Week In Review

Notable Messari Updates

1. Rari Capital CEO Jai Bhavnani has shared the way they plan to reimburse exploited users.
2. 2,809 AAVE ($1.25 million) has been transferred from the Ecosystem Reserve to the grants DAO multi-sig.
3. The Teku development team released v21.5.0 of its Eth2 client on May 11, 2021.
4. Near Protocol launched its EVM-compatible execution layer, Aurora, on May 12, 2021. Near’s new layer also comes with the Aurora Bridge (based on the Rainbow Bridge technology) to facilitate ETH and ERC-20 token transfers between Ethereum and Aurora.
5. The Injective team announced the launch of the first of three phases of the Injective mainnet launch.

Sector Performance Overview

Crypto markets had it rough last week. Despite the bloodbath, smart contract platforms showed incredible resilience to the market turbulence being the only sector that ended the week with a positive return of 4.6%. On the negative side, Currencies and Web3 lagged the rest of the sectors finishing the week with double-digit losses of -12% and -15% respective

Sector Drill Down - Risk and Performance Review

Top Assets

After a phenomenal week, the top assets had a bit of a bumpy ride this week. All assets started the week with negative returns setting the tone for the following days. All assets in the top ten tumbled sharply Wednesday night following the rest of the market. By the end of the week, only Ethereum (ETH) and Cardano (ADA) ended the week with positive returns of 10% and 6%. The rest of the assets in the top ten ended in negative territory. Notably, Dogecoin (DOGE), last week’s outperformer, suffered a loss of 40% whipping out about half of last week’s performance.

Despite the turbulent week, volatilities in the top ten remain relatively stable. As of yesterday, asset volatility remained below 10% with the exception of Dogecoin (DOGE) which continues to be elevated at 24%.

As a result of the recent sell-off, correlations among the top ten assets increased over the week. In particular, Dogecoin (DOGE) is slowly becoming more correlated with the rest of the group.

Correlation with Bitcoin saw an uptick during the week across most top assets. Notably, the correlation between Bitcoin and Uniswap (UNI) increased approximately 20% from 14% to 34% over the week.

DeFi

DeFi assets also had a crazy week. Most started the week with negative returns then hovered around the zero line for the remaining of the week. Early in the week, SushiSwap (SUSHI) was the decisive winner reaching a return as high as 22% in two days. Yearn (YFI) was by far the most interesting token in the DeFi space in terms of performance. The token saw a huge upswing starting on Tuesday reaching a return as high as 63% by Thursday, May 12th which was followed by a 40% drop the next day. Despite the drop, Yearn (YFI) was the clear outperformer of the week ending with a strong 27% return. Aave ended the week in second place with a total weekly return of 14%. On the negative side, Terra (LUNA) and PancakeSwap (CAKE) lagged the rest of the group ending the week with a return of -12% and -22% respectively.

Volatility in the DeFi sector remains in the 5% to 10% range for most assets. Week-over-week, Yearn (YFI) is the only asset with a noticeable change in volatility given its recent moves. The token’s volatility increased 6% to 9.8% making it the second most volatile asset in the group. Across the top DeFi asset, MakerDAO (MKR) continues to be the riskiest asset with rolling volatility of 10.6%.

Correlations didn't change drastically over the week. In previous weeks, Terra (LUNA) was one of the most uncorrelated assets within the group. However, recently LUNA has become more correlated with most DeFi assets with the exception of Rune. Correlation between Rune and LUNA is declining week-over-week reaching an all-time low of -17%.

Correlation with Ethereum across DeFi assets has been a bit mixed during the week. On the positive side, Uniswap (UNI), PancakeSwap (CAKE), and MakerDAO (MKR) saw their correlation with Ethereum spike over the week. On the contrary, Aave (AAVE) and Yearn (YFI) experience a slight decline week-on-week. As of May 13th, correlation in the group range from a low of 27% to a high of 64%.

Currencies

The currency sector had a rough week. Despite some assets starting the week with strong performance, Wednesday’s sell-off pushed the whole sector to negative territory. The assets that were least affected by the market drop were Monero (XMR) and Dash (DASH) which ended the week with negative returns of 4% and 7% respectively. The most affected were Ripple (XRP), Bitcoin SV (BSV), and Dogecoin (DOGE) suffering losses of -27%, -28%, and -40%.

