Crypto Index Tracker: The Crypto Crash Continues
- By Bilal Hafeez and Dalvir Mandara
- 3 min read
Bitcoin has struggled to hold above the crucial $20,000 level over the past week. The cryptocurrency has dropped for the fourth day in a row and is currently trading at around $19,300. Ethereum is trading just above $1,000. Crypto markets continue reacting to news around inflation and rate hikes with Fed Chair Jerome Powell’s comments at the ECB forum on Wednesday the latest to weigh on sentiment. He recognized that ‘we now understand better how little we understand about inflation.’ Aside from inflation, the ongoing crypto credit crunch also weighs on sentiment with prominent crypto hedge fund, Three Arrows Capital (3AC), falling into liquidation.
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Bitcoin has struggled to hold above the crucial $20,000 level over the past week. The cryptocurrency has dropped for the fourth day in a row and is currently trading at around $19,300. Ethereum is trading just above $1,000. Crypto markets continue reacting to news around inflation and rate hikes with Fed Chair Jerome Powell’s comments at the ECB forum on Wednesday the latest to weigh on sentiment. He recognized that ‘we now understand better how little we understand about inflation.’ Aside from inflation, the ongoing crypto credit crunch also weighs on sentiment with prominent crypto hedge fund, Three Arrows Capital (3AC), falling into liquidation.
As for the performance of our various indexes, performance is mixed (Charts 1 and 2). Our DeFi Index is the only one to have made gains at just 1% over the past seven days. Our Smart Contract Index is flat on the week and all other indexes are in the red with the Privacy Index leading losses at 10%.
Correlation between our Bitcoin Index and the others are down compared to last month except for our DeFi Index (Chart 3). The Metaverse Index is least correlated to bitcoin at 75% and the DeFi Index the most at 88%. On macro markets, bitcoin’s correlation to tech stocks remains elevated. Meanwhile, its correlation to Oil has increased (Chart 4).
- Smart Contract Platform Index: Solana (SOL) is down the most at 13% followed by Chainlink (LINK) at 12%. Ethereum is down 8%.
- DeFi Index: Aave (AAVE) is down the most at 17% followed by Thorchain (RUNE) at 15%. Compound is up 4%.
- Metaverse Index: RedFox Labs (RFOX) is down the most at 19%. The Sandbox (SAND) is the only coin to make made gains in this index – it is up 11%.
- Privacy Index: All coins are down in this index except for Keep Network (KEEP) which is up 11%. Zcash (ZEC) is down the most at 18%.
- Bitcoin: this is down 7%.
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.