Trakx Weekly Update: Prices Stabilize As Sentiment Hits Rock Bottom

Key Crypto Market Figures

CTIs Weekly Performance

Digital asset prices remained under pressure over the past week with sentiment hitting rock bottom as highlighted by the Fear and Greed index falling to 5, its lowest level ever recorded. Despite this ongoing negativity, our flagship large cap Top 10 Crypto CTI stabilized last week, posting a 0.3% gain over the preceding seven days. The standout performer, bucking the recent bearish mood, was the Meme CTI after it surged over 30%, driven by a parabolic rally in Solana-based token Pippin – a fully autonomous AI influencer. At the other end of the spectrum, the Bitcoin Ether CTI was the weakest performer, declining 3% over the week.

Crypto Credit Concerns

Weighing on crypto investor sentiment was renewed concerns around centralized crypto credit after BlockFills, a Chicago-based institutional crypto trading and lending firm, temporarily suspended client deposits and withdrawals amid heightened market volatility. The company, which reportedly facilitated more than $60 billion in trading volume last year and serves around 2,000 institutional clients, cited liquidity pressures as collateral values declined and margin stress increased. While described as a temporary measure, the move revived memories of the 2022 crypto lending crisis that resulted in the failure of BlockFi and Celsius.

Solid January US Jobs Report

Contrary to expectations, the US economy added 130,000 jobs in January according to the latest nan-farm payroll report. This was more than double the monthly rise expected by consensus forecasts, which had been scaled down following the generally weak tone to private sector estimates of US hiring trends. While last month’s number was solid, as part of their annual benchmark revisions the BLS revised down the figures for 25 of the last 26 months, and in doing so lowered the number of jobs created last year by 400,000, to 181,000. Despite this, the report prompted tradfi investors to scale back their expectations of future Fed easing, with just two 25bp reductions now priced in before year-end, down from almost three prior to the release. Typically such a US rate move would weigh on liquidity-sensitive digital assets but given the depressed mood amongst crypto investors the leading tokens largely shrugged off the US employment data.

A Step Closer To A Digital Euro

Last week, the EU Parliament voted 420-158 in favour of the ECB’s annual report. While the vote has no legislative impact, it is significant because the report included an amendment supporting a digital euro. For the first time, this signalled solid backing from the legislative body for a central bank digital currency (CBDC) issued by the ECB—providing the region with a new form of payment alongside cash and card transactions.

European central bank officials have long opposed privately-issued digital currencies, but they strongly support a public version (unlike the US under President Trump, which favours USD-backed stablecoins as opposed to CBDCs). Their concern is that payments networks are currently dominated by Visa and Mastercard, which can undermine monetary sovereignty. Moreover, cash remains the only form of government-issued money accessible to the general public, and in a world where most transactions are electronic, it is far from certain that central banks will be able to maintain financial stability without some form of CBDC. In this context, the emergence of a digital euro seems increasingly inevitable. This point was recently echoed by Ray Dalio, founder of Bridgewater, the world’s largest hedge fund. Dalio also noted that CBDCs would give monetary authorities far greater visibility into financial transactions, meaning users could face increased oversight and a loss of privacy—a concern raised by many, including ourselves.

For many in the crypto community, publicly-issued digital money runs counter to the anarchistic roots of digital currencies. However, as discussed in a previous research note, CBDCs could paradoxically become the best recruitment tool for privately-issued cryptocurrencies, once the public begins to recognize the potential drawbacks of government-issued digital money.

Sources: Trakx, Coingecko, Alphavantage

Market Trends

• Crypto-Lender BlockFills Suspends Client Deposits and Withdrawals As Crypto Market Slumps: Bitcoin Magazine
• U.S. added stronger than expected 130,000 jobs in January, with unemployment rate falling to 4.3%: CoinDesk
• EU lawmakers back digital euro as bloc races to bolster monetary sovereignty: DLNews
• Ray Dalio Warns CBDCs Could Hand Governments Sweeping Financial Control: Decrypt
• Bitcoin whales just moved $4.7B dollars into cold storage while regular investors are busy panic selling the dip: CryptoSlate
• Is China hoarding gold so yuan becomes global reserve instead of USD?: Cointelegraph
• Elon Musk Reveals X Money May Launch Soon, Fueling Crypto Speculation: Yahoo Finance

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.