Kraken’s Crypto Volatility Report: March 2021

Each month, Kraken publishes a report analyzing the volatility of Bitcoin and other Crypto assets. These reports are first shared with the exchange’s VIP clients before being shared publicly.

The latest report covers “History In The Making” for Crypto markets throughout March, as well as historical volatility trends and correlations to gold and other traditional markets.

Key Report Takeaways

  • BTC finished Mar. up +30%, which marked a sixth consecutive month of double-digit, positive returns. With Apr. being, on average, the second best performing month, one could expect BTC to finish higher and thus tie for the longest winning streak since BTC’s inception.
  • Further interest and excitement surrounding NFTs attracted considerable attention from new and existing market participants, thereby driving the broader NFT space +285% higher in Mar. Of the 10 largest NFT coins by market cap, Mar.’s average and median returns were +404% and +343%, respectively. Aggregate daily transaction volume across the largest NFT marketplaces also hit an all-time high of $34M on Mar. 11.
  • Corporate adoption, institutional adoption, the passing of a $1.9T COVID-19 relief package in the U.S., and several BTC ETF filings were among the major headlines in Mar. that helped lift BTC and the broader crypto market higher.
  • Historical data indicates that 2Q is typically a positive yielding quarter for both BTC and ETH; since 2011, BTC has returned, on average, +256% in 2Q while ETH has returned, on average, +141% when looking as far back as 2016.
  • When plotting logarithmic regression lines against ETH’s historical price action, one will find that ETH’s next big level of resistance resides around $2,700. Furthermore, one can identify various levels where ETH could top out this market cycle. For instance, a move up to the logarithmic regression line that coincides with ETH’s previous market cycle top would imply a $15,238 Ether.
  • The current trend in BTC’s bull market support, the 20W EMA and the 21W SMA, suggests that one could expect BTC’s bull market support to reside around $44,165 and $48,702 come May 1. At a month-end price of $58,786, this would mean that a retrace down to said support would go from -29% to -36% to roughly -17% to -25%.

What Happened In NFTs?

  • After hitting an all-time high of $26M in Feb., further momentum in NFTs drove aggregate daily transaction volume across the largest NFT marketplaces to an all-time high of $34M on Mar. 11 before concluding the month at $13M.
  • Some of the more notable market moving headlines included an original artwork by iconic British street artist Banksy being burned and transformed into an NFT, the Kings of Leon becoming the first band to release an album as an NFT, Justin Sun purchasing Jack Dorsey’s first tweet for $500K, digital artist Beeple selling an NFT for $69M via legacy auction house Christie’s, NFL star Rob Gronkowski and Patrick Mahomes selling limited edition NFTs, and multi-million dollar capital raises by SuperRare, Dapper Labs, and Enjin.
  • Of the 10 largest NFT coins by market cap, Mar.’s average and median return was +404% and +343%, respectively. The month’s out performer was Chiliz with a monthly return of +887%.
  • The rapid appreciation of NFT coins and jump in daily transaction volume across the largest NFT marketplaces speaks to the current excitement surrounding the vertical. Whether the momentum can persist into and through Apr. is unclear. However, if there is anything that we can learn from “DeFi Summer,” it’s that a “healthy correction” can often set the stage for the next leg higher.

What Happened In DeFi?

  • Mar. was a relatively underwhelming month for DeFi, but total value locked (TVL) across the largest DeFi platforms hit an all-time high of $46.4B on Mar. 13.
  • Of the 9 largest projects by TVL, the average and median monthly return was +26% and +9%, respectively. Curve was the top performer with a gain of +77%.
  • On Mar. 1, Compound released the prototype for Gateway. Per the announcement, “Gateway is a cross-chain interest rate market that allows you to borrow assets native to one chain, with collateral from another chain.”
  • On Mar. 9, the MakerDAO community posted a proposal for an
    Optimistic DAI Bridge to act as a decentralized off-ramp for Optimistic rollups. The DAI bridge will at first share the same 1-week waiting period to take funds out of the Optimistic L2, though instant withdrawals is scheduled for 3Q.
  • On Mar. 16, Aave released new AMM liquidity pools that allows users to provide liquidity on Uniswap and Balancer by depositing their LP tokens as collateral to generate loans.
  • On Mar. 23, Balancer announced a partnership with Gauntlet. According to release, “This partnership will make available long-awaited dynamic-fee AMM pools to Balancer liquidity providers (LPs). This will come at no extra cost and with no strings attached for LPs. All funds will remain fully non-custodial and Gauntlet will not be able to access or move them in any way.”
  • On Mar. 24, details surrounding the May 5 release of Uniswap V3 were shared on Twitter. One of the most notable changes is the addition of concentrated liquidity pools. These pools will allow LPs to set custom ranges for their contributed assets to be used to facilitate swaps and has the potential to do away with impermanent loss risks while also increasing capital efficiency.

Ether You’re Bullish or Bearish

  • When plotting logarithmic regression lines against ETH’s historical price action, one can identify various different macro support and resistance levels that can be of use in both bull and bear market cycles.
  • ETH currently resides between Band 4 ($1,462) and Band 5 ($2,695). This tells us that ETH’s next big test of resistance resides around $2,700 and the bulls will need to keep ETH above $1,462 to prevent price from trending lower in the short-/medium-term.
  • While these regression lines will continue to trend higher with each passing day, we can also use these logarithmic regression curves to estimate where ETH could peak this market cycle. For example, a move up to Band 8, which coincides with ETH’s previous market cycle top, would imply a $15,238 Ether and a +700% return from Mar.’s closing price of $1,919.
  • As ETH continues to trend higher, a close eye should be kept on how price trends upon a test of one of these bands of resistance. Be sure to subscribe to the OTC Daily to get an updated version of this chart each week.

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