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The Hard Fork – Weekly Market Commentary

This Week’s Topics:
1) S&P 500 volatility rises above that of bitcoin on COVID-19 concerns
2) Bitcoin hash rate reaches new all-time high
3) India Supreme Court overturns crypto ban

Indices Round-up
TradeBlock Index Asset1 Price ($) 7d∆2
ETX Ethereum 203.57 -9.12%
XBX Bitcoin 7,895.40 -9.52%
XRX XRP 0.21 -10.78%
XLMX Stellar Lumens 0.05 -12.59%
EOSX EOS 3.11 -13.59%
BCX Bitcoin Cash 274.40 -14.66%
XMRX Monero 56.67 -15.27%
ECX Ethereum Classic 6.85 -15.74%
LTX Litecoin 50.09 -16.19%
ZCX Zcash 42.17 -16.59%
1. Underlying asset sorted in descending order by 7 day price movers.
2. 7 day price movers monitored from 03/02/2020 06:00 ET thru 03/09/2020 06:00 ET.

7 day price movers

Digital currencies declined on the week as COVID-19 concerns heightened market turbulence. Among our indexed currencies, ZCX traded down the most, losing 16.59% Meanwhile, ETX declined the least losing 9.12% on the week. In traditional markets, US equities and US bond yields crashed, as investors clamored for safe haven assets. COVID-19 concerns increased this past week as Italian authorities announced measures that will quarantine roughly 25% of the country’s population in a bid to halt the spread. In the US, New York joined four other states in declaring a state of emergency as the number of cases rose past 500 across the country. As of this morning, European and Asian stock market indices had declined, on average, more than 5% on the day.


S&P 500 volatility rises above that of bitcoin

Traditional assets have seen a considerable increase in volatility over the past several weeks as COVID-19 concerns whipsawed markets. In response to an economic slowdown, the Fed announced a 50 bps rate cut, which spurred a brief rally last week in US equity markets.

The rise, however, was short lived as the number of COVID-19 cases increased throughout the US causing renewed concern around further economic pressures. Given the wild market swings, S&P 500 volatility briefly passed that of bitcoin this week. In the figure below we diagram year-to-date price volatility for the S&P 500 Index (SPX) and TradeBlock’s Bitcoin Index (XBX).

Figure 1: SPX and XBX price volatility YTD

Data for chart sourced from TradeBlock and YahooFinance

While US equity volatility has increased sharply over the past several weeks in comparison to that of bitcoin, on a longer time horizon bitcoin maintains a considerably higher historical volatility.

Figure 2: SPX and XBX price volatility over one year

Data for chart sourced from TradeBlock and YahooFinance


Bitcoin hash rate reaches new all-time high

The bitcoin network hash rate reached a new all-time high recently as miners, in aggregate, increased resources dedicated to securing the network. While market participants questioned whether COVID-19 quarantines would reduce hash power committed by Chinese mining facilities, it appears that those concerns may be unfounded as hash power reached new heights. In the figure below we diagram the bitcoin network hash rate over time.

Figure 3: Bitcoin network hash rate over one year

Screenshot sourced from the TradeBlock platform

Miners may be increasing hash power ahead of the halving, which is set to occur in May 2020 and will see mining rewards decline by approximately 50%. In our in-depth mining report published last month, we analyzed how mining breakevens will rise considerably following the May halving and could put pressure on mining operators’ profit margins after that point.


India Supreme Court overturns crypto ban

This past week the Supreme Court of India overturned a controversial ban by the country’s central bank on financial institutions servicing digital currency firms. The ban went into effect in 2018 and had hampered the nascent digital currency industry in the world’s second most populous country. After petitions from various entities, the Supreme Court ruled to overturn the ban, allowing banks to service digital currency businesses.

The positive ruling had increased market expectations that India could see renewed activity in digital currencies–following news that the ban was overturned, digital currencies traded higher. The rally, however, proved to be short lived as continued risk-off investor sentiment led to further losses across digital currencies and risk markets in general over the remainder of the week.

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