“The markets and economy are two different things.”
-Milton Friedman
For the past few months, there has been one central pain point on the minds of most central bankers, policymakers, private entities, and government institutions: Inflation.
Focusing on the crypto markets, it has been widely reported that the increased price fluctuations in assets like BTC & ETH are a direct result of ongoing inflation concerns. Looking through the CVI, we observe that while there was a significant spike in future volatility sentiment from January 20th — 24th, 2022 (around the period BTC plunged to $33,000), the market’s view on inflation from a mid-term perspective has been somewhat tempered. Inflation worries have been a constant theme for the past few months — however, the CVI has largely remained below 90 since December 21st, 2021. This could lead to a strong argument that inflation sentiment has already been priced into the crypto markets.
As we start a new month (and Lunar New Year), we encourage investors to equip themselves with market insights that will enable them to make informed macro and micro-level portfolio decisions. The CVI is and will continue to be the leading source for crypto market sentiment on future volatility — a powerful tool for making both hedging and entry decisions. While broader macroeconomic and political views might have some short-term effects on crypto assets, the psychology and utility driving the crypto economy is extremely unique and should be considered in isolation. To that effect, the CVI is the perfect oracle for the crypto markets.
This week’s takeaways:
- The crypto volatility index (CVI) has trended downwards after peaking at 90 on January 24th, 2022.
- Since last Friday, the CVI has been hovering around the 75–80 range bounds.
- Ethereum’s ETHVI has also been on a downward trend since January 24th, 2022.
Market Movements
So far, we have experienced consecutive weeks of uncertainty in crypto markets.
However, following last week’s selloff, there does appear to be some light at the end of the tunnel for some of the major crypto assets. While BTC’s price is still fluctuating around the $35,000 range, the previous panic surrounding the geopolitical and regulatory concerns seems to have subsided.
Looking at the price charts, BTC appears to have corrected tremendously in the short term while still maintaining a floor of around $36,000 over the past few days.
Ethereum on the other hand has outperformed BTC on a week-over-week basis, despite trailing the DeFi asset ecosystem by about 1%. As Ethereum continues to face tough competition from other Layer 1 infrastructures, it will be important to observe the impact of ETH’s overall price dominance in the broader markets.
Volatility Index
The CVI Index trended lower on a week-over-week basis. Following the 1-month peak experienced on January 24th, 2022, we have seen a significant drop in future volatility sentiment over the past few days — reaching a low of 75.
It was a similar situation with ETHVI. We saw an almost 15% drop in implied volatility last week and despite inflation and geopolitical fears, the ETH options market appears to be holding steady.
Judging by the sheer number of crypto assets that have experienced short-term corrections, investors have reason to be concerned about the future of their crypto investments. However, as we mentioned in previous writings, the crypto markets have seen volatility almost 90% higher than what we have experienced in the past few weeks. While this consolation can’t reverse any realized portfolio losses, it will hopefully encourage crypto investors to analyze current market conditions from a longer-term perspective.
A few things that have happened this week
- The COTI Treasury is now live — learn more and get started here.
- TVL in DeFi remains steady at $190 Billion.
- Ethereum’s Vitalik Buterin published an insightful article on non-transferable NFT’s. Read more here.
- GOVI has been chosen as a top pick for 2022 by the Stanberry report.
For all of our updates and to join the conversation, be sure to check out CVI channels:
Website: https://cvi.finance
Whitepaper: https://cvi.finance/files/cvi-white-paper.pdf
Twitter: https://twitter.com/official_CVI
Telegram (group): https://t.me/cviofficial
Telegram (channel): https://t.me/cvichannel
Discord: https://discord.com/invite/jXba8HmTs5
Gitbook: https://docs.cvi.finance/
