Crypto Index Tracker: Crypto Hangs in the Bullish Balance

Crypto markets have largely continued to make progress led by a strong rally in DeFi (+8.0% Wow) and Privacy coins (+14.0% WoW).

Bitcoin inched higher but remained practically rangebound over the past week, as questions arose about the sustainability of the original crypto rally. Bitcoin originally rallied as institutional interest gained traction as EDX – a new crypto exchange backed by Citadel Securities – officially started trading. Markets are likely waiting for more positive news on the recent ETF filings. Elsewhere, crypto products continue to expand: CME Group plan to launch an Ether/Bitcoin future on 31 July.

Markets continue to misprice the Federal Reserve (Fed). While they are coming around to the idea of a July hike, they are yet to fully price a November hike in line with Dominique’s expectations. However, it is not just hikes they are mispricing; they are also overestimating Fed 2024 rate cuts! Dominique’s latest weekly demystifies M2 contraction, finding that it is neither recessionary nor disinflationary.

Performance of Our Indices

This week, four of five indices are in the green with our Privacy Index (+14.0% WoW) up the most. Our Metaverse Index (-3.6% WoW) is the only in the red.

Our Metaverse Index is most correlated to our Bitcoin Index (+80%) and is closely followed by our Smart Contract Index (+79%; Chart 3). Its relationship with our DeFi Index (+71%) and Privacy Index (+67%) has weakened.

Macro correlations are turning even more negative with bitcoin now most negatively correlated with the S&P 500 (-56.5%) and the NASDAQ (-52.4%). The correlations are weaker, but still negative, with gold (-30.9%), brent crude oil (-26.9%) and US 10Y yields (-30.5%).

• Smart Contract Platform Index: Cardano (ADA; -5.0% WoW) is down the most while Vechain (VET; +11.5% WoW) is up the most. Ethereum (ETH) has slid 1.1% lower over the past week.

• DeFi Index: Compound (COMP; +69.8% WoW) has flown higher while Maker (MKR; -6.9% WoW) has fallen the most.

• Metaverse Index: Most cryptocurrencies in this index are down this week with RedFOX Labs (RFOX; -12.8% WoW) leading the pack lower.

• Privacy Index: The largest gain of the week is found in this index; Verge (XVG) has returned +97.8% over the past week.

• Bitcoin Index: this is up 1.8% WoW.

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.

Photo Credit: depositphotos.com

(The commentary contained in the above article does not constitute an offer or a solicitation, or a recommendation to implement or liquidate an investment or to carry out any other transaction. It should not be used as a basis for any investment decision or other decision. Any investment decision should be based on appropriate professional advice specific to your needs.)