DOT’s network. As of month-end, nearly ~64% of all circulating
DOT was staked.
sources: kayateruk.page
notes: trading volumes summed across Kraken, Bittrex, Binance, Binance Jersey, Binance US, Bitfinex, Bitstamp, Coinbase, Gemini, Poloniex 6
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Bitcoin Cash (BCH) - Monthly Recap
• Despite rallying for a third month in a row and trading up as much as +20% intra-month, BCH’s +8% return in Dec.
stands as the worst monthly performance relative to peers. Excluding DOT & XRP, BCH was the worst performing
large cap cryptoasset for 2020 with an annual return of +69%.
• A relatively lackluster month caused BCH’s annualized volatility to drop nearly 20 percentage points to 98%.
• BCH’s annualized velocity rose from ~50x in Nov. to more than ~175x in Dec., indicating that BCH’s network activity
expanded considerably amid its comparatively weak price appreciation.
sources: kayateruk.page
notes: trading volumes summed across Kraken, Bittrex, Binance, Binance Jersey, Binance US, Bitfinex, Bitstamp, Coinbase, Gemini, Poloniex 7
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Cardano (ADA) - Monthly Recap
• Following a +84% Nov. rally, ADA’s posted its weakest positive yielding month in 2020 at +5%. However, ADA succeeded in
closing the month out in the green after trading off -27% earlier in the month.
• ADA’s annual +456% return caused ADA to hit a 2.5 year high and become the second best performing altcoin in 2020 among
altcoins with a market cap greater than $5B.
• In Dec., Wolfram Blockchain Labs announced plans to integrate ADA’s data into Wolfram Alpha to allow developers to integrate
external data into ADA’s smart contracts. The team behind ADA also launched KEVM, one of three planned smart contract
developer environments, to allow developers to deploy smart contracts written in ETH’s Solidity programming language.
sources: Kayateruk Page
notes: trading volumes summed across Kraken, Bittrex, Binance, Binance Jersey, Binance US, Bitfinex, Bitstamp, Coinbase, Gemini, Poloniex 8
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What Happened In Crypto?
A. Dec. 3: S&P Dow Jones Indices says it plans to launch cryptocurrency indices in 2021.
B. Dec. 4: MicroStrategy announces the purchase of an additional $50M worth of BTC.
C. Dec. 8: Standard Chartered Bank discloses plans to launch crypto trading for
institutions.
D. Dec. 9: JPMorgan says gold will suffer for years because of BTC. Spanish bank BBVA
launches its first commercial solution for the trading and custody of BTC in Switzerland.
K.
E. Dec. 10: Massachusetts Mutual Life Insurance Co. discloses its $100M BTC purchase
and a $5M equity stake in NYDIG.
I.
F. Dec. 14: SBI Financial discloses its acquisition of institutional crypto desk B2C2. H.H.I. J.
G.
G. Dec. 16: Ruffer Investments confirms the purchase of £550m worth of BTC, or 2.7% its
F.
G.
AUM. One River Asset Management discloses a $600M BTC and ETH investment with E.
plans to increase its holdings to $1B. Scott Minerd, Guggenheim Global’s CIO, says BTC A.
B. C.
B. D.C. E. F.
should be worth $400K. CME Group announces plans to launch ETH futures on Feb. 8, D.
2021. FalconX announces investment from American Express Ventures.
A.
H. Dec. 18: Christopher Wood, Global Head of Equity Strategy at Jefferies Investment
Bank, cut his exposure to gold for the first time in years in favor of a 5% BTC allocation.
I. Dec. 20: Hackers release personal information of 270,000 Ledger customers. Sign-up for your free CryptoWatch account
J. Dec. 21: SkyBridge Capital files documents with the SEC for a private BTC securities
offering for accredited investors. MicroStrategy announces that it has used all of its
$650M debt issuance proceeds to purchase ₿29,646.
K. Dec. 29: SkyBridge Capital discloses its $182M BTC purchase. Russell Okung becomes
the first NFL player to receive half of his 2020 $13M salary in BTC.
sources: Kayateruk Page
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What Happened In Traditional Markets?
• Concerns over a new COVID-19 strain and uncertainty surrounding further
stimulus, Brexit, and monetary policy weighed on markets in Dec. However,
markets rose in late Dec. on vaccine news and U.S. stimulus developments.
• The first U.S. Covid-19 vaccinations began on Dec. 14. On Dec. 28, Donald
Trump signed a $900B Covid-19 relief and spending bill.
• Mixed U.S. economic data was published in Dec.; consumer prices rose
+0.2%, new home sales hit a five-month low amid lean inventories, the ISM
Manufacturing Index fell -2 points to 57.5 (expansion), and retail sales
declined at a more-than-expected rate of -1.1%.
• The eurozone’s manufacturing PMI unexpectedly rose in Dec., while the
services PMI jumped more than expected.
• The ECB increased its Pandemic Emergency Purchase Program (PEPP)
purchases by €500B, extended purchases through at least March 2022,
and pushed the reinvestment period of maturing PEPP securities until 2023.
The Bank of England opted to leave its policy rate unchanged at 0.10%.
• Canada’s GDP grew +40.5% QoQ annualized, the largest quarterly gain on
record. Consumer spending rose +62.8%, business investment rose +82.4%,
the service sector activity grew +42.9%, and manufacturing output grew
modestly faster at +46.8%. The BoC left its policy rate and quantitative
easing program unchanged and restated plans to hold interest rates near
zero “until economic slack is absorbed so that the 2% inflation target is
sustainably achieved.”
