Long Bitcoin, Short the Banks? | Navigator
Review Date: March 21, 2022
Have you ever heard the phrase “long crypto, short the banks?” Now maybe a good time to revisit this phrase. The chart of the largest bank in the world Industrial and Commercial Bank of China (symbol: 1398) shows an interesting chart structure. Stress in the global financial system created by a rise in U.S. interest rates could drive 1398 down 30% from current levels. What would the world look like if the largest bank in the world dropped 30% over the next 6 months?
Data as of 3/21/2022 – Past performance not indicative of future returns
The picture for European banks (EXV1) is equally serious. The recent bear market rally has brought EXV1 back to resistance at 13.90. The possible downside target for European banks could be as low as 60% below current levels. Naturally, a move of that magnitude could be triggered by an escalation of either the kinetic or economic war in Russia. This could result in Russia and Russian companies defaulting on debt which could trigger what legacy analysts call contagion in the global financial system.
Data as of 3/21/2022 – Past performance not indicative of future returns
We suspect we are not the only people to see these charts. Concern over the global financial system could drive demand for bitcoin in the short term. If bitcoin rallies during the last ten days of March. $47,500 could be an upside target. If bitcoin reaches that target, bitcoin might then become vulnerable to any potential contagion that develops in risk assets.
Bottom Line: Crypto is likely in the process of taking its place in the new monetary order. That seems to be bullish short term as funds start to park money in alternative assets.
Starting in April, it may be wise to adjust your crypto portfolio and reduce risk.
ETH NFTs Inversely Correlated to Crypto Market
Nansen released six indexes to track the NFT market last month. Two indexes, the NFT-500 and the Blue Chip 10, focus on the top 500 projects and the top 10 blue chip NFTs respectively. The other indexes focus on four major sectors of the NFT market; art, social, gaming, and the metaverse.
These indexes have given investors access to new data about the NFT market and its correlation to other markets. The Nansen team found that the NFT market is correlated inversely with the price of Bitcoin and Ethereum, but only when denominated in ETH.
Inverse correlation means that as Bitcoin and Ethereum decrease in price, the NFT market increases in price. The vice-versa also applies: when the NFT market gets hammered, BTC and ETH tend to be going up. According to Nansen, this only works when NFT prices are denoted in terms of ETH due to volatility. This data furthermore only applies to our current year to date — it’s not much data in broader market terms.
This revelation confirms something Token Metrics’ own Bill Noble has been saying for months now: when the market goes down, investors are parking their money in NFTs. The NFT market is volatile, but it is possible that investors took profits at market tops and put them in blue-chip NFTs like Bored Ape Yacht Club and Azuki.
Bottom Line: The NFT market’s correlation to crypto blue chips like Bitcoin and Ethereum is data investors have desired for a long time, and Nansen’s indexes made this possible. The data is still narrow, but it confirms what Token Metrics analysts have been saying for months. Whether or not the NFT market will remain a store-of-value within the Ethereum ecosystem or if assets will become more closely correlated over time remains to be seen.
Token Metrics Grade Performance
The TM Grade was able to identify momentum plays that played out well over the past week. In fact, the table below shows a few examples of top-rated coins on Friday, March 11th, and how they performed up to Friday, March 18th.
| Token Name | TM Grade as of the 11th | ROI |
| NFTY Token | 87 | + 80% |
| Lido DAO | 88 | + 60% |
| THORChain | 88 | + 52 |
| Kyber Network Crystal | 90 | + 29% |
| Waves | 89 | + 27% |
Sources:
- https://www.nansen.ai/post/nansen-nft-indexes-a-new-way-to-invest-in-nfts
- https://decrypt.co/95139/ethereum-nft-inversely-correlated-crypto-market-nansen
- https://news.bitcoin.com/troop-of-bored-ape-nfts-rises-above-the-competition-bayc-donates-200k-i n-eth-to-orangutan-outreach/
- https://www.imf.org/en/News/Articles/2022/01/25/pr2213-el-salvador-imf-executive-board-concludes-2021-article-iv-consultation
