Crypto Index Tracker: Has the Drawdown Ended or Just Paused?
- By Bilal Hafeez and Dalvir Mandara
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- 3 min read
Rising interest rates and the stablecoin collapse had driven a rapid decline across our indices. Notably, smart contracts fell 48% last week, the most of our five indices, while even the best performing index, bitcoin, was down 20%. This week, at the very least the drawdown appears to have slowed (Chart 1). But we think this might just be a perch to rest upon. Our latest bitcoin update found that the next stop is likely at $24,000, while a nosedive could take it to $8,250.
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Rising interest rates and the stablecoin collapse had driven a rapid decline across our indices. Notably, smart contracts fell 48% last week, the most of our five indices, while even the best performing index, bitcoin, was down 20%. This week, at the very least the drawdown appears to have slowed (Chart 1). But we think this might just be a perch to rest upon. Our latest bitcoin update found that the next stop is likely at $24,000, while a nosedive could take it to $8,250.
As for the performance of our various indices, all five have extended their losses (Charts 1 and 2). Bitcoin is down the least at 3%. Our remaining four indexes are down at least double that with Smart Contracts taking first place for the second week running. Correlation between our Bitcoin Index and the rest remains above 95% (Chart 3). On macro markets, bitcoin remains most correlated to the NASDAQ and S&P500. It is now increasingly correlated with gold (Chart 4).
- Smart Contract Platform Index: Avalanche (AVAX) is down most at 22.6% while Terra (LUNA) has bounced 13.6% higher.
- DeFi Index: Maker (MAKR) was down the least last week. This week it is down the most at 19.4%. Meanwhile, aave (AAVE) increased second most at 11.0%, behind Terra (LUNA).
- Metaverse Index: Phantasma (SOUL) is down 27.5%, the most of all coins we trackacross our five indices. The Sandbox (SAND) is up 5.0%.
- Privacy Index: Keep Network (KEEP) is down 16.3%, while Monero (XMR) is up 14.2%.
- Bitcoin: is down 3%.
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.