Crypto Index Tracker: Privacy Coins Lead the Charge

Bitcoin hit a 13-month high of $31,500 yesterday before falling below $30,000 after the US ADP private sector employment report revealed 497,000 private-sector jobs were added in June against expectations of 220,000. It backs Dominique’s expectations that the June NFP will prove stronger than expected while it also overshadowed the Labour Department report showing jobless claims increased more than expected. US treasury yields increased after the ADP report with the policy sensitive US 2Y yield jumping to over 5%.

Markets continue to misprice the Federal Reserve (Fed). While they are now convinced of a July hike, they are yet to fully price a November hike, Dominique’s base case. Furthermore, they are also overestimating Fed 2024 rate cuts. Ultimately, Dominique sees the two rate hikes planned by the Fed this year as unlikely to break the broader risk market rally, though longer term her optimism is tempered by signs of inflation persistence.

Performance of Our Indices

This week, three of five indices are in the green with our Privacy Index (+21.4% WoW) up the most. Our Bitcoin Index (-1.6% WoW) is the only in the red.

Our Metaverse Index is most correlated to our Bitcoin Index (+75%) and is closely followed by our Smart Contract Index (+73%; Chart 3). The relationship between our Bitcoin Index and our DeFi Index (+59%) and Privacy Index (+51%, Chart 3) has weakened.

Negative macro correlations remain with bitcoin most negatively correlated with the S&P 500 (-53%) and the NASDAQ (-50%. The correlations also remain negative with gold (-36%), brent crude oil (-26%) and US 10Y yields (-24%, Chart 4).

• Smart Contract Platform Index: Solana (SOL; +10.7% WoW) is up the most while Fantom (FTM; -10% WoW) is down the most. Ethereum is up +0.1% WoW.
  
• DeFi Index: Maker (MKR; +43.4% WoW) is up the most and Terra Luna Classic (LUNC; -8.1% WoW) is down the most.
  
• Metaverse Index: Phantasma (SOUL; +9.5% WoW) is up the most while Ultra (UOS; -3.7% WoW) is down the most.

• Privacy Index: The largest gain of the week is found in this index; Verge (XVG) has returned a staggering +168.7% over the past week.

• Bitcoin Index: this is down -1.6% 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.

Photo Credit: depositphotos.com

(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.)