Vibe Check: The Sell-Off Continues: CoinDesk Indices' Todd Groth

Periodic observations and market musings from Todd Groth, Head of Research, CoinDesk Indices

AccessTimeIconJan 24, 2024 at 8:27 p.m. UTC
Updated Mar 8, 2024 at 8:26 p.m. UTC
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The sell-off continues.

Bitcoin Trend Indicator (Jan 16: changed to light green. Jan 18: changed to yellow)

Bitcoin Trend Indicator - Jan 16: changed to light green.  Jan 18: changed to yellow (CoinDesk)
Bitcoin Trend Indicator - Jan 16: changed to light green. Jan 18: changed to yellow (CoinDesk)

Since we turned neutral on the Bitcoin Trend Indicator (from significant uptrend, on Jan. 18), and front-end US interest rates have risen 5bps, we’ve fallen lower about 4.5% lower to 39.5k, and lie back in the middle of the bitcoin [BTC] price trend channel established at the crypto winter bottom in Dec 2022.

The Bitcoin Trend Indicator or BTI is an online tool, created by CoinDesk subsidiary CoinDesk Indices, to help investors determine where the price of bitcoin (BTC) is going. The tool generates one of five possible values, each representing a particular direction and strength of bitcoin's price trend, ranging from significant downtrend to significant uptrend. The indicators are generated via historical data from the CoinDesk Bitcoin Price Index (XBX), using a non-discretionary algorithm.

Bitcoin price trend channel (TradingView)
Bitcoin price trend channel (TradingView)

Down about 20% since the spot ETF launch peak suggests the market expected greater short term ETF inflows (over $1 billion net inflows over past seven days; H/T @EricBalchunas) and highlights why position sizing is so key in this emergent and volatile asset class we love so much. Sorry, recent TradFi joiners.

CoinDesk 20 Index, a benchmark that tracks top cryptocurrencies, saw its trading volumes growing. One week into the launch of CoinDesk 20 Index, we’ve seen significant daily traded volume on linked perpetual futures linked to crypto’s first multi-token tradable index (currently $44 million 24-hr volume).

CoinDesk 20 Index trading volume rising (CoinDesk)
CoinDesk 20 Index trading volume rising (CoinDesk)

While the CoinDesk 20 Index has been dragged lower with the broader market over the past week, over the past 3 months (i.e. since the Bitcoin Trend Indicator turned green) we’ve seen CoinDesk 20 significantly outperform bitcoin and ether by 1500 bps and 1200 bps, respectively.

CoinDesk 20 significantly outperform bitcoin (CoinDesk)
CoinDesk 20 significantly outperform bitcoin (CoinDesk)

This outperformance has been primarily driven by the CoinDesk 20 Index’s tilt towards smaller altcoins, notably Solana [SOL], Avalanche [AVAX] and Cardano [ADA], which all punched above their index weight relative to the established [BTC] and [ETH] majors.

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CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. In November 2023, CoinDesk was acquired by the Bullish group, owner of Bullish, a regulated, digital assets exchange. The Bullish group is majority-owned by; both companies have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial committee to protect journalistic independence. CoinDesk employees, including journalists, may receive options in the Bullish group as part of their compensation.

Todd Groth, CFA

Todd Groth was the Head of Index Research at CoinDesk Indices. He has over 10 years of experience involving systematic multi-asset risk premia and alternative investment strategies.

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