Big news: Genesis Trading, one of the biggest cryptocurrency lenders, filed for Chapter 11 bankruptcy protection, making it the latest victim of the FTX fallout. Notably, it is estimated the company listed over 100,000 creditors and owes over $3bn, including $760mn to crypto exchange Gemini (founded by the Winklevoss twins).
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Big news: Genesis Trading, one of the biggest cryptocurrency lenders, filed for Chapter 11 bankruptcy protection, making it the latest victim of the FTX fallout. Notably, it is estimated the company listed over 100,000 creditors and owes over $3bn, including $760mn to crypto exchange Gemini (founded by the Winklevoss twins). Gemini used Genesis as its partner for its yield product, Gemini Earn, which has over 340,000 customers’ funds in limbo as a result of the Genesis debacle. Gemini co-founder, Cameron Winklevoss, revealed Gemini’s intent to pursue direct legal action against Digital Currency Group (DCG), of which Genesis is an independent subsidiary.
Bitcoin and ethereum have proved resilient in response to the news – bitcoin remains close to $21,000 while ethereum sits a touch above $1,550. The story unfolded ever since Genesis halted withdrawals, so the bankruptcy had been somewhat expected. Or, at the very least, it wasn’t a surprise.
Performance of Our Indices
As for the performance of our crypto indices, they are all in the green. Our Metaverse Index is up most (+19% WoW) while all other indices are up at least 8%. Our Privacy Index (flat WoW) proved the only exception. The outperformance of the Metaverse Index is likely due to speculation around Apple entering the virtual reality (VR) space as early as spring. Decentraland (MANA) has rocketed +57% WoW in response to the news.
Our DeFi (+75%) and Smart Contract (+75%) indices are most correlated to bitcoin, while our Privacy (+70%) and our Metaverse (+64) indices are least correlated to bitcoin (Chart 3).
On macro markets, bitcoin is positively correlated to the S&P 500 (+21%, Chart 4), the NASDAQ (+34%), oil (+35%), and gold (+15%). Meanwhile, it remains negatively correlated to 10Y yields (-41%).
- Smart Contract Platform Index: Solana (SOL) is up most (+29% WoW) while Eos (EOS) is the only coin that is down (-1% WoW). Ethereum (ETH) is up +9% WoW.
- DeFi Index: Compound (COMP) is up most (+28% WoW) while Uniswap (UNI) is the only coin that is down (-0.3% WoW).
- Metaverse Index: All coins are up. Decentraland (MANA) is up the most at a staggering +57% WoW while Ultra (UOS) is up the least (+2% WoW).
- Privacy Index: Keep Network (KEEP) is up the most (+15% WoW) while Beam (BEAM) is down the most (-19% WoW).
- Bitcoin: this is up 12% 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.
(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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