Crypto Index Tracker: Bitcoin Surpasses, But Macro Headwinds Remain

by Arthur · April 28, 2023

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It has been a volatile week for crypto markets. Bitcoin started to rally on Tuesday as confidence in the banking system eroded – First Republic Bank shares were down -50% after it announced a $100 billion drop in first-quarter deposits a day earlier. Bitcoin broke into $30,000 on Wednesday before capitulating over 8% on the same day, wiping out most of those gains. According to data from Coinglass, over $300 million of long and short positions were liquidated on Wednesday alone. Since then, bitcoin has regained some momentum and is currently changing hands at around $29,200.

Surprisingly strong earnings from Microsoft, Google and Meta helped the stock markets this week. Given bitcoin’s tendency to be positively correlated to technology stocks, some positive sentiment from stock markets has also spilled over into crypto. Within crypto, however, bitcoin has been the clear better performer than with many altcoins (including ethereum) still down for the week.

Markets are focused on next week’s FOMC meeting. We agree that the market is pricing in a 90% chance of a 25bp hike at the FOMC on May 3, but disagree with the 60bp rate cuts priced in for the rest of the year. A credit crunch has not yet occurred, inflation data remains strong, and the FOMC has become more balanced in its assessment of credit crunch and inflation risks. Overall, data points to higher for longer prices, which is bearish for cryptocurrencies.

Table of Contents

The result of our indices

This week is our Bitcoin Index the only index up (+4.3% WoW) with all other indices down between -2.4% and -4.6% (Figure 2).

The Smart Contract Index remains the most correlated with our Bitcoin Index (+86%). Meanwhile, our DeFi and Privacy indices are correlated around +82% to our Bitcoin index. Our Metaverse index is the least correlated (+64%; Figure 3).

The correlation between our Bitcoin index and all the macro markets we track in this report increased compared to last month (Figure 4). Our Bitcoin Index is now +46% correlated to the NASDAQ and +40% correlated to the S&P 500, up from +29% and +22% last month. Meanwhile, its correlation to gold (+28%, last month: +25%) and 10-year yields (+19%, last month: +5%) increased. Finally, Bitcoin’s correlation with oil is negligible.

Smart Contract Platform Index: Cardano (ADA) is up the most (+1.7% WoW) while Fantom (FTM) is down the most (-7.9% WoW). Ethereum is down -1.7% WoW.
DeFi Index: Compound (COMP) is up the most (+0.8% WoW) while PancakeSwap (CAKE) is the most down (-21.1% WoW).
Metaverse Index: Aavegotchi (GHST) is up the most (+3.4% WoW) while Ultra (UOS) is down the most (-15.6% WoW).
Privacy Index: Zcash (ZEC) is up the most (+1.1% WoW) while Keep Network (KEEP) is down the most (-5.2% WoW).
Bitcoin Index: is up +4.3% WoW.

What is in the four indices?

Here are the indices in more detail:

Bitcoin: 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 can host smart contracts or decentralized applications and have allowed the emergence of the metaverse and defi. Ethereum (ETH) is the most popular version of a smart contract platform. In addition to ethereum, we also include some important 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 related to 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).

Decentralized Finance (DeFi): financial services built on top of blockchain networks without central intermediaries. This can be a broad category, so we limit this to platforms that focus on lending/borrowing, yield farming, automated market making and decentralized 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 hide transactions on the blockchain to maintain the anonymity of 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).