Benchmark Crypto Indices Weekly Performance Review — March 2
Over the past 7 days, the FS CryptoFX Agg Index decreased by 15.9%, compared with an 11.5% decrease for the S&P 500.
Amid the rising fear of the spread of coronavirus globally, Bitcoin’s price fell seven days in a row and declined 13.7% in the past week. BTC fell below its 200DMA last Wednesday but recovered above it over the weekend. Bitcoin is still one of the best performing asset classes with a YTD return of 19%, while S&P 500’s YTD gains were eliminated during the correction last week.
Sector Rotation
Except for the stable coins, all crypto market indices were down last week. FS CryptoFX Exchanges index is the only sector that beat the Bitcoin last week (+0.7%). Beneficiaries of the relative resilience of Bitcoin compared to other cryptocurrencies, FS CryptoFX Commodities index, and FS CryptoFX 10 Large-cap index were also the leaders in the past week.
The worst performing sector-based indices were FS CryptoFX Platform index and FS CryptoFX Privacy index. FS Platform index had been the leader in the prior six weeks. However, this leadership reversed as the prices of the most significant contributors, Tezos and Ethereum, declined 25% and 20% in the past week. The laggardship of the FS Privacy index persists. Since US Treasury Secretary Mnuchin said during a congressional hearing three weeks ago that “FinCEN is about to roll out some significant new requirements,” FS CryptoFX Privacy index has fallen over 30%. The big 3, Monero, Zcash and Dash fell 24%, 22%, 21%, respectively in the past week. However, FS CryptoFX Privacy sector is still the best performing sector YTD, up 71%.
Ripple Controversy Continues
Ripple has been fighting an ongoing legal battle as to whether its XRP token is an unregistered security. Recent court filings indicate that the class action lawsuit can proceed. This is not the ideal outcome for Ripple the company and if a final ruling goes against them, there could be negative implications for crypto markets as well (Why Ripple’s XRP lawsuit could wreak havoc on the market). Taken in conjunction with the SEC’s proceedings against Kik Messenger and Telegram, a definitive ruling could set a legal precedent encouraging disgruntled token holders to take legal action against other cryptocurrency issuers.
The controversy surrounding the XRP token was stoked earlier this year by the Company’s ongoing sales of the meaningful percentage of XRP token that it owns. While Ripple has created escrow contracts that “lock up” the majority of the XRP supply that it owns, it has sold large amounts of said supply once they’ve been released for escrow. Looking at the Company’s XRP markets reports, Ripple sold $169MM and $251MM worth of XRP tokens in Q1 and Q2 2019 before scaling back sales to $66MM in Q3 and just $13MM in Q4.
What should investors and XRP token holders expect going forward? Until the court gives a clear ruling on the status of XRP token, we expect Ripple to proceed with caution when making XRP sales in the future, but the sales of XRP tokens are likely to continue. Ripple has substantial financial resources to fight this class action lawsuit and has built a business that, like it or not, is facilitating billions of dollars of transactions and could have some serious runway.
