Notable Messari Updates
Kadena Kadena released Chainweb Mainnet 2.7 (Kadena’s mainnet client) on Apr. 29, 2021.
The Taproot signaling period has started.
Sector Performance Overview
The week ending May 6th was led by the smart contract sector dominating the week with a 30% return. The sector as a whole was boosted by Ethereum which smashed through its all-time high, rising to over $3,600. Web-3 came in second place closely followed Currencies. On the low end, DeFi and decentralized exchanges ended the week in positive territory but lagged the rest of the sectors.
Sector Drill Down – Risk and Performance Review
Top Assets
The week ending on May 6th was dictated once again by Dogecoin (DOGE). The surge in retail euphoria fueled DOGE’s returns making it the best-performing assets of the week with a total weekly return of 104%. Aside from DOGE’s insane performance, the rest of the assets in the top ten also had great weekly returns. The majority of the top ten ended the week deep in the green zone with double-digit returns. The only exceptions were Bitcoin (BTC) and Uniswap (UNI) which ended with a return of 4% and -2% for the week.
Top asset volatilities remained stable over the week. The majority continues to be below the 7% mark with Dogecoin (DOGE) and Ripple (XRP) being the only two exceptions. In XRP’s case, volatility decreased from 14% to 12% week-over-week while DOGE’s continues to increase reaching a new high of 24% making it the riskiest asset in the group.
The 30-day correlation between most of the top assets didn’t change much over the week. The only notable change was Uniswap (UNI) which saw a slight decrease in correlation with the rest of the assets in the group.
Correlation with Bitcoin is starting to increase across the group. As of the end of the week, eight out of the top ten have a correlation with Bitcoin greater than 40%. Dogecoin (DOGE) has remained stable, hovering around the zero line while Uniswap’s correlation continues to decrease dipping below the 20% mark.
DeFi
Last week was a bit mixed for DeFi assets. While most decentralized exchanges had muted to negative returns, THORChain’s RUNE came out on top of the DeFi sector with a total weekly return of 28%. Lending protocols such as MakerDAO (MKR) and Compound (COMP) closely followed with weekly returns of 25% and 22% respectively. Decentralized exchanges including PanckaSwap (CAKE), SushiSwap (SUSHI), and Uniswap (UNI) came in last with weekly returns of 0.6%, -1.5%, and -2.3%
Volatilities across DeFi assets are beginning to pick up. Overall the sector has seen a steady increase in volatility starting in mid-April. Most remain below 10% with the exception of MakerDAO (MKR) and RUNE which have rolling volatility slightly above the 10% level.
Correlations between DeFi assets have not changed drastically over the week. Week-over-week, Terra (LUNA) has seen a slight increase in correlation with the rest of the group. In contrast, Uniswap (UNI) is starting to become slightly more uncorrelated with the rest of the sector.
In terms of correlation with Bitcoin, all DeFi assets saw a small bounce over the week. The correlation between Uniswap (UNI) and BTC continues to decrease, reaching a level below 20%. MakerDAO (MKR) is the only other asset in the group with a correlation to Bitcoin below the 20% mark.
Currencies
The currency sector as a whole had a phenomenal week. As mentioned previously, the clear outperformer, and outlier, of the group was Dogecoin (DOGE) with a massive weekly return of 104%. Bitcoin’s forks, Bitcoin Cash (BCH), and Bitcoin SV (BSV) were the second and third best-performing assets in the group with returns of 51% and 47% over the week. Dash (DASH), Litcoin (LTC), Stellar (XLM), and Ripple (XRP) also had double-digit weeks with performances ranging between 28% and 38%. Bitcoin (BTC) and Monero (XMR) were the laggards of the group ending the week with returns of 4% and -0.5%.
Volatility in the currency sector is starting to pick up. While most remain under 10%, Bitcoin’s forks saw a sudden spike in volatility over the week pushing them above 10%. Notably, Bitcoin Cash’s (BCH) volatility increased from 8% to 12% in one single day.
Correlations across currencies remain on the high end of the correlation spectrum. The trend continues as correlations continue to climb across the group week-on-week. As of yesterday, the currency sector is the most correlated across all sectors covered in this report.
