Source: Messari, DefiLlama, Bloomberg, blockchain explorers, VanEck research as of. Figure 1 - Assorted “Large-cap” Cryptocurrencies: 30-day Annualized Volatility The same dynamic may play out for Ethereum if our bull thesis proves correct. However, we can see that in both cases the relevant sector beta eventually fell back to pre-crisis lows. As a point of comparison, equity market sector beta also transformed during the unwinding of so-called bubbles-tech in 2000, financials in 2007-as seen in Figure 2. “alt-coins” (Figure 1), which flip-flopped as ETH rose from among the lowest volatility crypto assets to among the highest. To illustrate how the leverage unwind changed market structure in June, we can observe the volatility profile of Bitcoin and Ethereum vs. Year-to-date, Bitcoin is down 60%, Ethereum -73%, and the MVIS CryptoCompare Smart Contract Leaders index down 76%, vs. Thus, for the month, Bitcoin price fell 40%, Ethereum 47%, and the MVIS CryptoCompare Smart Contract Leaders index down 34%, vs. The fallout may yet continue as the insolvent entities’ portfolios are liquidated to satisfy unpaid debts. Zug, Switzerland-based Nexo hired Citigroup and publicly announced they have signed a term sheet with Singapore-based Vauld giving Nexo 60 days of exclusive talks to explore an all-equity acquisition, but as of July 8, no deal has been announced. Eventually, some of the larger lenders in the space-including BlockFi, Voyager and Celsius-required additional working capital to meet withdrawal requests amidst the market rout, with Sam Bankman-Fried’s Alameda/FTX so far emerging as the only buyer/lender. As Ethereum represents ~65% of the AUM locked in DeFi, ETH was disproportionately sold. In all, total TVL (total value locked) in DeFi, a proxy for leverage in the space, fell from $88B on May 31 to $57B on June 30, as lenders called open-term loans and borrowers sold what they could to post collateral on losing positions to avoid liquidations. But when Ethereum core developers announced a delay to the merge to proof-of-stake on June 9, stETH ($5B outstanding as of ) price fell sharply versus ETH, prompting lenders to demand more collateral precisely as retail outflows were accelerating. Once Ethereum’s merge is complete, stETH will be redeemable at par for ETH. Unfortunately for crypto investors, the reason was an industry-specific deleveraging event catalyzed by a duration mismatch tied to Ethereum’s delayed transition to proof-of-stake.Įntities like Three Arrows Capital and Celsius staked Ethereum and received a token stETH in return, which they used as collateral for leveraged positions across crypto. Please note that VanEck may have a position(s) in the digital asset(s) described below.īitcoin’s feverish connection to the S&P 500 finally broke in June, with the 30-day S&P/BTC correlation falling from 0.77 to 0.25.
0 Comments
Leave a Reply. |