In a report titled, Monitoring the Currents of the Crypto Market, Matías Andrade and Kyle Waters from Coinmetrics noted that the digital asset market is “experiencing a surge in activity as we kick off the new year.
The update from Coinmetrics points out that Bitcoin is “up 36% in January rising to $22,500, its highest level since last summer.” This growth may “seem surprising amidst the backdrop of economic uncertainty, including large-scale layoffs in tech giants and persistent macro risks.”
Nonetheless, this presents “a unique opportunity to scout the trends in relative performance and track key market indicators to track the development of the market in upcoming months.”
As mentioned in the report, the digital asset market has seen a remarkable rebound, “as evidenced by the performance of the various indices tracked by Coin Metrics.”
Through the lens of datonomy™—the digital assets taxonomy developed collaboratively by Coin Metrics, Goldman Sachs, and MSCI—the researchers are able “to gain a deeper understanding of the market by analyzing and contrasting different sectors against each other.”
The CMBI Total Market Series indexes “have all seen positive growth, all netting gains over 25% through January 22nd.” The Metaverse sector is “leading the market, with a near 60% rise year-to-date, followed by Smart Contract Platforms, which has seen an increase of 52%.”
The Metaverse and smart contract sectors “have been performing particularly well in the current bull market and continue to outpace the overall digital asset market.”
Despite the move higher, there is still “a lot of room to go to retake the 2021 highs.
A full 400 days have now “passed since BTC hit its last all-time high in November 2021.”
Likewise, ETH has also “spent over 400 days now below its last ATH.”
Returns are only “one part of a market’s anatomy.” To understand recent market dynamics we must “look at volatility as well.”
Realized volatility is “a valuable tool for assessing historical market behavior and characterizing te performance of assets over specific time periods.”
Using their reference rate data, they calculate “a 30 day realized volatility metric.”
This measurement of volatility “highlights different episodes that occurred in the market over the past year, including the Terra/Luna de-pegging in May and the collapse of FTX in November.”
Bitcoin’s realized volatility flat-lined “towards the end of 2022.” However, in recent weeks, a bullish trend “has pushed prices higher, reaching $22,000 and volatility rising too, although still below previous levels.”
To gain a comprehensive understanding of market volatility, we can analyze volatility across various sectors of the digital asset taxonomy.
As noted in the Coinmetrics report, major assets “experienced more than 200% volatility in the period observed.” However, it is interesting to note “that Value Transfer Coins had lower volatility compared to tokens used in DeFi, which exhibited some of the highest volatility levels across these sectors.”
Recently, there have been notable shifts “in the relative market share of exchange-traded volume within the digital asset market.”
These developments have “further entrenched Binance as the leading exchange in terms of volume traded.” The sample indicates that Coinbase was “the second-highest volume traded since the beginning of the year.”
The market for derivatives trading “exhibits a slightly greater degree of diversity in the choice of venues.”
One easily noted player in this market is CME, which only “conducts trades during U.S. open market hours and is visible near the top of the chart below.” However, the majority of futures volume trades “take place on Binance, Bybit, and OKX.”
In conclusion, the digital asset market “has seen a remarkable rebound, as evidenced by the performance of various indices tracked by Coin Metrics.”
Additionally, by utilizing the datonomy framework, it is possible “to gain a deeper understanding of the market by analyzing the relative performance of different sectors.”
These insights “provide valuable information about the current state and potential future trends of the digital asset market.”
As global financial markets warm up to the prospect of a “soft-landing” following a turbulent 2022 of rate hikes and soaring inflation, crypto market participants “would surely welcome an easing macro headwind.”