Unsurprisingly, all currencies are starting to see an increase in their correlation to Bitcoin. Most are now above the 60% correlation level. Notably, Ripple (XRP) and Stellar (XLM) are at an all-time high reaching correlations to Bitcoin of 82% and 87% respectively.
Smart Contract Platforms
The smart contract platform sector was by far the best performing sector during the week. Overall, the group was up 30% boosted by the excitement around Ethereum’s all-time high week. EOS led the smart contract sector completely outpacing the rest with a whopping 52% weekly return. NEO and Ethereum (ETH) followed closely ending the week with returns of 29% and 27% respectively. Polkadot (DOT), Tron (TRX), Cosmos (ATOM), Binance Coin (BNB), and Cardano (ADA) also had strong weekly performance ranging from a low of 11% to a high of 20%. Interestingly, Solana (SOL) was the only smart contract platform that ended the week in negative territory despite being the top-performing asset last week.
As is the case with most assets in this report, volatilities across smart contracts platforms are starting to increase. EOS saw the biggest increase over the week going 7% to 11% in the span of two days. On the contrary, Tron (TRX) is the only asset with decreasing volatility across the assets in the sector.
Correlation in the sector did not change much over the week. Solana (SOL) saw a slight increase in correlation during the week but it’s still the only token that remains negatively correlated to the rest of the assets in the group.
Correlation with Bitcoin across smart contract platforms has been on the rise since the beginning of May. NEO, Tron (TRX), and Solana (SOL) are the three notable tokens seeing a rapid increase in correlation. Solana (SOL) continues to be the only asset with a negative correlation to Bitcoin making it a potential diversifier in the event of a sudden Bitcoin drop.
Decentralized Exchanges
The decentralized exchange sector was the worst-performing sector of the week ending with a 5% return. The group had one of the widest distributions of total returns with some DEXs having a great week while others fell flat. This week, RUNE led the group with a total return of 28%. Other DEXs with two-digit weekly returns include Bancor (BNT), 0x, and 1inch with performance ranging from 10% to 15%. Uniswap (UNI) was the underperformer of the group ending the week with a -2.3% return despite the highly anticipated launch of Uniswap V3.
Unlike most other sectors, volatilities across decentralized exchanges have remained relatively stable in the past weeks. Since April, Bancor’s (BNT) volatility has been hovering around 5% making it the least risky asset in the sector. On the contrary, RUNE’s volatility has steadily increased over the past month reaching an all-time high of 10% as of May 6th.
In terms of correlations, Uniswap (UNI) and PancakeSwap (CAKE) are the notable tokens of the week. Both are becoming slightly less correlated with the rest of the assets in the sector. Interestingly, the remaining assets experienced the opposite seeing a slight increase in correlation with one another.
Correlation between decentralized exchanges and Bitcoin has followed a similar trend over the past months. During last week, most DEXs experienced a slight bump in their correlation to Bitcoin pushing some over the 70% level. Across the sector, Uniswap (UNI) is the only asset that is consistently seeing a decrease in correlation with Bitcoin.
Web3
The Web3 sector was the second-best performing sector of the week with an overall return of 16%. Leading oracle provider, Chainlink dominated the Web3 sector ending the week with a 34% return. Performance among the remaining assets hovered around zero. On the positive side, Helium (HNT), Siacoin (SC), and The Graph (GRT) finished the week with low one-digit positive returns. Storj (STORJ) Stacks (STX), and Arweave (AR) were the underperformers of the group ending the week in negative territory.
Volatility across the Web3 sector has become more stable over the past week. Livepeer (LPT), Storj (STORJ), and Stacks (STX) had volatilities above 20% in the past month but have seen notable reductions of more than 15% in the last three weeks. As of yesterday, volatilities in the sector have stabilized ranging from 6% to 11%.
Correlations in the sector are not concentrated on either side of the spectrum. Over the past 30-days, Web3 has been the most uncorrelated sector compared to the rest covered in this report. One token worth highlighting is Stacks (STX) which has become significantly more correlated with Helium (HNT) and Livepeer (LPT) week-over-week.
Correlation with Bitcoin remains highly dispersed in the Web3 sector. However, this past week most assets experience a significant jump pushing all correlations past 30%. Notably, Helium (HNT), Arweave (AR), and Stacks (STX) saw increases of more than 20% over the week.