Are we finally close to capitulation point for cryptocurrencies? I’ve long thought that there’s a place for these digital currencies but I’ve been worried that valuations are essentially only driven by momentum flows i.e valuations will only increase alongside the flow of new interested investors. Once this stream of newbies dries up, we’ll see a panic which will eventually result in a capitulation point. Last week I think we edged closer to this point.
One way of testing the temperature of the varying and heterogenous cryptocurrency markets is to look at the excellent research of an outfit called Digicor – you can find them online at digicor.io
This new outfit is planning to launch a series of private tracker funds which are in turn based on in-house benchmark indices for a wide range of cryptocurrencies. These composite indices are the best I’ve seen in the market – they give the investor a proper sense of perspective.
The table below shows returns for these benchmarks over the most recent period – ending last week.
According to Digicor, the crypto space has taken a
“nosedive and made [the week befores] respite look like a dead cat bounce. The sell-off was broad-based and every single crypto in the DigiCor observed universe had a bad week. The DCEX index and the DCX index bled by -18.6% and –15.7%, respectively. Cryptocurrencies (DCCX index) decreased the least amongst the crypto economy sectors at -16.8% as panic-stricken investors sold their holdings into Bitcoin, producing the typical value rotation observed in crypto. Despite the great news that Ethereum is not a security, the Tokens index (DCTX), which are largely composed of Ethereum based tokens, plummeted by -19.7%. EOS drove the underperformance of the Protocols index (DCPX), which slid by -17.6%, as questions surrounding the transition of the tokens into the mainnet remains unclear.
Market participants attribute part of on “significant volatility” around futures expiry dates on the CBOE and CME futures marketplaces. Unkoin (UKG), an e-sports betting blockchain, had the worst performance dropping by -40%. UKG was closely followed by Polymath (POLY), a blockchain designed to tokenize securities, and UpToken (UP), a coin rewards system for ATMs, which had respective performances of 38% and 36%. Trading volumes continue to decrease leaving very little room for supporting a price floor. This makes May one of the most difficult months to trade. It’s worth highlighting that diversification pays in this market, even the simple index format. All the DigiCor indices performed in the upper 10th percentile relative to the DigiCor digital assets observable universe.”
My guess is that we’re fast approaching the point of market panic and proper capitulation. Get ready for the ride!