There was a significant run-up in volatility sentiment from the compounding effects of both increased geopolitical tensions and global economic uncertainties. Following increased tension between Russia and Ukraine, the crypto markets experienced a considerable week-over-week selloff, resulting in a 15% price drop for BTC and most of the major altcoins.
Despite this increased uncertainty in the markets, there are still lots of optimistic reasons for crypto investors to maintain and have a longer-term view of their digital asset holdings. For one, we have seen the increasing use of crypto and digital assets as critical forms of exchange for citizens living in countries like Canada, Ukraine, and Turkey that have experienced brief moments of political and economic turmoil. At its core, digital assets like crypto provide a means for borderless and efficient financial transactions that form the bedrock of modern commerce. Secondly, investors are equipped with tools like CVI that provide real-time volatility sentiments and a true view of actions expressed by larger option traders in the market. These are tools that were not available to investors during periods like 2018, when the level of uncertainty in crypto markers were at a much higher and extreme level.
As we enter the 2nd half of Q1 2022, we encourage all our readers to remain focused on a longer-term perspective of their crypto holdings, while utilizing the CVI to form entry and exit strategies that could lead to profit-taking in today’s markets. As we have said a few times, the alpha is ever more present in volatile markets like these.
This week’s takeaways:
- There was a 15% increase in week-over-week future volatility sentiment as measured by the CVI
- Crypto markets have seen some downward selling pressures in the past 24 hours
Market Movements
Following a brief period of calm and stability, the crypto market has recently seen some increased selling pressures as investors continue to express some pessimism about the future. BTC is down to the $35,000 range, the crypto market cap has dropped from about $2 trillion to its current value of approximately $1.8 trillion, and most of the altcoins have had considerable corrections.
Looking at the BTC chart, it is clear that there has been a considerable selloff from last week as most of the global equity markets continue to see increased volatility.
Like most of the altcoins, Ethereum has also seen increased volatility as the markets continue to get impacted by the Russia/Ukraine tensions.
While the price actions this week have been a lot more volatile than last week, we encourage investors to continue to observe their portfolio holdings from a much longer time horizon. Despite current uncertainties, there is still an important use case for most cryptocurrencies, and this positive sentiment will be favorable as the market corrects in the near future.
Volatility Index
There was a 26.4% increase in week-over-week future volatility sentiment as measured by the CVI. On Thursday, February 17th 2022, the CVI was at 71 and continued on an increasing trend before peaking at 89.8 on Thursday February 24nd 2022.
The ETHVI Index, which measures Ethereum’s implied volatility, saw a slightly higher future volatility sentiment with a 33% increase in its week-over-week (12% higher than what was experienced on the CVI).
The ETHVI also had a lot of higher peaks and falls over the past week compared to the CVI and this will no doubt be monitored in the coming days. Given Ethereum’s continued importance to most DeFi protocols, analyzing this chart from a mid-term perspective will be beneficial to investors with holdings in protocols linked to the Ethereum ecosystem. We anticipate that there will be a lot more market activities in the coming weeks as investors continue to re-assess and evaluate the economic and global political climate. However, as innovators and forward thinking investors, we continue to be extremely optimistic about crypto markets and digital assets.
A few things that have happened this week
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