Week In Review
Notable Messari Updates
Curve v2 is now live” target=”_new” rel=”nofollow”>https://messari.io/intel/event/b6262e31-b58b-4d64-9cec-f428a7213313?utmsource=newsletter&utmmedium=newsletter&utmcampaign=intel-curve-v2″>live and available on Ethereum and Polygon.
A proposal” target=”_new” rel=”nofollow”>https://messari.io/intel/event/6b1f7d52-7ba0-4684-ad28-2a622c9ae9ee?utmsource=newsletter&utmmedium=newsletter&utmcampaign=intel-reduce-uni-threshold”>proposal to lower the UNI proposal submission threshold from 10M UNI to 2.5M UNI, i.e. from 1% to 0.25%, has passed
Taproot has been locked” target=”_new” rel=”nofollow”>https://messari.io/intel/event/11212169-6e13-4968-9598-2658b5fadf26?utmsource=newsletter&utmmedium=newsletter&utmcampaign=intel-bitcoin-taproot-locked”>locked in, reaching the signaling threshold of 90% of all blocks mined in the current difficult period signaling in support, and will be activated in November 2021.
With the T Token Proposal officially approved by both the Keep and NuCypher communities, team developers are working” target=”_new” rel=”nofollow”>https://messari.io/intel/event/305a5af3-5275-4a9d-affc-ba9ba75451b9?utmsource=newsletter&utmmedium=newsletter&utmcampaign=intel-keanu-nucypher-merge”>working on the KEANU staking contract and the associated adapters to grandfather in existing NU and KEEP stakes
Cosmos Hub development teams released” target=”_new” rel=”nofollow”>https://messari.io/intel/event/9f5c084e-f3eb-40a6-852d-c16a9cb305ac?utmsource=newsletter&utmmedium=newsletter&utmcampaign=intel-cosmos-roadmap”>released an updated project roadmap (dubbed Roadmap 2.0) on Jun. 15, 2021, detailing the Hub’s future upgrades.
The Geth team released” target=”_new” rel=”nofollow”>https://messari.io/intel/event/1c3b4059-2243-4517-a94a-eaf4ec817da4?utmsource=newsletter&utmmedium=newsletter&utmcampaign=qredo-decentralized-custody”>released v1.10.4 (Voyager Cluster) on Jun. 17, 2021.
Sector Performance Overview
The week ending on June 17th was a mixed one for crypto markets. Following Messari’s sector convention, the Currency sector outperformed the rest ending the week with a 4.7% return. The sector benefited from Bitcoin’s 7-day performance (4.5% weekly return) which was one of the top-performing assets from the group of tokens covered in this report.
DeFi and Web3 also ended the week with positive returns. On the positive side, Venus (XVS), 1inch (1INCH), and BarnBridge (BOND) pushed the DeFi sector up while Alchemix (ALCX), Enzyme (MLN), and Rari (RGT) detracted from performance. The Web3 sector was propelled by Aragon (ANT) which ended the week with a 134% return. However, the sector’s returns were offset by the negative performance of the remaining assets in the sector.
Decentralized Exchanges and Smart Contract Platforms were the lagging sectors of the week. The DEX sector was primarily hurt by the weekly performance of SushiSwap (SUSHI), Balancer (BAL), and Curve (CRV). Similarly, the Smart Contract Platform sector was dragged down by the performance of Kusama (KSM), Internet Computer (ICP), and Celo (CELO).
Sector Portfolio Methodology
Following the same approach as previous weeks, this week’s report focuses on comparing the performance, risk, and correlation structure between different sectors. To achieve this, we constructed market-weighted “sector portfolios” by selecting the top assets (ranked by market capitalization) from each sector covered in this report. The sector portfolio allocations are the following using market capitalization data as of June 17th.
Sector Drill Down
Performance during the week ending on June 17th was a bit chaotic. All sector portfolios started the week with disappointing performance with some reaching lows of -15% to -20% in the first few days of the week. However, performance across the board improved starting on June 14th gaining back some of the weekend’s losses. In the latter part of the week, asset prices tumbled once again sending three out of the five sector portfolios to negative territory.
The Currency sector portfolio was the clear winner of the week finishing up with a 3.1% weekly return. The performance was mainly driven by Bitcoin’s weekly performance which accounts for roughly 60% of the Currency portfolio. The runner-up was the Top Assets portfolio which also benefited from Bitcoin’s performance but was ultimately dragged down by Dogecoin (DOGE) and Uniswap (UNI) which ended the week with -8% and -10% respectively.
The DEX and DeFi portfolio suffered the most losses ending the week with a -9% return. In both cases, Uniswap was the main driver of performance given its relatively high allocation in the portfolios.
Volatility, defined as the rolling standard deviation of daily log returns, remains elevated across all sector portfolios relative to levels before the market crash in mid-May. However, given the market has been moving sideways without a clear direction since the crash, volatility has stabilized.
The DEX and DeFi portfolios are currently the ones with the highest risk both running 30-day rolling volatility of 13%. The volatility of the Top Asset and Currency portfolios has been moving in the 6-8% range due to their higher allocation to Bitcoin which has been one of the least volatile assets relative to the rest of the tokens in this report.
All asset correlations continue to trend higher. The animation below highlights this trend over the past four weeks. As seen below, all correlations between sector portfolios are greater than 85% with certain pairs reaching levels as high as 95%.
Interestingly, the correlation between sector portfolios and Bitcoin is steadily decreasing. Aside from the portfolios that are heavily allocated to Bitcoin (Top Assets and Currency portfolios), all other sector portfolios have experienced some decline since reaching an all-time high last week.
On the contrary, the correlation with Ethereum is at an all-time high across the board. Aside from the Currency portfolio, all sector portfolios have a correlation with Ethereum higher than 95%.
Normally both statistics move in the same direction; however, this is the first time this kind of dislocation takes place. The reason is that most assets have recently underperformed Bitcoin as investors move down the risk curve to lower volatility assets. As a result, Bitcoin’s market-cap dominance is on the rise increasing roughly 6% over the past 10 days.