This is the last crypto volatility update for 2021. Staying true to crypto nature, the past few weeks in the market have been somewhat unpredictable but still somewhat tame compared to the second quarter of 2021. Omicron and inflation fears, while still present, have been a lot more tempered in crypto markets over the past few days, but it will be important to watch how this news affects the markets from a mid-term perspective.
As we have mentioned a few times, most tradeable assets experience huge correlations in periods of uncertainty as investors downsize on risk. The past 24 hours have seen some price fluctuations, with Bitcoin and Ethereum down by approximately 7%. Some of these rapid fluctuations seem to be driven by Wall Street sentiment on the overall economic direction for 2022. It has been an interesting year, and there is no doubt 2022 will be a sequel to 2021, given the constant interest crypto is receiving from regulators, retail investors, and institutions alike.
Taking an optimistic view of 2021, here are two interesting stats we discovered:
- As of the time of writing this, close to 95 crypto protocols have a trading market cap of over $1 billion; the total crypto market cap sits around $2.25 trillion.
- TVL in DeFi also sits at $250 billion (compared to $18 billion around this time last year).
Again, farewell to 2021, the year crypto assets hit $2 trillion!
Market Movements
It was surprisingly not a quiet holiday season for crypto investors and traders. Within the span of 24 hours, Bitcoin has traded as high as $51,988 and as low as $47,582.
Bitcoin has broken past the $50,000 range a few times this month but has failed to remain above this critical number, reflecting the short-term panic that might still be present in certain crypto investors. The holiday season is usually regarded as “profit-taking season”, so as we enter the New Year, all eyes will be on the charts to see if there is a BTC $50,000 breakout (and if it happens, how long it sustains).
It’s a similar story for Ethereum, the most popular Altcoin as it has traded around the $4,000 range all month. As of writing, it has seen some rapid 24-hour fluctuations, dropping from the $4,090 range to $3,781.
It is possible that we will enter the 2022 year with lower than expected prices in both Bitcoin and Altcoins; however, looking at the mid-term price movements in 1–2months time will give a better estimate of what 2022 will look like for the crypto markets in general.
Expect more updates from us about this in the coming weeks.
Volatility Index
The CVI Index, which measures current and projected market sentiment, had a more tempered gauge of risk. Since Wednesday, December 22nd, the CVI has been below 90 and below the 85 range for most of the Christmas & Christmas Eve period.
Looking at the ETHVI index, which measures the 30-day implied volatility of Ethereum, the trend was also similar, with the index down below the 110 range since December 16th and down below the 100 since December 23rd.
Whatever the sentiment being priced, examining these trends from a much longer time horizon (i.e. 2–3 months), will be more beneficial as a guide for investors to hedge their portfolio. It does appear the market has priced a lower risk sentiment, despite the rapid 24-hour price movements of both Bitcoin & Ethereum.
Let’s see what 2022 has in store for the markets!
Until next week!
The CVI Team
A few things that we noticed this week
- ADA Pay had a significant year — read a summary of key activities for 2021 and what the team has in store for 2022 here.
- Uniswap is finally live on Polygon — more info here.
- 2021 Trading volumes for BTC & ETH options reached an outstanding $387 billion.
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