While 2021 was considered the golden year for crypto, 2022 wasn’t as kind. Major cryptocurrencies lost over 50% of their value throughout this year during the bear market. Now, it’s hard to imagine that at this time in 2021, Bitcoin was soaring above $60K. Still, the ongoing crypto winter was not unforeseeable, rather, projected.
The crippling financial impact of the pandemic and the Russia-Ukraine war meant that liquidation would be high. To cope with the unprecedented increase in the cost of living, it was evident that traders would quickly drop their most risky assets. In addition, the tightening monetary supply amid rising interest rates meant that volatile assets like crypto would be devalued. Consequently, these forecasts were precisely on point, and as a result, we are seeing this continual bear market.
What’s the silver lining in this? We must understand that crypto isn’t the only economic tool that’s crashing. From liquid currency to stock and shares, every aspect of financial transactions has been affected by the ongoing crisis. But believe it or not, crypto and other DeFi assets like NFTs have exhibited significantly better resilience than other centralized assets during this period.
So, given that we are still in a bear market and about to enter a more severe period of recession, is it a good time to enter the crypto and NFT scene? Let’s see what the statistical trends suggest.
Crypto Shows More Resilience than Stocks
Historically, crypto assets are known for their volatile reputation, while major stocks such as S&P 500 and NASDAQ are considered more stable and low-risk investment options. While this is true on paper, there are fine lines in stock price trends that suggest that tier-1 cryptocurrencies have shown more stability than traditional stocks during this recession.
The Federal Reserve has announced plans to increase the interest rates by another 1.25%, bringing the total federal funds interest rate to 4.25-4.5% by the end of 2022. Higher borrowing costs mean stocks and treasury assets will also decline in the short term. However, given that the treasury already paid 2% raises in advance, the long-term yield
Yield
A yield is defined as the earnings generated by an investment or security over a particular time period. This is in typically displayed in percentage terms and is in the form of interest or dividends received from it.Yields do not include the price variations, which differentiates it from the total return. As such, a yield applies to various stated rates of return on stocks, fixed income instruments such as bonds, and other types of investment products.Yields can be calculated as a ratio or as an internal rate of return, which may also be used to indicate the owner’s total return, or portion of income, etc.Understanding Yields in FinanceAt any point in time, all financial instruments compete with each other in a given marketplace. Analyzing yields is simply one metric and reflects a singular part of the total return of holding a security. For example, a higher yield allows the owner to recoup his investment sooner, and thus mitigates risk. Conversely, a high yield may have resulted from a falling market value for the security as a result of higher risk. Yield levels are also dictated by expectations of inflation. Indeed, fears of higher levels of inflation in the future suggest that investors would ask for high yield or a lower price versus the coupon today.The maturity of the instrument is also one of the elements that determines risk. The relationship between yields and the maturity of instruments of similar credit worthiness, is described by the yield curve. Overall, long dated instruments typically have a higher yield than short dated instruments.The yield of a debt instrument is typically linked to the credit worthiness and default probability of the issuer. Consequently, the more the default risk, the higher the yield would be in most of the cases since issuers need to offer investors some compensation for the risk.
A yield is defined as the earnings generated by an investment or security over a particular time period. This is in typically displayed in percentage terms and is in the form of interest or dividends received from it.Yields do not include the price variations, which differentiates it from the total return. As such, a yield applies to various stated rates of return on stocks, fixed income instruments such as bonds, and other types of investment products.Yields can be calculated as a ratio or as an internal rate of return, which may also be used to indicate the owner’s total return, or portion of income, etc.Understanding Yields in FinanceAt any point in time, all financial instruments compete with each other in a given marketplace. Analyzing yields is simply one metric and reflects a singular part of the total return of holding a security. For example, a higher yield allows the owner to recoup his investment sooner, and thus mitigates risk. Conversely, a high yield may have resulted from a falling market value for the security as a result of higher risk. Yield levels are also dictated by expectations of inflation. Indeed, fears of higher levels of inflation in the future suggest that investors would ask for high yield or a lower price versus the coupon today.The maturity of the instrument is also one of the elements that determines risk. The relationship between yields and the maturity of instruments of similar credit worthiness, is described by the yield curve. Overall, long dated instruments typically have a higher yield than short dated instruments.The yield of a debt instrument is typically linked to the credit worthiness and default probability of the issuer. Consequently, the more the default risk, the higher the yield would be in most of the cases since issuers need to offer investors some compensation for the risk. Read this Term from treasuries could be better than stocks, as more matured assets can be reinvested into new treasuries.
