The big news this week has been the Fed’s response to inflation – it raised rates by 75bps, the largest hike since 1994. There was a slight rally immediately after the FOMC meeting, but this was short-lived and crypto markets quickly began selling off again. Bitcoin and Ethereum are currently trading at around $20,800 and $1,100, respectively.
It is not just hot inflation that is weighing on crypto sentiment. DeFi has been under pressure ever since the TerraUSD collapse. Celsius, one of the biggest crypto lending platforms, is the latest to come under fire after locking users out of their funds by pausing all withdrawals. Our latest stablecoin update investigates what the implications of the Celsius debacle could be for crypto. Other factors include recession risks and significant layoffs at large crypto institutions like Coinbase – our latest ethereum update goes into detail.
As for the performance of our various indexes, they are all in the red (Charts 1 and 2). Our DeFi Index is again leading losses at 35% followed by our Bitcoin and Privacy Indexes at around 32% each. Our Smart Contract and Metaverse Indexes are down the least at 29% and 26%, respectively.
Correlation between our Bitcoin Index and the others are down compared to last month except for our DeFi Index (Chart 3). On macro markets, bitcoin’s correlation to tech stocks drops slightly compared to last month. Meanwhile, its correlation to Oil has increased significantly (Chart 4).
- Smart Contract Platform Index: Ethereum (ETH) is down the most at 40% and Polkadot (DOT) is down the least at 23%.
- DeFi Index: Compound (COMP) is down the most at 46% and Terra (LUNA) down the least at 23% followed by Uniswap (UNI) at 26%.
- Metaverse Index: The Sandbox (SAND) is down the most at 35% and Aavegotchi (GHST) is down the least at 8%.
- Privacy Index: Monero (XMR) is down the most at 43% and Dusk Network (DUSK) is down the least at 24%.
- Bitcoin: this is down 32%.
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.