Crypto Index Tracker: Crypto Bloodbath
- By Bilal Hafeez and Dalvir Mandara
- 3 min read
Crypto markets have been plummeting on account of rising interest rates and stablecoin collapse. The Terra stablecoin (UST) recently de-pegged and continues to trade below par. The event prompted a multibillion-dollar selloff across crypto markets. Our latest bitcoin update dives into how markets are digesting higher US interest rates and the pressures weighing on crypto at the moment. The punchline is that any near-term support would be Fed dovishness as opposed to any crypto-specific dynamics.
As for the performance of our various indexes, they are all in the red (Charts 1 and 2). Bitcoin is down the least at 20%, and all of our other indexes are down over 40% with smart contracts leading loses at 48%. The declines in the Smart Contract and DeFi Indexes are largely driven by the Terra (LUNA) fiasco. Correlation between our Bitcoin Index and the rest remain above 80% (Chart 3). On macro markets bitcoin remains most correlated to the NASDAQ and S&P 500 (Chart 4).
- Smart Contract Platform Index: Ethereum (ETH) is down the least at 30% and Terra (LUNA) is down the most at 100%.
- DeFi Index: Maker (MKR) is down the least at 3% and Terra (LUNA) is down the most at 100%.
- Metaverse Index: Aavegotchi (GHST) is down the least at 13% and Terra Virtua Kollect (TVK) is down the most at 62%.
- Privacy Index: Zcash (ZEC) is down the least at 31% and Beam (BEAM) is down the most at 55%.
- Bitcoin: this is down 20%.
What Are in the Four Indices?
Here are the indices in more detail:
- Bitcoin: the OG of crypto markets deserves its own category and is in many ways the true benchmark for any other crypto market.
- Smart contract platforms: after bitcoin, the big innovation was to have blockchains that were more programmable. These could host smart contracts or decentralised applications and have allowed the emergence of the metaverse and defi. Ethereum (ETH) is the most popular version of a smart contract platform. As well as ethereum, we also include some key competitors. The constituents of this index are: Ethereum (ETH), Cardano (ADA), Avalanche (AVAX), Solana (SOL), Fantom (FTM), VeChain (VET), Terra (LUNA), EOS (EOS), and Chainlink (LINK). We also include Polkadot (DOT) which allows interoperability between blockchains and the use of smart contracts via parachains.
- Metaverse: coins associated with the creation of a virtual space/digital world on the internet using a combination of augmented reality, virtual reality, and social networks. The constituents of this index are Axie Infinity (AXS), The Sandbox (SAND), Decentraland (MANA), Enjin Coin (ENJ), Aavegotchi (GHST), Terra Virtua Kolect (TVK), Ultra (UOS), Phantasma (SOUL), RedFOX Labs (RFOX), and Gala (GALA).
- Decentralised Finance (DeFi): financial services built on top of blockchain networks with no central intermediaries. This can be a broad category, so we narrow this down to platforms that focus on lending/borrowing, yield farming, automated market making and decentralised exchange tokens. The constituents of this index are: Aave (AAVE), Compound (COMP), Uniswap (UNI), Yearn.finance (YFI), Loopring (LRC), PancakeSwap (CAKE), Maker (MKR), 1inch (1INCH), Thorchain (RUNE), and Terra (LUNA).
- Privacy Coins: coins that obscure transactions on the blockchain to maintain the anonymity of its users and their activity. The constituents of this index are Monero (XMR), Zcash (ZEC), Dash (DASH), Verge (XVG), Horizen (ZEN), Beam (BEAM), Secret (SCRT), Decred (DCR), Keep Network (KEEP), and Dusk Network (DUSK).
Dalvir Mandara is a Quantitative Researcher at Macro Hive. Dalvir has a BSc Mathematics and Computer Science and an MSc Mathematical Finance both from the University of Birmingham. His areas of interest are in the applications of machine learning, deep learning and alternative data for predictive modelling of financial markets.
Bilal Hafeez is the CEO and Editor of Macro Hive. He spent over twenty years doing research at big banks – JPMorgan, Deutsche Bank, and Nomura, where he had various “Global Head” roles and did FX, rates and cross-markets research.