Volatility in the sector increased slightly over the week. Most assets saw a small jump of 1-2% as a consequence of the turbulent week.

Correlations in the group remain skewed towards the upper end of the spectrum. Currencies is the most correlated sector compared to the rest covered in this report with most asset correlations being above 40%.

Following a similar pattern, correlation with Bitcoin continues to rise week-over-week. Now, the correlation with Bitcoin is greater than 60% across the sector. Dogecoin (DOGE) is the exception standing at 14% but has recently been steadily increasing over the past few weeks.

Smart Contract Platforms

Similar to the rest of the sectors, smart contracts platforms also experience a high volatility week. Most hovered around the zero line during the first part of the week while others had strong upswings. Similar to Yearn, EOS’s price skyrocketed reaching a return of 60% by the middle of the week but quickly gave back some of the performance as the week came to a close. Despite the bump in volatility, EOS remained the leader in the group finishing the week with a 16%. Ethereum (ETH) and Cardano (ADA) followed closely with total weekly returns of 10% and 7%. The rest of the assets in the sector ended the week in the red with Neo (NEO) and VeChain (VET) being the underperformers of the group.

Most smart contract platforms are seeing an upward trend in their volatility. Most notable is EOS’s volatility which increased drastically over the week as a result of its sudden price action. The token’s volatility increased from 9% to 16% in the span of three days. Neo (NEO), EOS, and Cardano (ADA) also experienced an increase in volatility in the 1-3% range.

Week-over-week correlation among smart contract platforms slightly decreased. Solana (SOL) remains the only negatively correlated asset in the sector.

Correlation with Bitcoin continues to rise week-on-week. Now, correlations with Bitcoin are above 50% with Solana (SOL) being the only exception standing at -10%. However, the token has seen a drastic change in recent weeks making it increasingly more correlated with Bitcoin.

Decentralized Exchanges

The decentralized exchanges sector followed a similar pattern as the rest of the sectors during the week. The first few days were a little mixed between good and bad; some DEXs had strong positive performance while others lagged. However, the whole sector declined in unison at the beginning of the week sending all assets to negative territory. In the following days, most assets rebounded sharply with Loopring (LRC) leading the pack reaching a return of approximately 50% by Wednesday. As is the case with the rest of the sectors, DEX’s experienced heavy losses in the middle of the week pushing most to end the week with negative returns. Curve (CRV) was the outperforming of the group ending the week with a 17% return while PancakeSwap (CAKE) suffered the most finishing with a -23% return.

Volatility across most decentralized exchanges was stable during the week. Exceptions include Uniswap (UNI) and Loopring (LRC). Over the week Uniswap’s volatility decreased 2% while Loopring’s increased by the same percentage. As of yesterday, volatility in the sector ranges from 5% to 10%.

Correlation between DEXs continues on the same pattern as previous weeks. Uniswap (UNI), PancakeSwap (CAKE), and Rune are the most uncorrelated assets in the sectors. However, over the week their correlation with the rest of the assets slightly increased.

Correlations with Bitcoin are starting to trend up. Correlations in the sector are above 40% for most DEXs. Uniswap (UNI) and PancakeSwap (CAKE) saw jumps of 20% and 30% over the week.

Web3

Web3 was the worst-performing sector of the week ending with a -14.7% loss. Despite the bloodbath in the sector, Livepeer (LPT) and Arweave (AR) managed to end the week in the positive with total weekly returns of 16% and 6%. The rest of the assets in the sector suffered significant losses ranging from -10% to -27%.

Despite the crazy week, volatility remained relatively stable. Livepeer (LPT) is the only exception which saw a 3% increase in volatility over the week.

Correlation among the assets in the sector increased over the week driven by the market decline. Week-on-week, Arweave (AR) has become increasingly correlated with the sector while Livepeer (LPT) is becoming less correlated with the rest of the assets in the group.

Correlation with Bitcoin across most Web3 assets has been consistently increasing over the past weeks. Most assets have a correlation greater than 50%. Livepeer’s (LPT) correlation declined dramatically during the week tumbling from 50% to 29%. Arweave (AR) correlation is at 28% making it the only other Web3 asset with a correlation of less than 50% in the group.

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