02 December 2022 Bitcoin & Crypto | US

Crypto Index Tracker: Crypto Markets Rally on Possibility of Slower Rate Hikes

By Dalvir Mandara
4 min read

Crypto markets have trended up this week after Federal Reserve (Fed) Chair Jerome Powell’s much-awaited pre-FOMC speech. He announced that a move to 50bp hikes ‘may come as early as the December meeting’ and an increase in the terminal federal funds rate (FFR) projection in the December SEP. Equities markets rallied strongly on the dovish comments and crypto markets followed suit. We continue to believe market consensus underestimates the terminal FFR. And even if the pace of hikes is slowed in December, we continue to expect a terminal rate close to 8%.

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Elsewhere, Kraken, one of the world’s largest crypto exchanges, is laying off approximately 1,100 people (30% of its headcount). Kraken CEO Jesse Powell cited macroeconomic and geopolitical factors ‘weighing on financial markets’ as one of the reasons why. Also, despite the moves up in crypto markets this week the FTX contagion continues to spread with BlockFi the latest firm to file for bankruptcy.

Turning to market moves, bitcoin is currently trading at c.$17,000 (+2% WoW, -16% MoM) and ethereum is currently trading at c.$1,300 (+6% WoW, -16% MoM). The global cryptocurrency market cap is c.$890bn – up 2% WoW.

Performance of Our Indices

Our Smart Contract and Privacy indices are up the most (+6% WoW). Outperformance of the Smart Contract Index is largely attributed to Fantom (FTM) rallying 39% WoW after the firm’s financial records revealed it earns more than $10mn annually. Meanwhile, outperformance of the Privacy Index is driven by Secret (SCRT) rallying 21% WoW. All other indices are up or flat (Charts 1 and 2).

Our Metaverse (97%) and Smart Contract (96%) indices are correlated most to bitcoin, while our Privacy (95%) and DeFi (93%) indices are least correlated to bitcoin (Chart 3).

On macro markets, bitcoin’s correlation to the S&P 500 (-32%) and the NASDAQ (-41%) turned negative on 10 November after Binance pulled out of a potential acquisition of FTX which sent bitcoin to multi-year lows. Meanwhile, its correlation to gold (-44%) is also negative. Bitcoin is currently only positively correlated to 10Y yields (+35%) and oil (+34%).

Smart Contract Platform Index: Fantom (FTM) is up the most (+39% WoW) and Solana (SOL) is down the most (-7% WoW). Ethereum is up 6% WoW.
DeFi Index: Thorchain (RUNE) is up the most (+12% WoW) and 1Inch (1INCH) is down the most (-3% WoW).
Metaverse Index: Ultra (UOS) is up the most (+3% WoW) and RedFOX Labs (RFOX) is down the most (-6% WoW).
Privacy Index: All coins are either flat or up. Secret (SCRT) is up the most (+21% WoW).
Bitcoin: this is up 2% 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.

(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.)

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Crypto Index Tracker: Crypto Markets Rally on Possibility of Slower Rate Hikes

Performance of Our Indices

What Are in the Four Indices?

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.

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Crypto Index Tracker: Crypto Markets Rally on Possibility of Slower Rate Hikes

Performance of Our Indices

What Are in the Four Indices?

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.

Enter your email to read this Macro Hive Exclusive

Your comments

Cancel reply

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