Week of Jan 4, 2022

A Deep Dive Into NFTs đź–Ľ

Comparing Retail and Institutional Investor Behaviour in BTC. Only 3 Hedge Funds Outperformed The S&P 500 Last Year.

đź’¬ Market Commentary


Happy Birthday Bitcoin! 13 years ago yesterday the Bitcoin genesis block was mined. We’ll share some fun facts in our What’s Ahead section today.

Bitcoin had the best annual performance of all major asset classes in 2021 - for a third straight year.

The above chart, courtesy of Charlie Bilello, shows how Bitcoin’s 66.5% annual return surpassed the next best-performing asset class (commodities), by a factor of 25.1%.

Bitcoin’s stellar performance has drawn attention from institutional investors, who have gotten much more involved in digital assets over the last year. 

On-chain data confirms that they have been playing an increasingly important role in bitcoin’s price discovery process during the last 6 months.

This point is perhaps best exemplified by the following 4 charts, shared by Bitcoin on-chain analyst Will Clemente last week. 

Chart 1 - Bitcoin transaction fees:

In this chart, we can see how Bitcoin’s transaction fee revenue suffered a steep drop in late April/May 2021 and has not bounced back with price. This highlights that the demand for blockspace on the chain has dropped since that time - meaning there have been less transactions competing for space.

Chart 2 - Transactions by size, from $0 to $1,000 in value.

This chart highlights that on-chain transactions of amounts lower than $1,000 were rising along with price during the first half of the year, but that they dropped drastically in May 2021 and it did not rebound with the same intensity when price did in August.

This means that there were much less small transactions being processed through the chain in the second half of the year.

Chart 3 - Transactions by Size, from $1,000 to $10,000 in value.

Similar to the previous chart, this one highlights that transactions valued between $1k and 10k in size dropped significantly after May of this year, and did not bounce back when price did in August.

Again, this means that there were much less transactions between $1k and 10k being processed through the chain in the second half of the year.

Chart 4 - Transactions by Size, from $10,000,000 and higher in value.

The last, and perhaps most powerful chart of the group, is the one highlighting on-chain transactions above $10 Million in value. We can see that they were involved in the first half of the year, and came back in the second half of the year with even more conviction.

The difference between the 3 cohorts of transactions is staggering and it shows just how much the demand profile for bitcoin has evolved over the last 12 months.

There was a recent report from Goldman Sachs last week that further demonstrates how institutions are looking at Bitcoin’s potential. 

In a slide from the report, Goldman analysts highlight that bitcoin has seen “increasing acceptance as collateral for financial transactions”, and that it is “unlikely to be used for commerce and payments” for volatility and tax reasons. 

It also goes on to present an “illustrative market opportunity” by comparing it to Gold. Bitcoin has 100 million global users, vs. Gold which has over 500 million. Goldman indicates that Bitcoin has potential to reach 4 Billion users, and it’s market cap would have to grow 10X in order to match that of gold. 

While retail interest seems to have rotated to more speculative assets, institutional investors still seem to be captivated by Bitcoin’s narrative as digital gold, deep liquidity, and much clearer regulatory framework. More on this in our DeFi section.

S&P 500

U.S. equity markets closed the year with a stellar performance - the S&P 500 index capped off with gains of +26%. 

As with every year, analysts were quick to provide comparisons on how most hedge funds fared vs. simply having invested in the S&P 500 index. 

The data speaks volumes. Only three (3) hedge funds outperformed the S&P 500’s +26.91% returns in 2021:

The vast majority of hedge funds actually underperformed the S&P 500 index this year. In fact, over the last 10 years, the S&P 500 index has outperformed the average hedge fund. 

This phenomenon has given rise to the “passive investing” trend, contributing to the popularity of ETF funds over the last decade. 

This is also important because it highlights the difficulty of active stock-picking. It drives home the fact that “stock pickers” have a very hard time outperforming the market consistently (although some can have very strong outlier years). 

With the universe of investable digital assets growing exponentially, this could be a trend that we see emerge in crypto in the near future.

In terms of where we could be headed, yields on U.S. treasuries seem to have started the year out with a bang to the upside.  And the Biden administration has come out firing against inflation. If they follow-through with their plans, treasury yields should continue to rise, which will put pressure on equity markets eventually. 

A key level to watch is the 1.75% interest rate on the 10-year U.S. treasury. Many bank analysts signal this as the “tipping point” for bond yields that could cause the market to turn south. 

Currently, that yield stands at 1.624% currently and it was at 1.387% just 3 weeks ago. 


Last week Nikkei ran a news story highlighting that Central Banks across the world are increasing the amount of gold that they hold in foreign exchange reserves. 

In it, they describe how the amount of gold held by central banks reached a 31-year high in 2021. 

“In the first nine months of 2021, Thailand bought some 90 tons, India 70 tons and Brazil 60 tons.”

There are a few interesting hypotheses that we can drive from this. 

For one, it is interesting to note that gold’s price performance was poor (-4%), in a year when Central Banks were purchasing it at record levels. This means that other investors must have been selling it at record levels - and buying something else. 

The other hypothesis is that Central Banks are worried about currency debasement, and actively exploring ways to preserve the value of their reserves. This may lead many to explore bitcoin in the near future.


In today’s DeFi section, we wanted to dive into the explosive popularity of NFTs, and how they could be different from layer 1 or layer 2 protocol assets.

