Crypto markets rallied into the start of the week; Bitcoin breached $21,000 for the first time since September on Wednesday. It has since given back some of those gains but remained above $20,000. Ethereum followed suit hitting almost $1,600 on Wednesday before it settled above $1,500.
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Crypto markets rallied into the start of the week; Bitcoin breached $21,000 for the first time since September on Wednesday. It has since given back some of those gains but remained above $20,000. Ethereum followed suit hitting almost $1,600 on Wednesday before it settled above $1,500.
This week’s rally comes as a Nick Timiaros article suggested a December Fed pivot was more likely than markets had priced. US yields retreated as a result. Indeed, the yield on the 10Y was close to 4.25% on Monday but is now below 4%. Despite this, Dominique believes a pivot announcement at the November FOMC meeting is unlikely as it would trigger an easing of financial conditions when inflation is high and persistent. We still expect 75bp hikes in November and December.
Performance of Our Indices
As for our various indices, they are all in the green. Our Smart Contract index (+9% WoW) and our Bitcoin index (+7% WoW) are up the most while our Metaverse, DeFi, and Privacy indices are each up between 2% and 4%.
Our Metaverse (83%) and Smart Contract (82%) indices are correlated most to bitcoin, while our Privacy (73%) and DeFi (73%) indices are correlated least to bitcoin (Chart 3). On macro markets, bitcoin’s correlation to tech stocks has increased slightly compared to last month but remains comfortably below 50% (Chart 4). Meanwhile, its correlation to gold (44%) and Oil (37%) are significantly higher compared to last month. On rates, bitcoin is negatively correlated to 10Y yields again.
- Smart Contract Platform Index: All coins are in the green. Ethereum (ETH) is up the most (+18% WoW) and Terra Luna Classic (LUNC) is up the least (+2%).
- DeFi Index: Uniswap (UNI) is up the most (+12% WoW) and Maker (MKR) is down the only coin that is down (-14% WoW).
- Metaverse Index: The Sandbox (SAND) is up the most (+7% WoW) and Axie Infinity (AXS) is down the most (-6% WoW).
- Privacy Index: All coins are in the green. Dusk Network (DUSK) is up the most (+9% WoW) and Keep Network (KEEP) is up the least (+2% WoW).
- Bitcoin: this is down 7% 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.
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.