Looking at the impact of the macroeconomic environment on encrypted assets from the perspective of privacy coins overtaking Bitcoin

  • Price Action: Privacy coins have outperformed Ethereum and Bitcoin since the end of February.
  • Trading volume: Crypto asset trading volume in Ukraine has dropped to pre-conflict levels after the central bank banned crypto asset purchases.
  • Order Book Liquidity: While the volume of Ethereum on the asset service platform is at its lowest level since 2018, market depth remains stable.
  • Derivatives: During bear market pullbacks, financing returns are negative.
  • Macro trend: Real yields turned positive for the first time since March 2020.
  • Special Features: We explore how outlier detection can improve encrypted data quality during flash crashes.

Price trend

Crypto assets trend down as stocks sell off.


Bitcoin and Ethereum closed lower last week, while stocks posted their biggest one-day losses since 2020 following hawkish comments from Federal Reserve Chairman Jerome Powell. Last week, TRON founder Justin Sun announced the creation of an algorithmic stablecoin for the network called Decentralized USD (USDD), which mimics Terra’s UST mechanism and will offer 30 % return, aiming to compete with Anchor’s 19.5%. Since then, the stablecoin wars have heated up. Near Protocol is also expected to launch an algorithmic stablecoin with a 20% return, underscoring the growing popularity of using decentralized stablecoins to drive network usage. Finally, Coinbase released a beta version of an NFT marketplace that emphasizes social features, allowing users to shop with credit cards.

Privacy coins have been outperforming (consistently outperforming Bitcoin) since February of this year.


After the Russian-Ukrainian conflict began in late February, the top two privacy coins by market capitalization — Monero and Zcash — rebounded faster than Bitcoin and Ethereum. As a result of the conflict, Russia faces tough sanctions, many of which specifically target crypto assets. Most recently, the U.S. Treasury Department sanctioned Russian bitcoin miner Bitriver; earlier this month, the U.S. and Germany banned a notorious black market asset service platform: Hydra.

Russian citizens are increasingly cut off from traditional financial services, and major asset servicing platforms like Binance have moved to restrict their access and access to services. This has brought a blowout of attention and introductions to fuel the growth of privacy coins, although it is unclear whether they are actually being used to evade sanctions. Monero and Zcash are still down 50% and 95%, respectively, from their all-time highs.

The second layer token struggles, while the first layer keeps pace with Ethereum.


Layer 2 tokens have struggled since early 2022, underperforming Ethereum and Layer 1 tokens. Since the beginning of the year, we have built a simulated basket of the first-layer tokens (SOL, LUNA, ADA, AVAX, and BNB), and the second-layer tokens (DYDX, LRC, METIS, BOBA, and MATIC). After a particularly difficult February and March, the second-tier token has struggled, falling by more than 40%.

With hints from the team that Optimism (TVL No. 4 L2) will release a token, there may be a resurgence of interest in L2. There is also mysterious news from the Arbitrum (TVL’s 2nd largest L2) team that a Token will be released.

While Ethereum continues to lose market share in total value locked, major layer 1 tokens have been in line with Ethereum over the course of the year. The NEAR protocol, the 7th largest layer 1 protocol by market cap, has outperformed other protocols and is about where it was at the beginning of the year.

Trading volume

Ukrainian crypto-assets trading volumes fell to their lowest levels since pre-war due to the central bank’s ban.


On Thursday, Ukraine’s central bank banned the use of the token to buy crypto assets “to prevent unproductive capital outflows from the country.” The impact on hryvnia-denominated trade was almost instantaneous. Bitcoin and USDT trading volumes on Binance fell to around $2 million by the end of the week at $5 million a day, the lowest level before the Russia-Ukraine conflict. Despite the ban, Ukraine has embraced crypto during the conflict and legalized its use last month, receiving more than $50 million in bitcoin and ethereum donations.

Despite growing market cap, U.S. Terra trading volumes reveal niche uses for decentralized stablecoins.


Last week, US Terra became the third largest stablecoin by market capitalization with a market capitalization of about $18 billion, surpassing Binance’s BUSD (for reference, the largest stablecoins USDT and USDC have market capitalizations of $83 billion and $83 billion, respectively. $50 billion). Despite the higher market capitalization, UST’s daily trading volume on centralized asset service platforms is significantly lower than that of BUSD, which is about $4 billion, compared to about $140 million for BUSD.

