Ninepoint Crypto and AI Leaders ETF

The crypto market experienced a sharp dislocation in October while equities soared to new highs. The turning point came on October 10, when President Trump signalled plans for 100% tariffs on China minutes after equity markets closed Friday evening. With crypto being the only global asset class trading 24/7/365, investors moved quickly to de-risk, triggering a domino effect. Selling intensified as declining prices forced the automated unwinding of leveraged long positions. Liquidity deteriorated further when several major trading firms, including Wintermute, temporarily paused operations, propelling the order-book gaps and exaggerated price moves. Over a 24-hour span, liquidations surged to $19.2 billion, the largest single-day total since May 2021 and greater than the next three biggest liquidation events in history combined. Open interest collapsed from roughly $220 billion to $155 billion. Bitcoin fell about 15% at the lows, while Ethereum and Solana declined more than 20%, and many smaller altcoins saw losses of almost 50%, underscoring the disproportionate pressure on assets beyond Bitcoin.

Although prices initially rebounded as U.S.–China tensions eased, crypto continued to work through the aftershock and its “hangover” with prices since declining more. ETF and Digital Asset Treasury inflows also cooled, totalling $7.7 billion in October compared to nearly $11 billion in September and $12 billion in August. While painful in the moment, flush-outs of this scale historically reset positioning, clean up leverage, and lay the groundwork for stronger advances ahead.

Though corrections are nothing new to cryptoassets – in prior cycles, for example, Bitcoin has routinely dropped by 20% or more before propelling to new highs – this recent crash felt different in its speed and severity. One theory is that market depth in many so-called “altcoins” has thinned out, in part because speculative capital has migrated to the public markets. The wealth-effect – when bitcoin holders flush from strong returns recycle capital into smaller coins – may have instead funnelled into crypto equities and digital asset treasury companies, aka “DATs.” This was helpful for us, as we have a higher share of the fund’s assets in public equities than in crypto, beyond Bitcoin. The weak bounce may be a harbinger of things to come – that a rising tide will no longer lift all boats. This makes our recent decision to overweight Bitcoin within our cryptoasset allocation look prudent.

AI companies, in contrast to crypto markets, continued to grind higher and extend leadership in the market. The month featured robust enterprise activity, ongoing hyperscaler spending strength, and constructive earnings updates from major technology companies. Management teams repeatedly highlighted early evidence of productivity gains and emphasized that supply, not demand, remains the primary bottleneck, reinforcing that this investment cycle is still in an early phase. One standout pocket remains High-Performance Compute & Mining, particularly legacy Bitcoin miners that have transitioned toward AI-powered compute. We have consistently maintained that in some important ways, AI and crypto are converging, which is reflected in our asset allocation and certain positions which cross over between AI and crypto, specifically Bitcoin miners, whose large compute capacity and access to cheap power make them candidates for the AI data centre buildout. Though we reduced our holdings in some of those positions, we increased them in others that offer more pure-play exposure to AI vs. Bitcoin mining. With long-term power agreements and existing facilities already in place, these firms are proving to be attractive partners for hyperscalers looking to deploy capacity faster and more cost-effectively than building new data centers themselves. The result has been a valuation reset: the Indxx Bitcoin Miners Index is up more than 80% YTD versus Bitcoin’s roughly 10%, while miners that stayed exclusively focused on Bitcoin have lagged. With Nvidia’s earnings release in mid-November, it will provide an important read-through on demand, spending priorities, and capacity expansion across the ecosystem. The company remains the bellwether of the AI age, and expectations remain elevated.

Leadership continues to rotate each month and within subsectors, reinforcing the importance of flexibility and thoughtful diversification. Today, AI remains firmly in the lead while the crypto market is trying to find its footing and reconsolidate. We believe the Fund is well-positioned: our allocations reflect strong conviction in the long-term potential of both crypto and AI, while also recognizing near-term shifts in momentum. These two technologies represent transformational technologies that will reshape every business and industry in profound and unexpected ways. Our objective is to provide investors with a differentiated strategy that captures this opportunity set while managing risk and maintaining high-quality exposure across the value chain. We remain constructive on the outlook and committed to navigating this dynamic environment on behalf of unitholders.