When will the crypto winter end? This question plagues everyone who has anything to do with digital assets. After the collapse of Terra, Three Arrows Capital (3AC), and FTX, the whole market went into a prolonged recession, many projects closed, and companies went bankrupt. Everyone is waiting for the bottom because once it is reached, the bull market (growth) will start, and the crypto winter will be over.
Nansen’s research analyzed three key indicators that could signal the end of the crypto winter.
The USD is a timely indicator of global financial conditions. Cryptocurrency prices tend to benefit from a weaker USD and struggle when the USD strengthens. It is important to understand the dynamics of U.S. real growth in order to assess future movements in the price of the dollar.
The U.S. dollar began to decline against major DM currencies, especially low-yielding currencies such as the JPY, as well as the Chinese yuan after China exited the “zero-COVID.”
The brand new newsletter with insights, market analysis and daily opportunities.
Let’s grow together!
Most indicators showed that it is probably too early to call for a transition to an easier global financial environment, and thus there is likely no fundamental basis for crypto-assets to bottom out yet.
As for the derivatives market, analysts have assessed whether crypto option investors are still “capitulating” in this bear market. To do so, they calculate the open interest-weighted implied volatility of call vs. put options
Also, experts benchmark the best-performing CPIV indicator with the Nansen Smart Money stablecoin risk appetite indicator to find out more about the behavior of derivative investors.
They observe that:
Crypto Risk Premium or CRP — the excess return required for investors to compensate for owning “risky assets” — is related to investors’ perceived fundamental value of those assets.
In calculating the CRP for BTC and ETH, researchers tried to estimate investors’ perceived value of these two assets, such as how much demand there is among the premium investors, how it changed from January 2021 to November 2022, and how it compares to the risk premium demanded by equity investors.
The historical Deribit options data transmitted by Tardis via Nansen-Query was taken, taking into account the intraday buy and sell prices of calls and puts on BTC, ETH, and SOL. A methodology was used to estimate the equity risk premium (ERP) by tying it to a measure of implied volatility, SVIX. Calculating SVIX valuations based on crypto option prices to derive CRP has the same advantages.
The disadvantage is that it implicitly assumes that the implied volatility of one asset class closely resembles the implied volatility of another asset class.
The SVIX/CRP lines tend to surge at select points in time and then regress to more stable levels for longer periods. Two notable CRP surges occurred between January 2021 and May 2021 (the latter coincides with the timeline of China announcing measures to crack down on domestic crypto mining and trading).
Underlying crypto prices tend to decrease when the CRP is low and jumping and tend to increase when the CRP is high and falling.
The S&P 500
The Depository Trust & Clearing Corporation (DTCC), the world's largest securities settlement system, alongside blockchain…
Canadian authorities have charged Aiden Pleterski, a self-proclaimed "crypto king" and well-known social media figure,…
Recent 13F filings with the U.S. Securities and Exchange Commission (SEC) show that over 600…
Switzerland is taking steps to align with international crypto tax reporting standards by planning to…
Hey Crypto Enthusiasts! 👋 🚀 The crypto market is flying up Bitcoin and altcoins…
Since the beginning of April, the cryptocurrency market has seen the creation of over one…