Trakx Weekly Update: Black Friday Comes Early

Key Crypto Market Figures

CTIs Weekly Performance

Digital asset prices continued to tumble last week as investor fear intensified with the Fear And Greed Index dropping to its lowest levels since July 2022, when the last bear market was in full swing. As a result, our flagship large cap Top10 Crypto CTI, dropped by just over 8% in value. The Lending CTI was the weakest link, sliding around 15%, whereas the only non-negative performer was the BTC Momentum index, which was flat over the week.

Fed Uncertainty Spikes

Despite a blowout earnings report from tradfi market darling Nvidia, US equities slumped last Thursday triggering a wave of risk aversion that hit crypto prices hard. Market cap leader Bitcoin swooned to almost $80,000 over the following 24 hours – a drop of over 30% relative to the all-time high hit on October 6th.

The slump came after the September jobs report, whose publication was delayed due to the US government shutdown. The data showed an unexpected 119,000 jobs added (more than double consensus forecasts), even though the unemployment rate ticked up slightly — a mix that rattled market expectations of a December rate cut. What unsettled investors most, though, was the announcement that the October and November jobs reports will be published together on December 16, which critically is after the next FOMC meeting. That means Fed officials will have to make their next policy decision without timely official labour market data.

Given mixed signals about the strength of the jobs market (more timely private surveys have suggested significant weakness in labour demand), this increases the probability of a policymaking error. A small reprieve came after NY Fed Governor Williams acknowledged the increasing downside risks to employment, which, in his view, implies room for a near-term cut. As testament to the febrile nature of markets at present, his comments triggered a 30 point surge in the probability of a December rate cut even though he is only one of 12 FOMC voting members in what is a very divided Fed.

Strategy Stress

Adding to the negative crypto vibes, JP Morgan researchers last week published a report warning that Bitcoin Maxi Michael Saylor’s Strategy company may become removed from the NASDAQ 100 index after MSCI announced that it plans to review the status of digital asset treasury companies (DATs) in mid-January, including a proposal to exclude companies whose digital asset holdings account for 50% or more of their total assets. The review follows feedback from market participants that DATs behave more like investment funds than traditional operating businesses and they are generally not eligible for inclusion in MSCI’s core equity indexes. If the proposal is enacted it would mean that passive index funds, which purchase the shares of companies included in benchmark indices to ensure performance matching, would be forced to sell off their holdings. Such uncertainty is one of the reasons why Strategy’s mNAV has dropped from 2.7 a year ago to 1.2 currently.

Quantum Risk in Crypto Security

Ethereum co-founder Vitalik Buterin added his voice to the growing calls over the threat posed by quantum computing to blockchain encryption. Buterin specifically argued for an accelerated shift to quantum-resistant cryptography by 2028 — a dramatic re-assessment of long-term security risk. This is a critical issue because the advent of quantum attacks could undermine the integrity of major blockchains like Ethereum and Bitcoin.

Sources: Trakx, Coingecko, Alphavantage

Market Trends

• Crypto Sentiment Hits ‘Extreme Fear’ Amid $2.7 Trillion S&P 500 Wipeout: Decrypt
• BlackRock clients dump Bitcoin as price hits $81,900: DLNews
• Bitcoin Giant Strategy Could Shed Billions If Removed From Stock Indices: JPMorgan: YahooFinance
• Vitalik Buterin Warns 20% Quantum Risk by 2030 — Are Bitcoin and Ethereum Truly in Danger?: CCN
• Japan Approves $135B Stimulus Package; BTC Dip Keeps Giving: CoinDesk
• Cloudflare outage shows why crypto needs end-to-end decentralization: Cointelegraph

Trakx CTIs Performance

Sources: Coingecko and AlphaVantage

*Return of bitcoin is calculated since 01/05/2020, while CTIs performances were calculated since their respective launch date.
**Includes simulated performance.
***The risk signal is determined according to the historical volatility level, the higher the riskier.

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Disclaimers: No Investment Advice. Index returns and statistics are for illustration only. Index returns do not reflect any transaction costs or expenses. Past performance does not guarantee future results. The information provided in this newsletter does not constitute investment advice, financial advice, trading advice, or any other sort of advice and you should not treat any of the newsletter content as such. Trakx.io does not recommend that any cryptocurrency should be bought, sold, or held by you. Readers shall conduct their own due diligence and consult their financial advisors before making any investment decisions.