Crypto Outperforms Traditional Markets With DEX Tokens Leading the Way: A Data Perspective by IntoTheBlock

Crypto Outperforms Traditional Markets With DEX Tokens Leading the Way: A Data Perspective by IntoTheBlock

2 years ago

IntoTheBlock takes a look at what's going on in the markets this week.

Crypto Outperforms Traditional Markets With DEX Tokens Leading the Way: A Data Perspective by IntoTheBlock


Every week, IntoTheBlock brings you on-chain analysis of top news stories in the crypto space. Leveraging blockchain’s public nature, IntoTheBlock’s machine learning algorithms extract key data that provide a deeper dive into the major developments in the industry. 
This week, we analyze crypto’s sign of maturity as it weathers a storm hitting U.S. equities. Moreover, we dive into the upcoming catalysts crypto and DEX tokens in particular are set to benefit from in the short-term. 

Crypto Outperforms Macro Sell-Off With DEX Tokens Likely to Continue

Despite traditional markets experiencing a significant correction, crypto has outperformed remaining close to its all-time highs. Over the past couple of weeks, major American stock indices such as the S&P500 and the Nasdaq100 incurred losses while Bitcoin and Ethereum recorded gains. 
As of Mar. 2, 2021 using IntoTheBlock’s capital markets insights

The difference in behavior between crypto and traditional markets shows crypto evolving and acting again as an uncorrelated asset class after being highly correlated throughout most of 2020. 

This trend points to the consolidation of crypto as a separate asset class, less affected by turbulence in traditional markets. 

As of Mar. 2, 2021 using IntoTheBlock’s capital markets insights

Bitcoin’s correlation with major indices is for the most part relatively low (close to zero), while Ethereum does show slightly higher correlations as evidenced by the chart above. Interestingly enough, the correlation with the US dollar index has also declined in spite of crypto-assets often being denominated in dollars and the American currency gaining value in recent weeks. 

Despite the recent correction, markets are likely to be positively impacted by the upcoming $1.9 trillion stimulus package. Additionally, the $100 billion Coinbase IPO is also likely to generate traction for crypto markets, specifically for centralized and decentralized exchange (DEX) tokens.  

DEX Tokens Benefitted by Key Catalysts

Though there are major differences between Coinbase and decentralized exchanges, they can be compared head to head in terms of trading volume (the vast majority of Coinbase's revenue comes from trading fees). 
Over the past week, Coinbase has traded on average $2.61 billion per day. In contrast, Uniswap has settled approximately $955 million per day, but at a significantly cheaper valuation of $16 billion.  
As of Mar. 10, 2021 using IntoTheBlock’s Uniswap Protocol Metrics
To put the comparison clearly, Coinbase is currently trading at 38.31 times its daily trading volume, while Uniswap is valued at 16.75 times its volume. If UNI closes this gap versus Coinbase’s valuation, it could expect an increase of over 2.2x in price all else being equal, while SUSHI and BNT could grow even further to close this gap. 

Asides from the Coinbase IPO, stimulus checks coming within the next two weeks may further add to the risk-on momentum. As stocks recover from the recent correction, the risk-on sentiment appears to still be present as evidenced by Roblox’s recent IPO, with its $37 billion valuation pricing it over 40 times price-to-sales (P/S).

In comparison, Uniswap, Bancor and SushiSwap are being priced at 25, 16 and 8 P/S ratios respectively. With the stimulus checks approaching, it would be surprising for these multiples not to expand. 

Blockchain data supports the trend of bullish positioning among investors in DEX tokens. Centralized exchange flows point to high amounts of UNI in particular being withdrawn. 

Netflows, which measure the amount of tokens being deposited into exchanges minus those being withdrawn, have reached a new low of $82 million in a day for UNI. In other words, $82 million more UNI were withdrawn than deposited into centralized exchanges on Mar. 8. 

The magnitude of UNI withdrawals from centralized exchanges points to the likelihood of recent investors opting to hold their positions and/or deposit them for extra yield in DeFi protocols. 
Moreover, UNI has also seen vast levels of trading activity amongst institutional players. IntoTheBlock’s large transactions volume, which tracks the aggregate volume sent across transfers of over $100,000, acts as a proxy for institutions’ and whales’ trading.  
As of Mar. 10, 2021 using IntoTheBlock’s UNI financial indicators

Large transactions volume for UNI recently took off to a new all-time high of over $5 billion. The increase in institutional activity coincided with a 10% increase in price, suggesting a high likelihood of large players buying the token. 

Overall, investors in DEX tokens appear to be showing signs of confidence. With Coinbase’s high valuation in its upcoming IPO and stimulus checks set to begin distribution, DEX tokens are poised to continue to grow. 

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