Crypto Index Tracker: DeFi Extends Losses the Most
- By Bilal Hafeez and Dalvir Mandara
- 3 min read
Crypto markets have been selling off over the past week and the risk-averse price action has been confirmed by todays US May CPI release – it has come in at +8.6% vs +8.3% expected. This puts inflation at new 40-year highs. This is a big data point ahead of next week’s FOMC meeting and we expect more volatile price action around that given the continued anticipation of aggressive rate hikes to come.
As for the performance of our various indexes, they are all in the red (Charts 1 and 2). Our DeFi Index is leading losses at 8% followed by our Metaverse and Privacy Indexes at around 5% each. Our Smart Contract and Bitcoin Indexes are both down the least – around 1% each.
Correlation between our Bitcoin Index and the rest are down slightly compared to last month, but they remain around 80% (Chart 3). On macro markets, bitcoin’s correlation to tech stocks has come down again. Meanwhile, its correlation to 10y yields, Oil, and Gold has increased (Chart 4).
- Smart Contract Platform Index: Chainlink (LINK) is up the most at 29% and Terra (LUNA) is down the most at 25% followed by Fantom (FTM) at 12%. Ethereum (ETH) is down 2%.
- DeFi Index: PancakeSwap (CAKE) is flat on the week. All other coins are in the red with Terra (LUNA) down the most at 25% followed by 1inch (1INCH) at 14%.
- Metaverse Index: Terra Virtua Kolect (TVK) is up the most at 2% and Phantasma (SOUL) is down the most at 10%.
- Privacy Index: Dusk Network (DUSK) is up the most at 5% and Secret (SCRT) is down the most at 18%.
- Bitcoin: this is down 1%.
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.