But how do crypto assets fit into this scenario? While major tokens like Bitcoin and Ethereum have lost more than half of their value in the past year, they seem to have established a rather stable resistance level in recent months. If we see Bitcoin’s two-month price chart, the token has remained rather stable around the $19k-$20k price mark; similarly, Ethereum’s value has hovered between $1200-$1300 in the past three months.
These price trends indicate that tier-1 cryptocurrencies have already sustained mass liquidation. The prices are now projected to maintain a certain resistance level, as most assets are no longer concentrated among short-term holders, which means that Bitcoin and other major crypto assets could function like treasuries.
In fact, Bitcoin’s short-term holder cost basis has fallen below its long-term holder cost basis, meaning that most short-term holders are underwater. If the overall BTC supply remains highly concentrated on long-term holders, we might see prices pick up again slowly but surely, as liquidation risks tend to be low for long-term holders.
If we compare BTC and ETH price drops to NASDAQ and S&P500, we can see how these crypto assets have remained less volatile than the stock market in recent months. The VIX index currently sits at 31.10%, which measures the volatility of the US Stock market. On the other hand, Bitcoin’s volatility index is currently sitting at 19.65%, while Ethereum and Solana’s volatility
Volatility
In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Traders can be successful in both low and high volatile environments, but the strategies employed are often different depending upon volatility. Why Too Much Volatility is a ProblemIn the FX space, lower volatile currency pairs offer less surprises, and are suited to position traders.High volatile pairs are attractive for many day traders, due to quick and strong movements, offering the potential for higher profits, although the risk associated with such volatile pairs are many. Overall, a look at previous volatility tells us how likely price will fluctuate in the future, although it has nothing to do with direction.All a trader can gather from this is the understanding that the probability of a volatile pair to increase or decrease an X amount in a Y period of time, is more than the probability of a non-volatile pair. Another important factor is, volatility can and does change over time, and there can be periods when even highly volatile instruments show signs of flatness, with price not really making headway in either direction. Too little volatility is just as problematic for markets as too much, we uncertainty in excess can create panic and problems of liquidity. This was evident during Black Swan events or other crisis that have historically roiled currency and equity markets.
In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Traders can be successful in both low and high volatile environments, but the strategies employed are often different depending upon volatility. Why Too Much Volatility is a ProblemIn the FX space, lower volatile currency pairs offer less surprises, and are suited to position traders.High volatile pairs are attractive for many day traders, due to quick and strong movements, offering the potential for higher profits, although the risk associated with such volatile pairs are many. Overall, a look at previous volatility tells us how likely price will fluctuate in the future, although it has nothing to do with direction.All a trader can gather from this is the understanding that the probability of a volatile pair to increase or decrease an X amount in a Y period of time, is more than the probability of a non-volatile pair. Another important factor is, volatility can and does change over time, and there can be periods when even highly volatile instruments show signs of flatness, with price not really making headway in either direction. Too little volatility is just as problematic for markets as too much, we uncertainty in excess can create panic and problems of liquidity. This was evident during Black Swan events or other crisis that have historically roiled currency and equity markets. Read this Term indexes remain at 4.35% and 4.27%, respectively, showing significantly more stability than the stock market.
NFTs: One of the Strongest Assets in the Falling Economy?
If we talk about stability, surprisingly, NFTs have produced one of the most stable yields and returns in the bear market. On-chain metrics show that the number of unique traders in the NFTs space has increased by 36% in the third quarter of 2022 compared to last year. In September, non-fungible token sales recorded $947 million, which is a generous increase from the past two months. Around 8.78 million NFTs were transacted in September, which is an advance of three million since July.
These numbers are significant because non-fungible token sales and transactions continuously increase while the overall market economy is declining. This shows that NFTs adoption is getting stronger and stronger every day. In fact, nearly 23% of US millennials hold non-fungible assets.
This consistent adoption is being driven by NFT’s utility. Such assets are no longer just digital collectibles; a lot of them hold tangible real-world values as a result of partnerships with real brands and facilities.
Moreover, major brands and establishments are launching their own non-fungible tokens for more interactive and reward-based digital interactions. The world’s largest ETF issuer, BlackRock, is reportedly launching a Metaverse ETF and rolling out NFTs collections. Mastercard has allowed its cardholders to buy NFTs on several marketplaces and is issuing the world’s first NFTs customizable card in partnership with hi. This growing adoption, utility and real-world integration point to the fact that non-fungible tokens are, in fact, one of the most sustainable asset classes in the digital space right now, which continues to perform well through the recession.
In conclusion, crypto and NFTs have been more stable than centralized asset markets in recent months. This indicates that blockchain and DeFi assets might show more sustainability in the coming recession, which makes them a strong contender for bear market investment decisions.
