A Resilient Year for Crypto-Linked Assets Amid Geopolitical Uncertainties

Despite a tumultuous year marked by escalating conflicts in Eastern Europe and the Middle East, the ongoing impact of the yen carry trade unwind in August, and the rapid advancement of artificial intelligence (AI), traditional finance has seen significant returns from crypto-linked assets. One such asset that has stood out is MicroStrategy (MSTR), the software developer turned bitcoin accumulator.

MicroStrategy's Remarkable Rise

Since joining the Nasdaq 100 index and peaking at a 600% gain since the start of the year, MicroStrategy's stock has been on a rollercoaster ride. However, it still manages to be a staggering 342% ahead in 2024, the largest return among the highest-profile crypto-linked assets in traditional finance (TradFi). This feat is all the more impressive considering the volatile nature of the past year.

Comparative Performance

For context, Nvidia's (NVDA) production of integrated circuits needed for AI applications fueled a 185% return, the best among the so-called magnificent seven tech stocks. Meta Platforms (META), on the other hand, saw a much more modest 71%. Bitcoin itself rose 100%, with demand driven by the January approval of spot exchange-traded funds (ETFs) in the U.S.

Bitcoin and Its Rivals

Among the ETFs, iShares Bitcoin Trust (IBIT) also returned over 100% and became the fastest ETF in history to hit $50 billion in assets. However, among bitcoin mining companies as a whole, Valkyrie Bitcoin Miners ETF (WGMI), a proxy for mining stocks, rose just under 30%. Individual companies like Bitdeer (BTDR), which added 151%, and WULF (WULF), with a gain of 131%, have fared better. Notably, these gains are still ahead of the broader equities market.

Geopolitical Uncertainties

Concerns about U.S. inflation and the country's budget deficit have only added to the geopolitical uncertainties prompting a massive rise in U.S. treasury yields, which move in the opposite direction to price. The yield on the 10-Year Treasury added 15% to 4.5% over the course of the year and surprisingly gained a full 100 basis points since the Federal Reserve started cutting interest rates in September.

The Dollar's Strength

On the other hand, the dollar has shown significant strength. The DXY Index (DXY), a measure of the greenback against a basket of the currencies of the U.S.' biggest trading partners, rose to its highest level since September 2022. West Texas Intermediate (USOIL), the benchmark oil price in the U.S., ends the year little changed, up less than 1% to around $71 a barrel.

Looking Ahead

As we enter the new year, all eyes will be on the debt ceiling discussion and the policies of President-elect Donald Trump. The question remains whether the U.S. can continue with its impressive growth story amidst these uncertainties.