02 May 2022

Flight to safety in the crypto market

In 2022 crypto market participants have been climbing down the risk ladder, selling their smaller coins for blue-chip coins like bitcoin.
Source: Tradingview (Coinbase, FTX)
To gauge the state of the broad crypto market, we can study the performance of several indexes consisting of different coins. The best performer in 2022 is the Exchange Token Index, which is down 14% in an overall red market. Bitcoin is the second-best performer in 2022 after declining 20%. Bitcoin and exchange tokens are the traditional “safe-haven” assets in crypto, historically being the least impacted in bearish times. On the other side of the return spectrum, we find the Small Cap Index, which has almost halved since the start of the year. The small caps performed terrifically during Autumn’s bull run but have struggled as the market conditions have turned increasingly sour in recent months. These performance differences between large and small coins illustrate that the market currently is in a risk-off mode. The current poor market sentiment is also showcased by the Fear and Greed Index, which has been indicating a fearful market for most of 2022.
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