This difference illustrates the different intentions and designs of the stablecoin space:

BUSD was created by Binance, the world’s largest asset service platform, which promotes stablecoins by offering lower transaction fees when users trade. UST is designed as a decentralized, custom stablecoin on the Terra protocol.

However, when looking closely at the breakdown of UST usage, nearly 67% of the supply chain is deposited in the lending protocol Anchor, and users can earn more than 19% of the annual return on their deposits. The sustainability of this model has been in question, requiring an injection of capital to support high yields. While UST may now be the third-largest stablecoin, its recent growth has been largely driven by the high yields provided by Anchor.

Order Book Liquidity

Ethereum market depth remains strong despite FX outflows.


According to recent on-chain data, the amount of Ethereum held by asset service platforms is at its lowest level since 2018. Despite the massive FX outflow, the market depth of the Ethereum-USD pair has remained stable since the beginning of 2022. Kaiko’s Depth of Market data is the total number of bids and asks within 2% of the mid-price. Above, we have plotted the total market depth in ETH (orange) and USD (blue), and we can observe that the raw volume of ETH and the value of USD remain stable on the most liquid asset service platform.

Historically, high foreign exchange outflows have shown that investors are willing to hold rather than sell their crypto assets. Additionally, the amount of ETH locked in Ethereum 2.0 smart contracts (now known as “combined”) recently topped 10 million. The increase in bets and massive foreign exchange outflows could be interpreted as a “supply shock” for Ethereum, which could be positive for the price. Despite the recent drop in trading volumes, liquidity on asset service platforms remains strong, which is likely to maintain price stability.

Special features

How Outlier Detection Improves Crypto Asset Data Quality


In extreme cases, the prices of crypto assets can vary significantly from market to market due to asset service platform suspensions, flash crashes, volatile market events or (worst case) market manipulation. This is why determining a “good” price for a cryptoasset has always been a complex task requiring a large number of methods to select and filter data. On February 22, 2021, Kraken’s Ethereum-USD pair experienced a sudden flash crash due to intense selling pressure. From one minute to the next, the price of Ethereum fell from $1,500 to just $776 before recovering about ten minutes later.

Kraken is one of the most liquid dollar asset service platforms, and its quotations are widely used in the calculation of crypto asset reference returns. Without outlier detection, this flash crash could cause severe price distortions affecting a range of crypto services. With Kaiko’s new outlier detection feature, we can filter erroneous data from the aggregated price feed, preventing the sudden drop in the price of the aggregated Ethereum-USD pair (orange) that we can observe during a flash crash.


Outlier detection greatly improves data quality and ensures that price feedback can be deployed into production-level environments without risk of distortion.


Bitcoin and Ethereum funding returns fell into negative territory.


Bitcoin and Ethereum funding returns reset to neutral over the weekend after turning negative last week on renewed monetary policy tightening and concerns over China’s growth prospects. We plot the average Bitcoin and Ethereum (federal) fund returns for four asset service platforms (Binance, Bitmex, Bybit, and FTX). (Federal) fund returns are seen as a measure of market sentiment, with positive (federal) fund returns indicating that more traders are entering long positions and bullish demand is strong (and vice versa). Despite the recovery over the past few days, the decline in Bitcoin perpetual futures funding returns has outpaced Ethereum’s decline last week. Overall funding returns for both assets have been on a steady downward trend since December.

macro trends

Real yields are positive for the first time since March 2020.


The 10-year inflation-protected bond (TIPS) yield is seen as a real, inflation-adjusted, risk-free alternative to holding risky assets. When real yields rise, so does the opportunity cost of holding riskier assets, making it harder for VCs to justify. Real yields have turned positive for the first time since 2020, meaning the environment for risk assets has become the least attractive in recent years.

However, if we use the 40-year high CPI of 8.5% as an adjustment for real yields instead of TIPS yields, the real yield is still -5.5%. One might think that this shows that there is still a lot of incentive to invest in risky assets in the real world, or that it simply means that the Fed still has more room to raise rates. However, real yields appear to only rise in the short term, as the Fed appears to be prioritizing containing inflation over boosting economic growth.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/looking-at-the-impact-of-the-macroeconomic-environment-on-encrypted-assets-from-the-perspective-of-privacy-coins-overtaking-bitcoin/
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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