After an underwhelming first quarter of the year, the broader crypto markets saw month-to-month gains of over 15% on average in the first week of April. There are so many speculations as to the cause of the sudden pump in crypto prices last week, and there will undoubtedly be skeptics that highlight this week’s market correction as evidence that there is still some uncertainty among crypto assets.
Time and time again, we’ve seen that identifying quality assets, and establishing risk-management frameworks will allow investors to play the markets while protecting their portfolio from any short-term downside movements. A key element of optimizing on current and future opportunities is managing portfolio risk. To that effect, the CVI serves as the perfect tool for gauging the crypto market’s perception of future volatility — a critical element of any risk management strategy.
A few highlights for the week:
- Judging by the CVI charts, there appears to be a slight increase in the perception of future crypto volatility.
- Over the weekend, the Crypto Volatility Index (CVI) reached its lowest value since October 2020. Given this downward trajectory, all signs are pointing to a much tempered range of values — however, we have seen a slight increase in the CVI over the past few days.
- Last week, bitcoin and most major altcoins regained some of their Q1 losses — some of these have since been corrected with this week’s price action.
Market Movements
Despite the threat of stricter regulation, inflation worries, and the Ukraine-Russia crisis, the crypto markets saw a slight rebound over the past week that led to positive YTD values for BTC and a large majority of Altcoins. There has been a positive month-to-date trend in the BTC charts and it will be essential to also watch for any potential increases in volume within the next few weeks as a new quarter officially gets in full swing.
Despite BTC’s positive momentum, Ethereum has experienced a much larger upward breakout. As of today, Ethereum’s 1-month return is about 13% higher than BTC’s, although it trails the broader DeFi market by about 5%.
Volatility Index
Over the weekend, implied volatility (as measured by the CVI) dropped and hovered around the 63-point range. For context, the last time we saw these range of values on the CVI was on October 30th, 2020, and this was preceded by an increase in the CVI throughout November and December 2020.
We have gradually seen an increase in the CVI beginning on Tuesday, April 5th, 2022 as the crypto markets continue to experience some increased volatility.
The ETHVI, which measures the perceived future volatility of Ethereum, saw a 26% drop in its 1-month peak. Given Ethereum’s recent price action, we encourage active traders and investors to utilize the ETHVI in both their hedging and profit-taking/arbitrage strategies.
While it’s still too early to predict what comes next, the charts have shown positive signs that current uncertainties have been priced into markets and it does appear that investors are a lot more positive and optimistic about the future. The best might be yet to come.
A few things that we noticed this week
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