Over the past 7 days, the FS CryptoFX Agg Index increased by 0.1%, compared with a 1.3% decrease for the S&P 500. (Slide 6). The best performing size-based index was FS CryptoFX 10, which was up 0.3%. The worst performing size-based index was FS CryptoFX Eq Wt, which was down 1.3%. The best performing sector index was FS CryptoFX Platform, which was up 3.5%. The worst performing sector index was FS CryptoFX Exchange, which was down 2.9%. Bitcoin is down 4.8% for the past 7 days.
Cardano Upgrades Staking
Cardano (ADA) has completed a hardfork upgrade that transitions the network to its new proof of stake (PoS) consensus protocol. Cryptocurrency staking is all the rage these days as some assets with these features have seen significant price outperformance this year. Investors have flocked to networks like Tezos which is up 127% YTD compared to Bitcoin only up 34%.
Meanwhile, top exchanges like Coinbase, Binance and Kraken have added “staking as a service” offerings. These services have made it easier for non-technical crypto users to collect staking returns by participating in network consensus – which likely contributed to coin demand. In the simplest terms, the economics of the staking process consist of holding a certain amount of coins and receiving more over time. For this reason, many have classified staking returns as “yields” drawing similarities to owning a bond. But the risks are much different. Owning a bond does not come with the same principal price risk (assuming no default and you’re repaid at par). With staking coins, if the underlying asset goes the other way investors may be left holding the bag – even if they’ve collected a nice ‘yield’ along the way. But the market has been on investors’ side thus far this year largely offering staking returns and price appreciation.