Trakx Weekly Update:Crypto Comeback

Key Crypto Market Figures

CTIs Weekly Performance

Digital asset markets resumed their bullish trajectory last week, as evidenced by the 6.3% return generated by our flagship large-cap Top 10 Crypto CTI. The standout performers over the preceding seven days were the Recovery, AI Agent, and DEX CTIs, all of which posted weekly gains in the high teens. Such was the breadth of the bullish move that even the worst-performing CTI, the Bitcoin Control 15, finished in positive territory after rising by 1.5%.

Not So Strait Forward

The question of who controls the Strait of Hormuz remains pivotal for global energy markets, geopolitical stability, and investor sentiment, particularly as the launch — and subsequent pause 24 hours later — of “Project Freedom” underscored both the strategic importance of the waterway and the growing difficulty of guaranteeing freedom of navigation amid continued tensions between Iran, the US, and Gulf states. President Trump cited “great progress” towards reaching a comprehensive ceasefire agreement with Iran as the reason for the pause of Project Freedom, news that provided a mid-week boost to digital assets. However, this optimism proved short-lived after Iran launched missile and drone strikes on the UAE in retaliation for US strikes on Iranian ports and vessels, actions that once again placed the latest ceasefire efforts in jeopardy.

Adding to the confusion, the day after Trump announced the pause, Iran launched the “Persian Gulf Strait Authority”, a new government agency tasked with administering the tolls charged by the IRGC for securing safe passage through the Strait. The move followed reports that a number of scammers had been offering fraudulent transit documentation to ship owners in exchange for payment in cryptocurrency, highlighting the extent to which uncertainty and fragmentation in the region are creating opportunities for both state and non-state actors.

Never Say Never

The most famous Bitcoin bull of all is probably Michael Saylor, founder of Strategy (formerly MicroStrategy), the seminal and largest private digital asset treasury company (DAT), because for years he repeatedly stated that he would never sell Bitcoin. Indeed, Saylor has even gone so far as to say that he intends to burn the private keys to his personal Bitcoin holdings upon his death, framing it as a supply-reducing gift to the Bitcoin community. Whether his personal conviction has changed or not, the stance of Strategy appears to be evolving.

During its Q1 earnings call last week, the company revealed a net loss of $12.5bn, primarily due to a decline in Bitcoin’s fair value during the quarter. More importantly, Phong Le, president and CEO of the company, acknowledged that Strategy could consider selling portions of its nearly 820,000 BTC holdings in order to repay debt if doing so is “accretive to bitcoin per share”. This marks a significant philosophical shift for the company. Rather than functioning purely as a passive long-term accumulator of Bitcoin, Strategy will more actively manage its balance sheet in response to financing costs, market conditions, and shareholder expectations. Although this shift weakens the simplicity of the original “never sell” narrative that helped attract long-term Bitcoin maximalists, active balance sheet management should improve the company’s resilience during market downturns. It should also help boost the company’s profitability, which has been one of the key criticisms of the business model. Since Strategy’s first Bitcoin purchase in August 2020, the price of Bitcoin has increased more than 7X, implying an average annualised return of roughly 36%. By contrast, the difference between the current market price of Bitcoin and Strategy’s average purchase price across its entire holdings stands at just 7%, implying an average annual return on its aggregate holdings of barely 1%.

Coinbase Cuts

The predominant view is that the impact of AI on digital assets will be positive. This is because AI agents are expected to utilise cryptocurrencies rather than fiat currencies for conducting financial transactions due to their lack of legal personhood, which is a key requirement for opening bank accounts. We wholeheartedly share this view. However, it turns out that AI is not universally positive for the crypto industry. The downside to AI, as we have noted in previous research notes, is that it will be highly disruptive to the global labour market.

Back in late February, Jack Dorsey announced that Block was cutting headcount by 40%, due in part to increased adoption of AI. At the time, we stated that this was unlikely to be the last such announcement. So it proved, as last week Coinbase CEO Brian Armstrong announced that the company would cut its workforce by 14%, citing both the growing role of AI — which he said “was bringing a profound shift into how companies operate” — and the fact that crypto remains in a “downmarket”. (He probably should have added the caveat “excluding AI Agent tokens”, which, as mentioned above, were among the strongest performers last week.)

Sources: Trakx, Coingecko, Alphavantage

Market Trends

• Iran imposes new rules for Strait of Hormuz in bid to secure wartime gains: CNN
• Strategy Mulls Selling Bitcoin to ‘Inoculate the Market’: Saylor: Decrypt
• Coinbase Cuts 14% Of Global Workforce—Citing AI And ‘Down Market’: Forbes
• Canton Network creator targets $300M in capital raise: Report: Cointelegraph
• Bored Ape NFTs are finally making a comeback as crypto traders rediscover their appetite for risk: CoinDesk
• Chainlink emerges as the unlikely $3B winner of KelpDAO exploit as DeFi projects dump LayerZero: CryptoSlate

Trakx CTIs Performance

Sources: Coingecko and AlphaVantage

*Return of bitcoin is calculated since 01/05/2020, while CTIs performances were calculated since their respective launch date.
**Includes simulated performance.
***The risk signal is determined according to the historical volatility level, the higher the riskier.

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Disclaimers: No Investment Advice. Index returns and statistics are for illustration only. Index returns do not reflect any transaction costs or expenses. Past performance does not guarantee future results. The information provided in this newsletter does not constitute investment advice, financial advice, trading advice, or any other sort of advice and you should not treat any of the newsletter content as such. Trakx.io does not recommend that any cryptocurrency should be bought, sold, or held by you. Readers shall conduct their own due diligence and consult their financial advisors before making any investment decisions.