Weekly Recap Ending July 1st
Week In Review
- The current Granada proposal for Tezos has passed the Exploration Phase, which ended on Jun. 23, 2021.
- The Helium blockchain began to successfully elect new Consensus Groups after a ten-hour delay
- Voting on a proposal to create an Aragon Association Venture Capital Fund has started and will end on Jul. 2, 2021.
- 1 million UNI will now be allocated to a nonprofit entity based in the United States to provide grants for political, educational, and legal engagement.
- Algorand shared a pre-release version of v2.7.1 of its mainnet client on Jun. 29, 2021.
- Perpetual Protocol team introduced Perpetual Protocol V2, called Curie.
Sector Performance Overview
The week ending on July 1st was a mixed one for cryptocurrency markets. Following Messari’s sector convention, three out of the five sectors covered in the report ended the week in positive territory while two suffered some minor losses.
The week was led by the Smart Contract Platform sector which ended with a positive return of 6% driven by assets such as Ethereum (5.12%), Solana (6.70%), Ethereum Classic (22.85%), and Internet Computer (32.30%). The DeFi sector followed closely in second place finishing the week with a return of 4.8%. Assets such as Compound (29.67%), Aave (11.95%), MakerDAO (13.36%), and Terra (6.42%) were among the best-performing assets of the sector.
On the contrary, the Currency sector was the worst-performing one of the week as a sudden appetite for riskier assets hit the markets. The biggest detractor of the sector was Bitcoin which had a 7-day return of -3.74% as investors moved to higher beta tokens in search of higher returns.
Sector Portfolio Weights
The sector portfolio weights for this week’s report are as follows. The portfolio allocations are constructed following the market capitalization methodology using data as of July 1st.
Sector Drill Down
Performance during the week ending on July 1st was a bit bumpy but positive overall. Asset prices experienced a small rally during the first day of the week followed by a sharp decline which sent returns to the red zone. However, the story quickly changed as the weekend came to an end.
On Monday, UK regulators banned Binance from having ongoing operations in the U.K., in the latest sign of the growing crackdown on crypto markets around the world. Despite the bearish news, crypto markets shrugged off the bad press as asset prices rallied, setting a positive tone for the rest of the week.
The DeFi and Smart Contract Platform portfolios outperformed the rest of the sector portfolios during the week. Within the DeFi portfolio, Compound was the top-performing asset finishing the week with a 29.67% return. The portfolio also benefited from the weekly performance of Aave (11.95%), MakerDAO (13.36%), and Terra (6.42%). Similarly, Ethereum (5.12%), Solana (6.70%), and Cosmos (24%) were the main drivers of performance for the Smart Contract Platform portfolio. Compound outperformed as the protocol announced it will give a fixed 4% APR on US dollars, with daily liquidity, targeted at financial institutions.
During the week, Bitcoin’s dominance dipped roughly 4% as investors dialed up risk, rotating away from lower volatility assets into higher-risk assets.
Conversely, Ethereum’s dominance spiked 3% during the week in a sign of a rotation to higher volatility tokens.
Last week, volatility, defined as the rolling standard deviation of daily log returns, suddenly spiked across the board as markets tumbled down on the back of China’s crackdown on Bitcoin mining. However, during this week volatility stabilized and is now ranging from 5% to 7% across all sector portfolios.
Similarly, the correlation between the sector portfolios and Bitcoin stabilized around the 85% mark after seeing a decline over the past two weeks.
Following a similar pattern, the correlation between the sector portfolios and Ethereum also stabilized after experiencing a small dip. Interestingly, the correlation of the DeFi and DEX portfolios remains elevated hovering around the 95% levels. On the contrary, the Web 3 and Currency portfolios are continuing to see a decline in their correlation with Ethereum.
Cover image source: Coin Companion
Roberto is the Head of Data Science at Messari. Prior to his current role Roberto worked as a researcher focusing on DeFi and DAO treasury management. Before joining Messari Roberto spent 4 years at BlackRock working as a quantitative developer focusing on building high performance Python tooling for research.