Crypto Index Tracker: Crypto Markets Rally After October Jobs Data
- By Dalvir Mandara
- 4 min read
The Federal Reserve (Fed) hiked rates by 75bp at this week’s FOMC meeting, as we expected. There was some (expected) volatility surrounding the announcement as bitcoin dropped from highs of around $20,800 prior to the announcement to lows of close to $20,000 in the hours after.
This article is only available to Macro Hive subscribers. Sign-up to receive world-class macro analysis with a daily curated newsletter, podcast, original content from award-winning researchers, cross market strategy, equity insights, trade ideas, crypto flow frameworks, academic paper summaries, explanation and analysis of market-moving events, community investor chat room, and more.
The Federal Reserve (Fed) hiked rates by 75bp at this week’s FOMC meeting, as we expected. There was some (expected) volatility surrounding the announcement as bitcoin dropped from highs of around $20,800 prior to the announcement to lows of close to $20,000 in the hours after.
It has since more than recovered those losses and is currently trading at around $20,900 after today’s nonfarm payroll data. The data showed the U.S economy added 261,000 jobs in October against an expected 200,000 while the unemployment rate increased from 3.5% to 3.7%. The data gives mixed signals, on one hand, it highlights the continued resilience of the labour market, but on the other hand, the rise in unemployment points to some labour market cooling. In the short term, crypto markets and stock futures appear to have reacted positively to the data. All eyes will now be on next week’s CPI data for October.
Performance of Our Indices
As for our various indices, our Smart Contract Index (+4% WoW) is up the most, followed by our Metaverse and Privacy indices which are up around 1% each. Bitcoin is flat on the week and our DeFi index is down 1%.
Our Smart Contract (80%) and Metaverse (74%) indices are correlated most to bitcoin, while our and DeFi (70%) and Privacy (70%) indices are correlated least to bitcoin (Chart 3). On macro markets, bitcoin’s correlation to tech stocks remains below 50% (Chart 4). Meanwhile, its correlation to gold (36%) and Oil (33%) are higher compared to last month. On rates, bitcoin remains negatively correlated to 10Y yields.
- Smart Contract Platform Index: Fantom (FTM) is up the most (+19% WoW) and Terra Luna Classic (LUNC) is down the most (-9% WoW). Ethereum (ETH) is up 1%.
- DeFi Index: PancakeSwap (CAKE) is up the most (+4% WoW) and Terra Luna Classic (LUNC) is down the most (-9% WoW).
- Metaverse Index: RedFOX Labs (RFOX) is up the most (+18% WoW) and Phantasma (SOUL) is down the most (-5% WoW).
- Privacy Index: Dusk Network (DUSK) is up the most (+13% WoW) and Zcash (ZEC) is down the most (-5% WoW).
- Bitcoin: this is flat on the week.
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.