Inflation Turnaround?

Crypto Market Week in Review (16 October 2022)

Markets

This week the markets were in slightly negative mode. Stocks corrected down after last week's big rally; bonds continued to slide. Long-term US Treasuries yields reached the highest level since 2014, briefly touching 4%.

30-year US Treasuries yield (%)

* Shaded area represents recession

The most interesting price action was seen on Thursday when S&P 500 initially plunged by more than 2.5% because of the bad inflation report, but during the day recovered all the losses and closed 2.5% higher. The markets probably focused on short-term inflation performance, which indicated that 3-month seasonally adjusted annualized CPI is close to 2% despite scary longer-term year-over-year figures. Although the same-day bond market performance was far more muted, such an impressive turnaround of the stock market gives hope to bulls.

Bitcoin and Ethereum were slightly down for the week. Cryptocurrencies continued to be relatively stable compared with the stock market with both up and down crypto moves being muted compared with a historical beta to the stock market and implied volatility difference. For example, on Thursday, when there were big moves on inflation news, the difference between the daily high and low was 7.6% for Bitcoin and 5.6% for S&P 500 futures, while the implied volatility of Bitcoin is twice higher than S&P 500.

Bitcoin DVOL index (orange) and VIX (green)

Interestingly, Uniswap managed to secure new funding despite this year's DeFi gloom, “crypto winter” and broader market negativity. Uniswap said it was to receive $165 million, valuing the company at $1.66 billion. That’s far lower than Uniswap’s current market cap of $4.9 billion, but the news does indicate renewed interest in riskier crypto investments.

Who’s doing really well this year despite all the gloom is crypto hackers, as Bloomberg reported that they set for a record year after stealing over $3 billion. “At least $718 million has been stolen so far in October alone, taking the gross tally for the year past $3 billion and putting 2022 on course to be a record for the total value hacked”, Bloomberg said referring to the data from Chainalysis Inc.

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