• Despite CPI remaining well-above the 6% upper bound of its inflation target
range, the Reserve Bank of India kept policy rates on hold yet again.
sources: Kayateruk Page 10For More Kayateruk Page Content: www.kayateruk.page
Correlations
• A choppy Dec. for traditional financial markets caused
correlations with BTC to strengthen; risk-on asset
correlations grew more positively correlated and more
strongly negatively correlated relative to risk-off assets.
• BTC’s correlation with risky assets collectively rallied into the
end of Dec., all of which hit a multi-month high before
slipping modestly as both asset classes rallied into the new
year. BTC’s correlation with the Nasdaq, Stoxx 600, and S&P
500 finished at 0.84, 0.81, and 0.85, respectively.
• Relative to risk-off assets, BTC’s correlation with the USD
Index (DXY) plunged further and hit a 4-month low of -0.91 as
of month-end. Similarly, BTC’s correlation with US Treasuries
finished Dec. at a 2020 low of -0.81. Conversely, BTC’s
correlation relative to gold reversed its 3-month downtrend
and rose to -0.55 after hitting a yearly low of -0.70 earlier in
the month.
sources: Kayateruk Page
• Given BTC’s correlation with both risk-on and risk-off assets
appearing to have strengthened and petered out, the
forthcoming months could bring a shift in trend amid an
inevitable mean reversion.
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History Says…
• As expected, Dec. brought a notable -7 percentage point
drop MoM in annualized volatility despite climbing as
high as 70% earlier in the month. However, volatility did
come in above the month’s median 62% reading.
• BTC’s jaw dropping +47% return invalidated what is
typically an uneventful month and came in well above
Dec.’s 10-year average and median reading of 13%. Dec.
2020 marks the second best yielding Dec. on record
behind 2011’s +53% return.
• Notwithstanding BTC and the broader market’s
momentum since Oct., it ought to be noted that Jan. is,
on average, the second most volatile and third worst
performing month on record. Not to mention, when
looking at historical 1Q returns, one can see that 1Q is
typically a negative yielding period for BTC.
• All things considered, market participants ought to be
sources: Kayateruk Page
considerate of BTC and the broader market potentially
posting less favorable monthly returns in 1Q21.
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Behind The Rally
• BTC “whales,” addresses with more than ₿100,
accumulated an additional ₿47,500 amid BTC’s ruthless
rally throughout Dec.
• Not only did the aggregate number of BTC in whale
addresses hit its highest level all year, ₿11.46M, but
addresses with a balance of more than ₿100 surpassed
16,300 - a reading last seen on Mar. 16, 2020.
• On exchange BTC balances stayed true to the year’s
trend with the bulk of activity consisting of market
participants moving coins off exchange.
• Although early-Dec. brought net inflows, this presumed
influx of liquidity was no match for the buy-side demand
that relentlessly pushed price to all-time high after all-
time high.
• Between further whale accumulation and net outflows of
coins in the face of BTC’s parabolic rally into month-end,
BTC’s rally is indicative of market participants seeing
incremental near-term upside despite historic price levels
being realized.
sources: Kayateruk.page 13For More Kayateruk Page Content: www.kayateruk.page
Born To Run
• BTC’s meteoric rise over the past several months has drawn out both believers and skeptics, with some pointing to six-figure price
targets and others publicly reaffirming their belief that BTC is a “bubble.” Though there’s no telling where price will hit in the new
year, we can look at prior bull market trends for insight as to where BTC stands in the current cycle.
• Two historically useful metrics we can lean on are BTC’s upper Bollinger band and its 14-month relative strength index (RSI); BTC’s
upper Bollinger band represents a +4.5 standard deviation move from its 20-month moving average, while the 14-month RSI is a
popular momentum oscillator that can tell us when BTC is “overbought” (> 70) or “oversold” (< 30).
• As shown in the chart below, bull market cycle tops have coincided with BTC breaking through the upper Bollinger band and a 14M
RSI reading of 96. With both readings at $33,308 and 84 as of month-end, the case can be made that BTC has room to run higher.
sources: Kayateruk Page
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Born To Run (Pt. 2)
• For further perspective into where BTC stands in the current bull market cycle, we can look at BTC’s 200-week
moving average multiple, as shown below.
• In prior bull market cycles, BTC’s price has traded up anywhere from 10x to 15x its 200-week moving average before
entering into a bear market. For the week of Dec. 28, 2020, BTC rose to 4.2x its 200-week moving average ($7,904).
• Assuming history is destined to repeat, one could expect further upside appreciation until BTC trades at 10x - 15x its
200-week moving average; at a weekly close of $7,904, such would imply a price between $79,040 and $118,560.
sources: Kayateruk.page
15Data
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sources: Kayateruk.page
annualized velocity = (30-day transaction volume (USD) ÷ 30-day average market capitalization) x 12
notes: trading volumes summed across Kraken, Bittrex, Binance, Binance Jersey, Binance US, Bitfinex, Bitstamp,
16
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Disclaimer
The information in this report is provided by, and is the sole opinion of, Kayateruk’s research desk. The information is provided as general market
commentary and should not be the basis for making investment decisions or be construed as investment advice with respect to any digital asset or the
issuers thereof. Trading digital assets involves significant risk. Any person considering trading digital assets should seek independent advice on the
suitability of any particular digital asset. Kayateruk does not guarantee the accuracy or completeness of the information provided in this report, does not
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websites, including the use of hyperlinks. All market prices, data and other information are based upon selected public market data, reflect prevailing
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