Let’s start with a few assumptions. As we covered in our bitcoin section earlier, on-chain data suggests that the recent volume has been led by parties transacting over $10 Million, and low-value transactions, from $0-$10k, have dried up. Both Bitcoin and Ethereum ended the year at a lower price than what they were in May of this year. Meanwhile, newer and cheaper tokens like Solana and Avalanche closed the year more than 3X higher than their prices in May.

Similarly, search interest and trading volumes for NFTs have continued to soar since the summer of 2021, suggesting that retail interest has been growing. 

The floor prices for Bored Ape Yacht Club NFTs have gone from 15 ETH in early August to over 72 ETH to end the year. That’s an increase of more than 4X in 6 months.

From the above data, we can infer that a great deal of what makes investors excited about participating in new assets is the fact that they can “get in at the ground floor”, hoping to experience similar gains as the ones the “OG” Bitcoin and Ethereum investors saw. 

If we take the view that NFTs are speculative instruments, and that newcomers are agnostic to the digital asset that can provide those gains, then NFTs have distinct characteristics that make them appealing to retail investors:

  1. They have similar appreciation potential as layer 1 or layer 2 protocols. 

  2. They are easier to understand than layer 1 protocol assets or layer 2 project tokens.

  3. Buying them can provide a sense of identity and community. When you support a particular project, you are growing the community and making everyone’s NFTs more valuable - therefore most people are welcoming to newcomers and trying to recruit more. 

  4. Humans get attached when their investments do well. At the later stages of a market cycle, you sometimes hear people refer to stocks as “My Tesla”, or “My Apple” - this type of attachment can be even more powerful if the asset that made your gains is also your avatar or profile picture.

  5. Even if the investment does poorly, you have a story to tell, an image to show for it - like a tattoo. This could be considered more interesting than a trading account with a zero balance.

Food for thought as we enter into 2022. This trend could very well continue - just last week Eminem announced that he had bought a Bored Ape NFT and set it as his profile picture on Twitter.



Not much has changed on this front. The next difficulty adjustment should occur this coming Friday and should bring difficulty up to 24.67 THs - very close to our all-time high of 25 THs. 

The mempool continues to be clear and transaction times and costs remain optimal.

What's Ahead

It’s a tale as old as FIAT. Governments print, prices rise, then they blame someone else for prices rising. 

Anyone who has lived through hyperinflation can write a book about what they are seeing in the U.S. right now. 

We closed last week’s BEC by saying that November’s probe into turkey prices could signal more animal protein price probes to come. Less than 7 days later, the Biden administration is seeking to cut meat prices in the U.S. 

What tends to happen when you try to fix or alter market prices, is that you create more dislocations in the market. 

When prices are artificially low, people will consume the good in excess - and replace other cheaper options with it. This drives demand higher, pushing the real prices higher - which makes the subsidy even more painful. 

What follows is usually rationing of purchases of that particular good. When rationing is announced, this can lead to people wanting to stockpile other goods - which makes inflation even worse.

It is a slippery slope, and we don’t want to be alarmist. We simply want to point out that this is exactly what has happened in other countries as inflation makes its way through an economy.

To close out, we wanted to commemorate Bitcoin’s birthday by sharing a few  interesting facts about the genesis block - courtesy of our friend Pete Rizzo at Bitcoin Magazine:

  • The block reward for the genesis block is unspendable. Satoshi thought so much about a fair launch that he made sure that the reward for finding the first block would be unspendable.

  • He HAD to mine the first block because if he pushed out the code, then anyone could have launched their own “bitcoin” and there could have been “competing bitcoins”

  • Bitcoin did not go “live” until 6 days after the genesis block was found

We hope you enjoyed reading and as always, we wrap up with a summary of the upcoming economic data and earnings reports for the week:


2.00 PM EST - Federal Open Market Committee Meeting minutes.


8.30 AM EST - U.S. Unemployment rate - currently at 4.3%

8.30 AM EST - U.S. Average Hourly Earnings. Expectation here is for a 0.4% month-over-month increase - which equates to an annualised rate of +4.8%. It’s still quite below November’s inflation rate of 6.8%. 

It's a big week coming up, and as always, we'll keep you posted on any relevant news throughout the week right here and from our Twitter account.

This article is intended for general information and discussion purposes only, it is not an offer, inducement or solicitation of any kind, and is not to be relied upon as constituting legal, financial, investment, tax or other professional advice. This article is not directed to, and the information contained herein is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution, publication, availability or use would be contrary to law or regulation or prohibited by any reason whatsoever or that would subject Ledn and/or its affiliates to any registration or licensing requirement. This article is expressly not for distribution or dissemination in, and no services are being marketed or offered to residents of, the European Union, the United Kingdom or the United States of America. A professional advisor should be consulted regarding your specific situation. Digital assets are highly volatile and risky, are not legal tender, and are not backed by the government. The information contained in this publication has been obtained from sources that we believe to be reliable, however we do not represent or warrant that such information is accurate or complete. Past performance and forecasts are not a reliable indicator of future performance. Any opinions or estimates expressed herein are subject to change without notice. We expressly disclaim all liability and all warranties of accuracy, completeness, merchantability or fitness for a particular purpose with respect to this article/communication. For full legal terms and conditions visit https://ledn.io/legal

About the author

Mauricio Di Bartolomeo

Mauricio is the co-founder and Chief Strategy Officer of Ledn.io. He grew up in Venezuela where he and his family learned about Bitcoin. Now based in Canada, Mauricio holds HBA and MBA degrees from the Richard Ivey School of Business in London, Ontario in Canada.