Crypto Volatility Updates
The crypto markets appear to be undergoing a period of mixed sentiments.
As BTC struggles to maintain a $40,000 price floor and ETH continues to see increasing price fluctuations, there is no doubt that investors are wondering if the “Crypto Winter” is still in full swing. Analyzing the CVI charts, we observe a slight run-up in the week-over-week implied sentiment for crypto volatility — a lot tempered compared to February 24th’s peak, but still an increasing trend.
The next few weeks will be crucial for crypto as the world continues to realize the importance of a decentralized and open infrastructure in today’s highly volatile, geopolitical environment. While border macroeconomic and political views might seem unfavorable, it is important to note that the crypto markets have an additional utility layer that drives future market sentiment. This period presents a unique opportunity for long-term investors to filter through the noise and highlight crypto assets they believe will be beneficial to the digital economy over time.
The past few weeks have shown that portfolio hedging strategies are becoming increasingly important and necessary for investors, if they wish to reduce portfolio volatility without negatively impacting their profits. Given this view, the CVI remains the most reliable source for future volatility sentiment in the crypto markets — enabling investors to hedge and trade the crypto markets with confidence.
This week’s takeaways:
- There was a slight run-up in future crypto volatility sentiment as measured by the CVI
- The broader crypto markets have seen increased price fluctuations following recent geopolitical events and ongoing inflation
- The CVI has been above the 80 range all week — could this be the floor in the coming weeks?
A recent spike in selling pressure has been occurring in the crypto market following a brief period of calm and stability. Are investors no longer pessimistic about crypto’s future, or are these the actions of a few “whales”? Whatever the answer, it does appear that there has been an increasing price fluctuation among BTC and the broader altcoin market. In times of uncertainty, most tradeable assets share the same characteristics as investors downsize on risk in favor of safer investments like US Treasuries.
Looking through the BTC chart, it is evident that there has been a considerable selloff from last week, as the global equity markets also experience increased volatility.
Ethereum, on the other hand, has also been on a similar trend with week-over-week losses of 8%. The broader Altcoin and DeFi marketcap has also experienced significant selling pressures, so this is not unique to just Ethereum.
Despite the fact that this week has seen increased volatility compared to last week, we encourage investors to monitor their portfolio holdings from a much longer horizon. In spite of current uncertainties, cryptocurrencies still have a significant use case, and this positive sentiment will be advantageous as the market corrects.
The CVI experienced a week-over-week increase in future volatility sentiment, reaching a peak of 85 on March 8th, 2022.
Although we are nowhere near the peak experienced in late February, it’s undeniable that the markets have witnessed a substantial increase in future volatility sentiment. The ETHVI, which tracks Ethereum’s future volatility sentiment, has also seen some increased week-over-week volatility sentiments. Over the past few weeks, we have also seen a lot more sharp spikes on the ETHVI compared to the CVI — we will continue to monitor this trend in the coming weeks.
It should come as no surprise that investors might be concerned about their crypto investments, given the large number of crypto assets that have experienced short-term corrections. As crypto continues to lead the way in facilitating much-need transactions globally, an optimistic but realistic view is that we will approach a pinnacle of innovation and growth in digital assets that will unlock increased opportunities across the ecosystem.
The best is yet to come!
A few things that have happened this week
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