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What’s in the Crypto Nutshell Portfolio?

BREAKING: Bitcoin ETFs shed $90M as BTC sits 32% below year-old ATH

Bitcoin is down about a third from the $126,000 record it hit a year ago, which is less than half the damage every earlier cycle had done by this point.

Twelve months after the 2013, 2017 and 2021 peaks, it was down between 70% and 82%.

Even this cycle's low, just under $59,000 on June 30, was a 53% fall, against the 77% to 85% wipeouts of past bear markets.

Past cycles ran on retail traders using borrowed money, while this one's buyers are increasingly ETFs, asset managers, family offices and companies, CoinDesk notes.

(Those funds hold Bitcoin as a set slice of a wider portfolio, so when it falls they top it back up to the target weight.)

Griffin Ardern of Primal Fund says that money "buys weakness by construction."

The borrowed money got flushed early too, with more than $19 billion of leveraged bets wiped out across crypto four days after the record, and Ardern says leverage never properly came back.

With no big pile of forced sellers left to unwind, the slide took nine months to play out instead of collapsing in a few.

Those steady buyers haven't been able to push Bitcoin higher, though…

It turned back at $87,000 on Monday for the third time since September 23, and US spot Bitcoin ETFs lost $89.9 million the same day after taking in about $293 million over the previous two.

Early Wednesday in Asia it slipped under $84,000, as oil climbed on Iran's stepped-up attacks on tankers.

A fund that tops up a falling position trims a rising one for the same reason, which goes some way to explaining why the dips keep getting bought while the breakouts keep stalling.

Anyone sitting in cash for the classic 80% capitulation is waiting for funds to dump Bitcoin when most of them are built to buy it on the way down. 🚀

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Ray Dalio has a simple answer for what he calls the holy grail of investing, and it doesn't involve picking the next big winner.

Dalio is the founder of Bridgewater Associates, the largest hedge fund in the world, and the most studied voice on long-term debt cycles alive today.

Here's what he posted on Monday:

His point is that two assets with similar expected returns can cut a portfolio's swings without cutting what it earns, as long as they move differently from each other.

(It's the thinking behind Bridgewater's All Weather strategy, built to hold up whichever way growth and inflation break.)

He says most of his own money is invested exactly that way.

That's the test Bitcoin has to pass to earn a place in a balanced portfolio, because its case as a diversifier rests on moving differently from stocks.

Over the past year, Bitcoin's daily moves had a correlation of about 0.46 with the Nasdaq-100, by our count from daily closes (1 means lockstep, 0 means no link at all).

In the last 30 trading days that's climbed to 0.67, so lately Bitcoin has been trading a lot more like a tech stock.

It also swings roughly twice as hard, with annualised volatility near 44% over the year against about 20% for the Nasdaq-100.

In Dalio's world you balance by risk rather than dollars, so an asset that moves twice as much gets a much smaller slice.

His own past advice has been to hold a bit of Bitcoin as insurance alongside gold.

And when the link to stocks tightens like this, that slice is doing less balancing than usual, which is worth knowing before the next stock selloff hits.

Own Bitcoin for the upside, but size it for the days it moves with everything else. ⚖️

Today we'll be taking a look at the overall stablecoin supply.

Stablecoins are the backbone of crypto liquidity, used for seamless trading and instant cross-border transactions.

The chart below tracks the aggregate change in the total stablecoin market cap.

$263.09 billion in stablecoins now sit on-chain. (Two weeks ago: $262.54 billion)

Up $0.55 billion in a fortnight, more than reversing the $0.42 billion that left the print before.

New stablecoins get minted when dollars come in to buy them, so a growing pool means fresh capital arriving on-chain.

That lifts the pool back above where it sat a month ago, $262.96 billion, before last fortnight's dip.

It's still a modest move, about 0.2% of the pool, but three of the last four fortnightly prints have now been green.

The dip two weeks ago turned out to be a pause, and the refill is back on. 💵

Winklevoss group seeks to launch Zcash ETF with 0.25% fee, proposed WINK ticker. The Nasdaq fund would hold ZEC directly with Gemini as custodian, joining Grayscale's ZCSH, which has nearly $890 million in net assets.

Tether Hit With Lawsuit Over $2.76 Million Stablecoin Freeze. Payments firm Conduit says the frozen wallet never held funds linked to Onix, the firm Brazil's Federal Police were investigating.

UK names 6 banks to lead first digitally native government bond. Barclays, HSBC, Lloyds, Morgan Stanley, NatWest and RBC will run the DIGIT gilt pilot, due in the first quarter of 2027.

Solana Foundation unveils a program to settle institutional trades in seconds. JPMorgan gave input. The open-source delivery-versus-payment tool swaps assets and cash in one onchain step, against the one to two days traditional settlement takes.

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Select your answer below and you’ll be redirected to the results page. (answer explanation can be found after “Meme Corner”)

Because what would the crypto world be without its share of memes?

Trivia Answer: It switched Ethereum from proof of work to proof of stake 🥳

The Merge swapped Ethereum's miners for validators who stake ETH to secure the chain, cutting the network's energy use by roughly 99.9%. Balances, contracts and history all carried over untouched.

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DISCLAIMER: The content of this newsletter is not financial advice. This newsletter is strictly educational and is not investment advice. Please be careful and do your own research.