Different cryptos will be less correlated, as health stocks ‘won’t move in the same way’ as ETFs move in gold, says crypto asset manager

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Salvation! Welcome back to Distributed Ledger, our weekly crypto newsletter that arrives in your inbox every Thursday. I’m Frances Yue, Crypto Journalist at MarketWatch, and I’m going to bring you the latest and greatest digital assets this week so far. Find me on Twitter at @FrancesYue_ to send comments or let us know what you think we should cover.

Crypto at a glance

Bitcoin BTCUSD, -3.21% is trading recently at around $ 42,900, with a gain of 1.5% in the past seven days. Ether ETHUSD, -3.87% has registered a loss of 2.2% over the past seven days, recently trading at around $ 3,287. Dogecoin DOGEUSD meme token, + 4.48%, rose 6.9% over the past seven days, while another dog-themed token, Shiba Inu SHIBUSD, -8.37 saw a gain 4.5%.

Crypto Metrics Biggest Winner Price 7 Day% Return Oasis Network $ 0.51 32.9% Harmony $ 0.36 26% Near $ 18.4 19.3% Dash $ 143.6 16.2% Osmosis $ 9.3 15.5% Source: CoinGecko as of Jan 13 Biggest declines% 7-day return Olympus $ 226.3 – 28.4% Wonderland $ 2,197.28 -13.8% Loopring $ 1.59 – 12.5% ​​Helium $ 34.36 -11.7% Celsius Network $ 3.28 -10.3% Source: CoinGecko as of January 13 Diversified crypto?

Major cryptocurrencies often trade in tandem, as investor sentiment swings around news about macroeconomics, regulatory oversight, and widespread adoption of digital assets. However, such correlations are likely to weaken as the crypto space becomes more mature with different industry verticals, some industry participants said.

“Whenever there is a huge correction, the correlations increase very momentarily,” Jeff Dorman, chief investment officer at crypto asset management firm Arca, told Distributed Ledger in an interview. But such correlations will decrease in the longer term, according to Dorman.

Tokens from various sectors have shown dramatically different returns over the past year. Bitcoin gained around 25%, while Ether rose 216%. Among other blockchains, Terra’s LUNA gained more than 10,770%, while Solana SOLUSD, -3.98%, recorded a gain of more than 4,000%. XRP XRPUSD, -4.31% and Cardano ADAUSD, -4.65% returned 160% and 335%, respectively.

Over the same time frame, the DeFi Pulse Index, a capitalization-weighted index that tracks the performance of decentralized financial tokens, gained 42%.

The Axie Infinity Blockchain Gaming Token AXSUSD, -6.88% and Sandbox traded up 16.419% and 13.024% respectively.

“There’s no reason why just because two assets are wrapped in digital asset wrapping they should behave the same,” Dorman said. Likewise, why would you want healthcare stocks to evolve the same way a gold ETF evolves than an early stage tech ETF? They are all ETFs, that doesn’t mean they are similar.

“It’s the same with digital assets. Just because they’re wrapped in digital asset wrapping doesn’t mean they make them similar assets. They behave differently. There are different inputs that drive the outputs, ”Dorman said.

Bitcoin correlation with other crypto

This chart shows the correlation of bitcoin over the past three years with the Ether smart contract blockchain, the Cardano proof-of-stake blockchain, the Decentraland MANAUSD token linked to the metaverse, -5.19%, the Dogecoin meme token, the token SushiSwap SUSHIUSD decentralized exchange, -0.84% ​​and centralized Binance cryptocurrency exchange token, respectively.

While an ideal version would show bitcoin’s correlations with different market value-weighted indices from various verticals, the graph gives a general idea of ​​how bitcoin traded with other cryptocurrencies.

The correlation varies in amplitude from -1.00 to 1.00. A positive correlation means that the assets have moved in the same direction, while a negative correlation means that they have moved in the opposite direction. The higher the absolute value of the coefficient, the stronger the relationship.

Bitcoin showed positive correlations with most of the selected cryptos during the period. Its correlation coefficient with the ether is significantly higher than with other tokens. Bitcoin’s correlations with most of the selected cryptos have seen a slight uptick in the last round of massive sell-offs in the market.

The crypto potential of Coin Metrics Citadel?

Citadel Securities, the electronic market maker founded by Ken Griffin, on Tuesday announced a $ 1.15 billion investment from venture capital giant Sequoia and cryptocurrency investment firm Paradigm.

In an opinion piece, MarketWatch’s Thornton McEnery explained how the deal could give Citadel the cash to expand and go overseas. “It’s been an open secret for years that Griffin has wanted Citadel to be the next Goldman Sachs, a financial services superpower with a global reach that can make the markets, dominate stock trading and fund spectacularly sized deals. “McEnery wrote.