Chris Stuart Oldfield, Chief Strategy Officer (CSO) at Fit Burn
While 2021 was considered the golden year for crypto, 2022 wasn’t as kind. Major cryptocurrencies lost over 50% of their value throughout this year during the bear market. Now, it’s hard to imagine that at this time in 2021, Bitcoin was soaring above $60K. Still, the ongoing crypto winter was not unforeseeable, rather, projected.
The crippling financial impact of the pandemic and the Russia-Ukraine war meant that liquidation would be high. To cope with the unprecedented increase in the cost of living, it was evident that traders would quickly drop their most risky assets. In addition, the tightening monetary supply amid rising interest rates meant that volatile assets like crypto would be devalued. Consequently, these forecasts were precisely on point, and as a result, we are seeing this continual bear market.
What’s the silver lining in this? We must understand that crypto isn’t the only economic tool that’s crashing. From liquid currency to stock and shares, every aspect of financial transactions has been affected by the ongoing crisis. But believe it or not, crypto and other DeFi assets like NFTs have exhibited significantly better resilience than other centralized assets during this period.
So, given that we are still in a bear market and about to enter a more severe period of recession, is it a good time to enter the crypto and NFT scene? Let’s see what the statistical trends suggest.
Crypto Shows More Resilience than Stocks
Historically, crypto assets are known for their volatile reputation, while major stocks such as S&P 500 and NASDAQ are considered more stable and low-risk investment options. While this is true on paper, there are fine lines in stock price trends that suggest that tier-1 cryptocurrencies have shown more stability than traditional stocks during this recession.
The Federal Reserve has announced plans to increase the interest rates by another 1.25%, bringing the total federal funds interest rate to 4.25-4.5% by the end of 2022. Higher borrowing costs mean stocks and treasury assets will also decline in the short term. However, given that the treasury already paid 2% raises in advance, the long-term yield
Yield
A yield is defined as the earnings generated by an investment or security over a particular time period. This is in typically displayed in percentage terms and is in the form of interest or dividends received from it.Yields do not include the price variations, which differentiates it from the total return. As such, a yield applies to various stated rates of return on stocks, fixed income instruments such as bonds, and other types of investment products.Yields can be calculated as a ratio or as an internal rate of return, which may also be used to indicate the owner’s total return, or portion of income, etc.Understanding Yields in FinanceAt any point in time, all financial instruments compete with each other in a given marketplace. Analyzing yields is simply one metric and reflects a singular part of the total return of holding a security. For example, a higher yield allows the owner to recoup his investment sooner, and thus mitigates risk. Conversely, a high yield may have resulted from a falling market value for the security as a result of higher risk. Yield levels are also dictated by expectations of inflation. Indeed, fears of higher levels of inflation in the future suggest that investors would ask for high yield or a lower price versus the coupon today.The maturity of the instrument is also one of the elements that determines risk. The relationship between yields and the maturity of instruments of similar credit worthiness, is described by the yield curve. Overall, long dated instruments typically have a higher yield than short dated instruments.The yield of a debt instrument is typically linked to the credit worthiness and default probability of the issuer. Consequently, the more the default risk, the higher the yield would be in most of the cases since issuers need to offer investors some compensation for the risk.
A yield is defined as the earnings generated by an investment or security over a particular time period. This is in typically displayed in percentage terms and is in the form of interest or dividends received from it.Yields do not include the price variations, which differentiates it from the total return. As such, a yield applies to various stated rates of return on stocks, fixed income instruments such as bonds, and other types of investment products.Yields can be calculated as a ratio or as an internal rate of return, which may also be used to indicate the owner’s total return, or portion of income, etc.Understanding Yields in FinanceAt any point in time, all financial instruments compete with each other in a given marketplace. Analyzing yields is simply one metric and reflects a singular part of the total return of holding a security. For example, a higher yield allows the owner to recoup his investment sooner, and thus mitigates risk. Conversely, a high yield may have resulted from a falling market value for the security as a result of higher risk. Yield levels are also dictated by expectations of inflation. Indeed, fears of higher levels of inflation in the future suggest that investors would ask for high yield or a lower price versus the coupon today.The maturity of the instrument is also one of the elements that determines risk. The relationship between yields and the maturity of instruments of similar credit worthiness, is described by the yield curve. Overall, long dated instruments typically have a higher yield than short dated instruments.The yield of a debt instrument is typically linked to the credit worthiness and default probability of the issuer. Consequently, the more the default risk, the higher the yield would be in most of the cases since issuers need to offer investors some compensation for the risk. Read this Term from treasuries could be better than stocks, as more matured assets can be reinvested into new treasuries.
