Trakx Weekly Update: September 9

Key Crypto Market Figures

CTIs Weekly Performance

It was another week in the red for crypto prices as evidenced by the Trakx Top10 Crypto CTI losing just under 3% over the prior seven day period. The top performer over the period was the Gaming CTI, which rose almost 3% . By contrast, the weakest performance during the last seven days was in the Bitcoin-Ether CTI, with a fall of almost 5%.

Depressing investor sentiment was continued concern about the health of the US economy after a series of downbeat data releases. While the much anticipated US non-farm payroll report was not as bad as some feared after data earlier in the week showed a sharp deceleration in job openings, there is nevertheless a clear decelerating trend is US employment growth – a potential harbinger of recession for the reasons outlined in the latest Trakx crypto monthly update (see below). Following these latest data releases, a 75% probability of a 25bp Fed rate cut is now priced in US interest rate futures for the September 18 FOMC meeting, with a 25% chance of an even greater 50bp cut. Typically, lower nominal interest rates are considered a positive for non-cash generating assets such as crypto or gold. However, there is scant evidence of this positive impact on either of the aforementioned asset classes at the moment.

As alluded to above, a particular soft spot amongst the larger cap cryptocurrencies was Ethereum. Last week its price fell to its lowest level so far this year as investors reacted to the continued decline in fee revenues. According to Dune analytics, the average gas fee for an Ethereum transaction has fallen to below 2 gwei, which on current transaction volumes equates to overall revenues of approximately $75m per year; not much of an aggregate return for an asset whose market cap stands at $300bn. Although lower network activity is the reason for the decline in overall transaction fees it is not simply a sign of user apathy. Indeed, the decline in usage of the Layer 1 blockchain to a substantial degree reflects the success of Layer 2 networks within the Ethereum ecosystem such as Polygon, Optimism and Arbitrum. Designed to be more scalable than the Layer 1 network they are built on top of, they reduce the demand for Layer 1 block space and, especially after the Dencun Upgrade back in March which improved data storage efficiency, are also able to offer lower transaction fees. Good news for the Layer 2s, but not so great for the holders of ETH – the native token of the Layer 1 blockchain.

Finally, US politics may have taken a back seat to macro concerns over recent weeks, but a comeback may well be in the offing as Trump and Harris square up for their first presidential debate this Tuesday with the polls showing just one percentage point difference between the two candidates.

Sources: Trakx, Coingecko, Alphavantage

Market Trends

• Bitcoin slides below $54,000 on weak US jobs data and fears of Fed jumbo rate cut: DL News.
• Mastercard enables non-custodial crypto spending in new partnership: Cointelegraph.
• Ethereum’s network revenue plunges by 99%, sparking ‘death spiral’ concerns: CryptoSlate.
• Hoskinson slams proposal to burn 1.5 billion Cardano’s ADA tokens: CryptoSlate.
• We Need DePIN to Get to Net-Zero Emissions: CoinDesk.

Trakx News

• As a reminder, Trakx will be attending the Patrimonia Conference in Lyon on September 25 & 26 and looks forward to meeting our IFA clients and prospects.
• Ryan Shea’s August Crypto Monthly Update entitled “Shūban” , which examines the impact a US recession would have on the crypto prices, was published last week.

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.