The deal may also hint at Citadel’s potential push into crypto, as Paradigm is a venture capital firm that focuses on investing in crypto companies and protocols.

In a statement, Matt Huang, Co-Founder and Managing Partner of Paradigm wrote, “We look forward to partnering with the Citadel Securities team as they expand their technology and expertise to even more markets and classes. of assets, including cryptography “.

Compared to other large quantitative trading firms, Citadel has fallen a bit behind in the crypto game, which could be related to Griffin’s long-standing doubts about digital assets, although the billionaire said in October that his company would trade cryptocurrencies if properly regulated.

Other large high-frequency trading firms, such as Jump Trading and Hudson River Trading brought their quantitative approach to the industry, while quantitative hedge fund Two Sigma also hired for crypto trading roles in order to expand. its crypto trading activity.

Coinbase acquires derivatives exchange

Coinbase announced on Wednesday that it is buying the FairX derivatives exchange with the aim of expanding the crypto exchange’s offerings for retail and institutional clients, giving them a place to trade bitcoin and other crypto. currencies, but also access to the growing world of related derivatives.

After Binance, Coinbase has the second largest cryptocurrency spot trading volume, with a 24-hour trading volume of around $ 3.3 billion, according to CoinMarketCap.

The addition of FairX, a Chicago-based derivatives exchange anchored in the retail market, would help Coinbase grow by offering its customers access to certain crypto futures contracts traded on a platform regulated by the CFTC.

Crypto derivatives trading volume was $ 2.9 trillion in December, overtaking spot trading, according to a report by data site CryptoCompare.

What else?

Changpeng Zhao, or CZ, founder of the world’s largest crypto exchange Binance, has a net worth of $ 96 billion, surpassing that of Mark Zuckerberg, according to the Bloomberg Billionaires Index. Wealth did not account for CZ’s personal crypto holdings. Binance took issue with the accuracy of Bloomberg’s estimates of Zhao’s net worth, saying the crypto is “sensitive to higher levels of volatility,” according to the Bloomberg article.

In a tweet last year, Zhao warned investors of the importance of managing their risk. “I could bear to lose the house. I can still find a job in a bank if bitcoin goes to 0. My (simple) lifestyle wouldn’t be affected much. Not everyone is in the same situation, ”Zhao wrote.

In other crypto-related news, more companies and banks are launching their own stablecoins, a type of cryptocurrency whose value is tied to another asset, often fiat currencies.

Pay Pal plans to launch its own stablecoin, while a consortium of banks, including New York Community Bank, NBH Bank, FirstBank, Sterling National Bank, and Synovus Bank, are launching their own stablecoin called USDF.

Crypto companies, funds

In trading of crypto-related companies, shares of Coinbase Global Inc. COIN, -1.30% traded down 1% to $ 232.75 on Thursday afternoon. It was down 0.5% over the past five trading sessions. Michael Saylor’s MicroStrategy Inc. MSTR, -3.98%, traded down 3.4% on Thursday at $ 497.34 and has lost 0.3% in the past five days.

Mining company Riot Blockchain Inc. RIOT, -3.69% of shares fell 3.2% to $ 20.44, with a loss of 0.2% in the past five days. Shares of Marathon Digital Holdings Inc. MARA, -7.48%, fell 6% to $ 28.53, and down 2.7% in the past five days. Another miner Ebang International Holdings Inc. EBON, -7.55%, traded down 7.1% to $ 0.98, with a gain of 5.5% in the past five days.

Overstock.com Inc. OSTK, -2.33% lost 2.85% to $ 52.23. Shares were down 2% over the five-session period.

Block Inc. ‘ SQ shares, -5.05% were down 3.7% to $ 144.15, with a loss of 3.12% for the week. Tesla Inc. TSLA shares of -5.00% traded down 4% to $ 1,061.5, while its shares were down 0.3% in the past five sessions.

PayPal Holdings Inc. PYPL, -2.31% lost 1.5% to $ 184.52, while it posted a loss of 4% in all five sessions. NVIDIA Corp. NVDA, -4.49% lost 4% to $ 268.47, and was forecasting a loss of 4.8% in the past five days.

Advanced Micro Devices Inc. AMD, -2.65% was down 2.7% to $ 134.1 and lost 1.6% in the last five trading days on Thursday afternoon.

In the fund space, ProShares Bitcoin Strategy ETF BITO, -3.37% was down 2.2% to $ 27.01 on Thursday, while Valkyrie Bitcoin Strategy ETF BTF, -3.28% was down 2.2% to $ 16.71. VanEck Bitcoin Strategy ETF XBTF, -2.91% fell 2.5% to $ 42.2.

Grayscale Bitcoin Trust GBTC, -4.82% was trading at $ 30.97, up from 3.4% on Thursday afternoon.

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