Ninepoint Crypto and AI Leaders ETF

The “K-shaped rally” of October, where traditional markets surged to new highs while crypto materially diverged, proved not to be a one-off anomaly. Investors who view Bitcoin as an early signal for broader markets were vindicated by what unfolded in November: a decisive correction led by high-momentum names across the crypto and AI sectors, with the Nasdaq down 8.5% and Bitcoin down 24.8% at the month’s lows.

Many pundits tried to explain the market downturn by pointing to a single driver, but as each theory was tested and disproven, the market quickly shifted to the next. Ultimately, it became clear to us that the weakness was the result of a confluence of forces rather than a single event. The stage was set by the 43-day U.S. government shutdown, the longest in history, which elevated fiscal uncertainty, delayed key economic data releases, and strained liquidity until it was resolved on November 10. At the same time, sentiment around the AI trade quickly deteriorated. Concerns mounted over accelerating balance sheet leverage, aggressive capex without clear monetization pathways, and a perceived circular revenue environment across leading AI names. Even Nvidia’s earnings print, another beat paired with raised guidance, failed to calm markets. AI names spiked on the release before sharply reversing to the downside, reinforcing that sentiment rather than fundamentals seemed to be dictating price behavior. However, one variable ultimately emerged and appeared to be the decisive driver: rate cut expectations. It was only after dovish Fed communication that markets sharply reversed course, repricing heavily toward a 25-basis point cut in December after previously pricing the cut out. That looked like the catalyst investors had been waiting for. Assets rebounded meaningfully into month end, still closing November in negative territory, but well above the month’s lows.

Having addressed the forces that rattled markets at large, we turn to crypto, which has significantly lagged and raised understandable concerns about what is driving this ongoing disconnect. Again, it’s our view that several distinct factors are contributing to this recent weakness. First, the main contributor is likely the October 10 deleveraging event: the largest flash crash in crypto history, which forced the liquidations of roughly $20 billion in positions. While clearing excess leverage is ultimately healthy and lays a stronger foundation for a next leg higher, the short to medium-term damage is still being absorbed. The market seems to be still working through a post-shock recovery phase, which is effectively a structural hangover. Second, it appears that onchain investors have shifted into risk-off mode and are waiting for the dust to settle. A key indicator is stablecoin dominance, which rose from 8.6% to 10.9% in November despite a net decline in overall stablecoin supply. Capital has not exited the ecosystem; it has simply moved to the sidelines. Sentiment data tells the same story. The Crypto Fear and Greed Index printed a 10 out of 100, signaling excessive fear. For context, sentiment was higher during Liberation Day in April 2025 and even during the FTX collapse in November 2022. Historically, readings at this level have often coincided with market bottoms. Third, demand from the two largest public incremental buyers of crypto over the past two years, ETPs and DATs, has meaningfully cooled. Global crypto ETPs saw $3.2 billion in net outflows in November, the worst redemption stretch since February 2025 during the DeepSeek-driven tech selloff. DATs purchased just $1.8 billion of crypto over the month, down from $3.6 billion in October and a peak of $13.6 billion in July. Not only were DATs buying less crypto, but some became sellers. More importantly, a few DATs started to convert from net buyers to opportunistic sellers, as many now trade at discounts to their underlying crypto NAV. The dynamic is now drawing intense scrutiny toward Strategy, the pioneer of the DAT model and holder of approximately 650,000 BTC (~$60 billion). Its long-standing premium has compressed to near NAV, constraining the historical playbook of issuing equity to finance additional Bitcoin acquisitions. Should the stock trade below NAV, the risk that Strategy follows peers in selling Bitcoin to defend its share price becomes materially more concerning given its substantial holdings. It is worth noting, however, that Strategy has navigated similar stress before. During the last bear market, its premium compressed to NAV following the FTX collapse, and it ultimately recovered, an outcome the bulls now highlight as a potential analog.

To close, this past month has reminded us that sectoral leadership is never linear. Crypto is moving through a reset and consolidation phase, while AI remains firmly in an expansionary cycle, each advancing on its own timeline. Our mandate is not to forecast a single winner, but to participate intelligently and across the full breadth of both innovation arcs, managing risk where appropriate and leaning into areas of durable strength. We remain confident in the long-term trajectory of these technologies and will continue to refine the portfolio in service of that conviction.