Taking stock of the main news of the week: changes after the market crash

Project information

• The Ziliqa team released the mainnet client v8.0.3;

• The KyberDAO community initiated the KIP-8 proposal to add Kyber DM;

• The CGP-28 proposal ends on May 13, 2021, and code changes are implemented on May 18, 2021;

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market price data

As of May 22, the entire market was down more than 60% from its peak, with risky tokens suffering even greater losses. This market crash is a reminder to everyone that the crypto market is not for the faint of heart. Last week's performance deteriorated, and market volatility increased across the board. In addition, asset correlations across all sectors covered in this report have risen sharply, driven by market corrections.
Compared with other sectors, the currency sector fell the least this week. The sector consisting of Bitcoin, Dogecoin and others closed the week down -16%, followed by DeFi which returned -19%, with decentralized exchanges and Web3 suffering the worst losses, respectively for -22% and -26%.

The market panic sell-off started against the backdrop of Musk’s tweet that Tesla would no longer accept Bitcoin as a payment method due to environmental concerns. Macroeconomic concerns also played a role, with a higher-than-expected 4.2% inflation rate stoking fears in markets. Last week, Binance faced regulatory scrutiny and a reaffirmation since 2017 that China does not accept cryptocurrencies as a form of payment also exacerbated the problem.
The culprit is rising leverage. Binance, the world’s largest exchange, has seen positive funding rates for the past few months:

At the same time, the position of ETH is also rising, and the purchase of ETH is continuing to be analyzed from the data.

Funding rates remained volatile as of the end of last week, with positive rates on some exchanges and negative rates on others (see table below), suggesting that the market is still in turmoil. The projected funding rate also kept rising with each dip, as traders who were long bought on dips. However, as the price fell, traders increasingly bought until the next round of liquidation was triggered, causing the price to plunge further. An example is FTX – the rate on FTX was climbing until May 20th.

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Industry Insights - Assessing Risk and Performance
top asset
The performance of the top ten crypto assets (by market capitalization) fluctuated around zero early last week, with some assets performing well and others lagging. By the middle of last week, things had taken a nosedive, with all top assets closing in double-digit losses by the end of last week. Cardano (ADA) and Dogecoin (DOGE) were the least affected cryptocurrencies over the weekend, with returns of -13% and -26%, respectively. Ethereum (ETH), Chainlink (LINK), Uniswap (UNI), Litecoin (LTC) and Binance coin (BNB) suffered the most losses, losing more than 40% in a week.

As expected, there was a sudden spike in volatility in the top ten. On a rolling 30-day basis, volatility for most assets increases by roughly 5% over the course of a week. Over the past few weeks, volatility has been between 5% and 9%, but overall volatility is now above 10%. The only exception is Bitcoin, which has a rolling volatility of 6%.

Correlations in this group gradually strengthened as the market crashed. As of yesterday, the 30-day correlation between the top assets was well above 50%.



Correlations with Bitcoin have also risen sharply this week. Dogecoin (DOGE) has seen a correlation increase of more than 60% in a week, while Uniswap (UNI) has increased by around 30%. All assets are now more than 60% correlated, with some reaching 80%.
DeFi
Like the rest of the market, DeFi assets sold off sharply last week. For most of the week, the asset moved sideways without leaning in any particular direction. SushiSwap (SUSHI), Synthetic (SNX) and Aave (Aave) had a decent rally on Tuesday, but the results were short-lived. Similar to the top ten, DeFi assets closed the week with double-digit losses ranging from -23% to -51%. Uniswap (UNI) and PancakeSwap (CAKE) experienced the biggest losses of the week, with gains of -45% and -52%, respectively. They are also arguably the most dominant token in the centralized exchange (DEX) segment.

Notably, the total value locked (TVL) in the Binance Smart Chain (BSC) and Ethereum ecosystems was affected.
From the peak, BSC and ETH lost -62% and -27% of TVL respectively. This shows that tokens in Ethereum DeFi have largely not been withdrawn from the protocol. Among them, BSC sees a hole in BUNNY, which may worsen the overall TVL.

Volatility in DeFi surpassed its highest level in three months, with all assets reaching levels above 10%. Notably, the volatility of ThorChain (RUNE) doubled from 7% to 14% in three days. Among them, SushiSwap (SUSHI) is the riskiest asset with a rolling volatility of 16%. As of May 20, volatility was around 10% to 16%.

