Trakx Weekly Update: Crypto Hangover

Key Crypto Market Figures

CTIs Weekly Performance

Digital asset prices remained on the back foot for much of last week as evidenced by our benchmark Top10 Crypto CTI declining by 6%. The top performer over the period, with a gain of just over 2%, was the defensive Inflation Hedge CTI, while the other end of the performance ranking was populated by the Centralized and Decentralized Exchange CTIs – both fell over 10% – as the disruption at Binance during the recent crash negatively impacted investor attitudes towards this segment of the market.

End In Sight For Fed QT Programme

Sentiment amongst crypto investors deteriorated markedly during the week, at one stage pushing the Fear and Greed Index into Extreme Fear territory, as the post-Trump tariff threat flush out and turn in price momentum (Bitcoin fell below its 200 day moving average – a key metric for many speculators) encouraged short sellers. In addition, BTC and ETH ETFs saw significant net outflows last Thursday totalling almost $600 million, ending a two week period of consistent net buying.

However, things improved somewhat after President Trump withdrew his China tariff threat and Fed Chair Powell signalled that the Federal Reserve’s quantitative tightening (QT) program was nearing its end, as the central bank approaches its goal of maintaining “ample” reserves in the banking system. That said, Powell offered little clarity on the future path of US interest rates, noting the Fed faces a delicate balance: cutting rates too soon risks reigniting inflation, while moving too slowly increases downside risks in the labour market.

$300 trillion Fat Finger

One of the bright spots in the crypto space in recent months has been the growth of fiat-backed stablecoins, whose combined market capitalization has risen above $300 billion. That figure briefly and spectacularly spiked last week when Paxos, the blockchain partner of PayPal, accidentally minted $300 trillion (yes, trillion) of its USD-backed stablecoin PYUSD. The mistake, which occurred during an internal transfer, was quickly identified, and the excess tokens were immediately burned. While easy to dismiss as a one-off error, the incident underscores a key point: the supply of fiat-backed stablecoins—which are meant to be fully backed by cash or low-risk US government securities—is not mechanically linked to those reserves. As a result, token holders must ultimately rely on the issuer’s credibility and the independent audits or attestations conducted by third parties.

US Strategic Reserve Boost

As per President Trump’s executive order, the US strategic Bitcoin reserve is set to receive an AUM boost of 127,271 BTC after the US authorities, working with their British colleagues, seized approximately $15 billion in the cryptocurrency linked to a vast “pig butchering” scam network operating out of Cambodia. The operation, allegedly controlled by businessman Chen Zhi, was accused of using forced labour and large-scale online fraud to lure victims into fake crypto investments. The seizure represents one of the largest confiscations of digital assets in history and underscores the growing international cooperation in tackling crypto-related financial crime.

Sources: Trakx, Coingecko, Alphavantage

Market Trends

• Fed’s Powell suggests tightening program could end soon, opens door to rate cuts: CNBC
• Paxos Fat-Fingers $300T of PayPal Stablecoin, Outpacing USD’s $2.4T Supply: CoinDesk
• US to add $14 billion BTC to Strategic Bitcoin Reserve seized from Chinese scammer: CryptoSlate
• ‘Dino coin’ season: Why are Zcash and Dash seeing biggest rebounds?: Cointelegraph
• Are Perps and Leverage Creating Systemic Risk in Crypto Markets? Experts Weigh In: Decrypt
• Is Crypto Ready For Q-Day? The Quantum Countdown Has Begun: Forbes

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.

Trakx is a global fintech company creating new standards for digital asset investments. Through our trading platform, we offer thematic Crypto Tradable Indices (CTIs) and customised solutions, providing sophisticated investors with a high degree of compliance, custody and liquidity.

TRAKX SAS,  10 rue de Penthièvre, Paris, 75008, FRANCE – French société par actions simplifiée Paris Trade and Companies Register number 850 626 078

Crypto Asset Service Provider (CASP) Registered with the Autorité des Marchés Financiers (AMF) under number E2021-020

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.