Trakx Weekly Update: February 10

Key Crypto Market Figures

CTIs Weekly Performance

After all the yoyo price action since Trump’s return to the White House last week saw a modicum of stability return to crypto prices. Unfortunately, though, this was not enough to keep the large cap cryptocurrencies in the green as evidenced by the 3% pull-back in our benchmark Top10 Crypto CTI. Within the suite of Trakx crypto indices, the top performer was the Inflation Hedge CTI, which eked out a modest 0.2% weekly gain, while the higher beta Meme CTI experienced the heaviest selling, losing almost 15% over the past seven days.

Macro Worries

One factor that stymied the bulls was continued fears about a possible global trade war. Although President Trump agreed to postpone the implementation of tariffs against his northern and southern neighbours, after they agreed to his demands to tighten up border security, he went ahead and imposed a 10% tariff on Chinese imports. This sparked a tit-for-tat exchange with the Chinese announcing retaliatory tariffs on many US products, which Trump responded to by threatening to impose a 25% tariff on US imports of steel and aluminium. Given such escalatory dynamics many investors – both in tradfi and crypto – are concerned about the potential drag such measures will have on economic growth.

Also weighing on investor sentiment was last Friday’s US employment report. While it showed a cool down in the pace of hiring in January, the potentially bullish impact was negated by the uptick in average earnings and a drop in the jobless rate, both of which will discourage the Fed from bringing forward interest rate cuts.

ETH Pectra Upgrade

Ethereum developers last week announced that the first major upgrade since last year’s Decun upgrade is slated to take place in April, assuming the testnet trails in end-February/early-March go smoothly. Named Pectra (an amalgamation of Prague and Electra) the upgrade incorporates several EIP proposals, including EIP-7702, which allows externally owned accounts, such as user-controlled wallets, to act like smart contracts which should pave the way to a better user experience. Also included, is EIP-7251, which raises the staking limit from 32ETH – a cap that has been in place since the Merge – to 2,048ETH. This substantial increase should allow large validators to consolidation their node validation operations, helping to reduce network congestion, by removing the need for them to run multiple nodes in order to comply with the cap. The upgrade comes at a critical time for the Ethereum ecosystem given the recent in-fighting triggered to a large extent by the token’s underperformance relative to the prices of other large cap cryptocurrencies like Bitcoin and Solana.

“Czech” Mate

Finally, as we mentioned in last week commentary, the Czech central bank (CNB) has begun looking into the merits of widening the list of assets it can invest its official reserves after the governor proposed adding Bitcoin. Building on these pro-crypto credentials the country’s President Petr Pavel last week signed into law a bill that exempts capital gains taxes from being applied for crypto assets held for more than three years – an exemption that applies retrospectively; great news for “hodlers” located in that part of the world. The tax exemption bill also means Czech taxpayers will no longer be required to report transactions whose value is below 100,000 CZK (roughly EUR 4,000).

Sources: Trakx, Coingecko, Alphavantage

Market Trends

• Bitcoin stumbles as Trump announces 25% steel and aluminum tariffs: CoinTelegraph
• Ethereum’s Pectra Upgrade to Begin Testing in February: CoinDesk
• Czech president signs law exempting capital gains taxes on crypto held for three years: The Block
• FDIC to update crypto banking guidelines, releases documents on pause letters: CryptoSlate
• Nobel Laureate Thinks Bitcoin Is Going to Zero: Decrypt

Trakx News

• Lionel will be attending the EtH Denver at the end of the month. If you are planning to be there please drop by and say hello.

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.