Correlations for this segment are also at an all-time high. On average, the correlation between DeFi assets ranged from 10% to 50% in the previous few weeks. After the market fell, the correlation shot up from 50% to 89%.



currency

currency
While currencies have been among the best performers in this bloodbath, they have been in turmoil over the last week. All currencies included in the report are down more than 20% this week. Dogecoin (DOGE) and XRP (XRP) have weathered the downward pressure better, ending the week with a -26% return. On the other hand, Monero (XMR) and Dash (Dash) ended the week down more than 50%, completely erasing the gains made in the previous weeks.

Volatility in the sector reached levels of over 10% for most currencies. Interestingly, the price volatility of Dogecoin (DOGE) has dropped significantly since the end of April and the beginning of May when it fluctuated wildly. The volatility of DOGE remains the highest after BCH, which has continued to increase since May, reaching a new high of 17%. Other fluctuations range from 6% to 14%, with Bitcoin being the least volatile asset in the industry.

Correlations between currencies have been relatively high over the past few months. Among them, the most obvious change is Dogecoin (DOGE). The correlation between DOGE and other tokens in the sector increases by about 50% every week.

Smart Contract Platform

Smart Contract Platform
Cardano (ADA) and Polkadot (DOT) seem to be doing well this week, and by the middle of last week they were clearly outperforming other coins. All assets were down at the same time through the end of last week, with Cardano (ADA) and Solana (SOL) finishing the week with the smallest declines in the sector, with -13.7% and -23.3% respectively. EOS and Binance Coin (BNB) returned -48.9% and -49.7%, respectively.

Volatility has increased by about 4% to 5% across most assets. Volatility in Solana (SOL) saw the biggest jump in the sector, going from 5% to 13% in one week. The volatility of EOS reached an all-time high of 21%, making it the riskiest asset in the smart contract platform sector.

Over the past few weeks, the smart contracts sector has been relatively less correlated compared to other sectors in the report. Solana (SOL) remains uncorrelated to other assets in the sector. However, correlations inevitably increase as the entire market collapses. In Solana's case, the correlation with other assets rises to 60%. The sector's current correlations range from 40% to as high as 96%.

decentralized exchange

decentralized exchange
Decentralized exchanges were one of the worst performing sectors last week. Over the past seven days, the industry has fallen 21%. Similar to others, DEX performance started heading south last Wednesday, falling to double-digit loss ratios. SushiSwap (SUSHI) had the least loss at -23%. The rest of the DEXs lost over 30%, with PancakSwap (CAKE) and Curve (CRV) losing over -50%.

Volatility in the sector rose from 4-9% to 8-15%. Lower ones are Bancor (BNT) and Uniswap (UNI), with rolling volatility of 8.8% and 9.3%, respectively. The highest is SushiSwap (SUSHI), which has a volatility of 16%.

Aside from the overall correlation change caused by the market correction, the only notable changes were for the three tokens of Uniswap (UNI), PancakeSwap (CAKE) and ThorChain (RUNE). All three assets have low correlations, but after last week's market moves, their correlations with other assets are at record highs. As of yesterday, the degree of correlation in this part exceeded 60%.

The DEX-Bitcoin correlation did not see a major uptick this week. The exceptions are Uniswap (UNI), PancakeSwap (CAKE), and ThorChain (RUNE), which have increased their correlation with Bitcoin by about 30%.

Web3
Web3 was the worst performer of all sectors. The sector posted an average loss of -25.7% for the week. Compared to other sectors, Web3 assets moved very closely throughout the week. All assets started to lose money on Sunday, May 16, and only Helium (HNT) recovered slightly in the following days. The Web3 sector fell overall, falling between 27% and 51% on Wednesday. HNT fell to 27% in the last week, while Siacoin (SIA) and Stacks (STX) fell to -49% and -51% respectively.

Like other sectors, Web3 assets saw a similar jump in volatility. Volatility across the sector has increased by about 4%, with the sector's overall volatility ranging from 9% to 12%.

The correlation of this group increased due to the market crash. Notably, within a week, Livepeer (LPT) and Arweave (AR) went from negative to positive correlation.

Like other sectors, Web3 assets have seen an uptick in correlation with Bitcoin. While most are between 70% and 85%, Livepeer (LPT) and Arweave (AR) have lower correlations, both hovering around 44%.

C plus Weekly News takes stock of the main news of the week, presents the information dynamics of the past week, and allows you to quickly grasp the interesting news of the industry.