aLTERNATIVE MARKETS UPDATE - MID DECEMBER 2024

​Cryptocurrencies keep dominating market news with staggering gains over the past weeks. Ever since Trump won the election in November 2024, cryptocurrencies kept soaring. Trump has been a strong supporter of cryptocurrencies during his race. Unsurprisingly, when he won, optimism about the asset class increased significantly. Enthusiasm increased due to the prospect of finally clear regulation around cryptocurrencies in the US. Under Trump’s administration, he wants to avoid that the US becomes irrelevant for such a promising industry, which is frequently compared to the early tech industry – of which the US is the major hub in the world through strong support during the development of the industry. Additionally, Trump suggested a large Bitcoin reserve, which naturally pushes the price of Bitcoin. He is also filling his departments with strong cryptocurrency advocates to place the US as market leader in the blockchain technology. One of his latest moves is replacing Gary Gensler with Paul Atkins as chair of the SEC. This will likely result in further institutional support, as the asset class matures and clearer regulations are in sight. Institutional adoption is already on the rise with Australia’s AMP adding Bitcoin to its portfolio. Similarly, Ray Dalio and BlackRock are also pushing for the asset class. The previously mentioned factors led Bitcoin to soar from around $60k-$70k prior to Trump’s election to above $100k within slightly more than one month. Inflows in Bitcoin ETFs in November and December also topped the inflows after the initial approval of the first Bitcoin ETFs in the US. As of the time of writing, Bitcoin is trading at $101k with a performance of 140% in 2024. Figure 1 also highlights the steep growth in the past month.

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RESEARCH PERSPECTIVE VOL. 241 December 2024 Alternative Markets Update Cryptocurrencies keep dominating market news with staggering gains over the past weeks. Ever since Trump won the election in November 2024, cryptocurrencies kept soaring. Trump has been a strong supporter of cryptocurrencies during his race. Unsurprisingly, when he won, optimism about the asset class increased significantly. Enthusiasm increased due to the prospect of finally clear regulation around cryptocurrencies in the US. Under Trump’s administration, he wants to avoid that the US becomes irrelevant for such a promising industry, which is frequently compared to the early tech industry – of which the US is the major hub in the world through strong support during the development of the industry. Additionally, Trump suggested a large Bitcoin reserve, which naturally pushes the price of Bitcoin. He is also filling his departments with strong cryptocurrency advocates to place the US as market leader in the blockchain technology. One of his latest moves is replacing Gary Gensler with Paul Atkins as chair of the SEC. This will likely result in further institutional support, as the asset class matures and clearer regulations are in sight. Institutional adoption is already on the rise with Australia’s AMP adding Bitcoin to its portfolio. Similarly, Ray Dalio and BlackRock are also pushing for the asset class. The previously mentioned factors led Bitcoin to soar from around $60k-$70k prior to Trump’s election to above $100k within slightly more than one month. Inflows in Bitcoin ETFs in November and December also topped the inflows after the initial approval of the first Bitcoin ETFs in the US. As of the time of writing, Bitcoin is trading at $101k with a performance of 140% in 2024. Figure 1 also highlights the steep growth in the past month. Figure 1: Bitcoin Price & Performance from January 2024 to December 2024, Source: CoinMarketCap, December 2024 Ahead of the US elections, altcoins could not match the success of Bitcoin. This is a typical phenomenon in the crypto market, as in the early stages of a bull run, Bitcoin soars, as more people move into the space and Bitcoin is the asset to do so. While altcoins achieved a similar performance until spring 2024, Bitcoin managed to hold its gains relatively close to these levels throughout the year before its upward outbreak. Altcoins on the other hand, had a bumpier ride and occasionally lost all their gains of the year during this period. When Trump won the election, altcoins soared as well and managed to surpass their hights of early 2024, albeit to a lower degree than Bitcoin. The altcoin “titans”, Ethereum and Solana are only up 60% and 110% in 2024 thus far. One exception is Ripple (XRP), which gained 300% within one month and is holding these levels currently. Prior to this surge, Ripple was consistently down from its initial price in 2024. This gain catapulted Ripple to becoming the fourth most valuable cryptocurrency and is even ahead of Solana. The gain of Ripple, which has been a market leader in the space since the emergence of cryptocurrencies, was sued by the SEC in 2020. This ongoing crackdown by the SEC against Ripple held its value down. Following Trump’s victory and the end of the current level of scrutiny against cryptocurrencies – of which Ripple was the posterchild – drove the price increase over the past month. Figure 2 shows the price development of the largest altcoins (excluding stablecoins) during 2024. During these bull runs, altcoins typically drive performance in the second half. In the current state and staggering optimism around the pro-crypto Trump administration, altcoins are well positioned to repeat past phenomenon. Figure 2: Price Development of Largest Altcoins from January 2024 to December 2024, Source: CoinMarketCap, December 2024 Inflation and interest rates are slowly drifting away from daily news. Inflation – across Western countries – remains elevated, but it is widely regarded as being in check. High interest rates that usually combat inflation also have a lagged effect, which suggests further declines, as interest rates are higher than inflation rates in most countries. Additionally, the global economy is also normalizing but remains fragile. This incentivizes central banks to cut interest rates, especially as interest rates are still at levels rarely seen in the past decades. The equity markets, in particular in the US, suggest a flourishing economy, which is misleading. Current growth is fuelled by AI and tech optimism and is not necessarily based on the actual state of the economy. Trump’s victory also led markets to keep soaring, as Trump will likely do all it takes for a strong stock market. With the significant geopolitical tensions around the world, the potential for a collapse is significant. Any escalation between Russia and Ukraine, supply chain disruption in the Middle East, or a new trade war could all provide such a trigger. In the US, inflation rose again in November, which likely warrants another rate cut in December. It is widely expected that the federal fund rate will be cut by 25bps in their upcoming meeting to 4.25%-4.5%. Both the ECB and the SNB cut rates in their decision last week. Europe’s main refinancing fixed rate was lowered to 3.15%. In Switzerland, interest rates were cut by 50bps, resulting in an interest rate of 0.5%. Figure 3 shows the development of the US, European, and Swiss interest rates from January 2023 to December 2024. Figure 3: Interest Rates in the US, Europe, and Switzerland from January 2023 to December 2024, Sources: TradingEconomics, Federal Reserve, European Central Bank & Swiss National Bank, December 2024 STONE MOUNTAIN CAPITAL Stone Mountain Capital is an advisory boutique established in 2012 and headquartered in London with offices Pfaeffikon in Switzerland, Dubai and Umm Al Quwain in United Arab Emirates and Tallinn in Estonia. We are advising 30+ best in class single hedge fund and multi-strategy managers across equity, credit, and tactical trading (global macro, CTAs and volatility). In private assets, we advise 10+ sponsors and general partners across private equity, venture capital, private credit, real estate, capital relief trades (CRT) by structuring funding vehicles, rating advisory and private placements. As of 2nd February 2024, Stone Mountain Capital has total alternative Assets under Advisory (AuA) of US$ 62.4 billion. 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