But how do crypto assets fit into this scenario? While major tokens like Bitcoin and Ethereum have lost more than half of their value in the past year, they seem to have established a rather stable resistance level in recent months. If we see Bitcoin’s two-month price chart, the token has remained rather stable around the $19k-$20k price mark; similarly, Ethereum’s value has hovered between $1200-$1300 in the past three months.
These price trends indicate that tier-1 cryptocurrencies have already sustained mass liquidation. The prices are now projected to maintain a certain resistance level, as most assets are no longer concentrated among short-term holders, which means that Bitcoin and other major crypto assets could function like treasuries.
In fact, Bitcoin’s short-term holder cost basis has fallen below its long-term holder cost basis, meaning that most short-term holders are underwater. If the overall BTC supply remains highly concentrated on long-term holders, we might see prices pick up again slowly but surely, as liquidation risks tend to be low for long-term holders.
If we compare BTC and ETH price drops to NASDAQ and S&P500, we can see how these crypto assets have remained less volatile than the stock market in recent months. The VIX index currently sits at 31.10%, which measures the volatility of the US Stock market. On the other hand, Bitcoin’s volatility index is currently sitting at 19.65%, while Ethereum and Solana’s volatility
Volatility
In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Traders can be successful in both low and high volatile environments, but the strategies employed are often different depending upon volatility. Why Too Much Volatility is a ProblemIn the FX space, lower volatile currency pairs offer less surprises, and are suited to position traders.High volatile pairs are attractive for many day traders, due to quick and strong movements, offering the potential for higher profits, although the risk associated with such volatile pairs are many. Overall, a look at previous volatility tells us how likely price will fluctuate in the future, although it has nothing to do with direction.All a trader can gather from this is the understanding that the probability of a volatile pair to increase or decrease an X amount in a Y period of time, is more than the probability of a non-volatile pair. Another important factor is, volatility can and does change over time, and there can be periods when even highly volatile instruments show signs of flatness, with price not really making headway in either direction. Too little volatility is just as problematic for markets as too much, we uncertainty in excess can create panic and problems of liquidity. This was evident during Black Swan events or other crisis that have historically roiled currency and equity markets.
In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Traders can be successful in both low and high volatile environments, but the strategies employed are often different depending upon volatility. Why Too Much Volatility is a ProblemIn the FX space, lower volatile currency pairs offer less surprises, and are suited to position traders.High volatile pairs are attractive for many day traders, due to quick and strong movements, offering the potential for higher profits, although the risk associated with such volatile pairs are many. Overall, a look at previous volatility tells us how likely price will fluctuate in the future, although it has nothing to do with direction.All a trader can gather from this is the understanding that the probability of a volatile pair to increase or decrease an X amount in a Y period of time, is more than the probability of a non-volatile pair. Another important factor is, volatility can and does change over time, and there can be periods when even highly volatile instruments show signs of flatness, with price not really making headway in either direction. Too little volatility is just as problematic for markets as too much, we uncertainty in excess can create panic and problems of liquidity. This was evident during Black Swan events or other crisis that have historically roiled currency and equity markets. Read this Term indexes remain at 4.35% and 4.27%, respectively, showing significantly more stability than the stock market.
NFTs: One of the Strongest Assets in the Falling Economy?
If we talk about stability, surprisingly, NFTs have produced one of the most stable yields and returns in the bear market. On-chain metrics show that the number of unique traders in the NFTs space has increased by 36% in the third quarter of 2022 compared to last year. In September, non-fungible token sales recorded $947 million, which is a generous increase from the past two months. Around 8.78 million NFTs were transacted in September, which is an advance of three million since July.
These numbers are significant because non-fungible token sales and transactions continuously increase while the overall market economy is declining. This shows that NFTs adoption is getting stronger and stronger every day. In fact, nearly 23% of US millennials hold non-fungible assets.
This consistent adoption is being driven by NFT’s utility. Such assets are no longer just digital collectibles; a lot of them hold tangible real-world values as a result of partnerships with real brands and facilities.
Moreover, major brands and establishments are launching their own non-fungible tokens for more interactive and reward-based digital interactions. The world’s largest ETF issuer, BlackRock, is reportedly launching a Metaverse ETF and rolling out NFTs collections. Mastercard has allowed its cardholders to buy NFTs on several marketplaces and is issuing the world’s first NFTs customizable card in partnership with hi. This growing adoption, utility and real-world integration point to the fact that non-fungible tokens are, in fact, one of the most sustainable asset classes in the digital space right now, which continues to perform well through the recession.
In conclusion, crypto and NFTs have been more stable than centralized asset markets in recent months. This indicates that blockchain and DeFi assets might show more sustainability in the coming recession, which makes them a strong contender for bear market investment decisions.
Chris Stuart Oldfield, Chief Strategy Officer (CSO) at Fit Burn
