Crypto Index Tracker: DeFi Leads Crypto Recovery
- By Dalvir Mandara
- 4 min read
Crypto markets have had some relief this week after last week’s series of central bank rate hikes. Bitcoin opened the week around $18,800 before rallying to weekly highs of around $20,300 on Tuesday. It is currently trading at around $19,600, which is marginally positive WoW. Ethereum followed a similar path, though it continues to underperform bitcoin – the ETH/BTC cross is still in a broader downwards trend (it is currently around 0.07).
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Crypto markets have had some relief this week after last week’s series of central bank rate hikes. Bitcoin opened the week around $18,800 before rallying to weekly highs of around $20,300 on Tuesday. It is currently trading at around $19,600, which is marginally positive WoW. Ethereum followed a similar path, though it continues to underperform bitcoin – the ETH/BTC cross is still in a broader downwards trend (it is currently around 0.07).
For most of the year, crypto has been trading like a risk asset being driven by broader risk sentiment. Notably, recession fears, rate hikes, and a strong dollar have weighed on sentiment. Now, however, some signs of decoupling from traditional financial assets, such as tech stocks, have started to show. Bitcoin’s correlation to the NASDAQ has come down significantly this month (it is now under 40%, Chart 4). Indeed, the NASDAQ fell ~2.8% yesterday while bitcoin registered a +0.1% return. Zooming out, the NASDAQ is down around 9% month to date compared to around 3% down for bitcoin.
Performance of Our Indices
As for our various indices, our DeFi index (+3% WoW) is up the most (Charts 1 and 2). Our Bitcoin and Smart Contract indices are up around +1% each. Our Privacy index is flat WoW and our Metaverse index is down 4%.
Our Metaverse (85%) and Privacy (76%) indices are correlated most to bitcoin, while our DeFi (42%) and Smart Contract (43%) indices are correlated least to bitcoin (Chart 3). On macro markets, bitcoin’s correlation to tech stocks drops while its correlation to gold (43%) rises (Chart 4).
- Smart Contract Platform Index: Chainlink (LINK) is up the most (+11% WoW) and Cardano (ADA) is down the most (-5% WoW). Ethereum is up just 0.4%.
- DeFi Index: Maker (MKR) is up the most (+14% WoW) and Yearn.finance (YFI) is down the most (-4% WoW).
- Metaverse Index: The Virtua Kolect (TVK) is up the most (+5% WoW) and Ultra (UOS) is down the most (-15% WoW).
- Privacy Index: Monero XMR) is up the most (+3% WoW) and Keep Network (KEEP) is down the most (-3% WoW).
- Bitcoin: this is up 1% 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.