The exchange has revised its multi-factor market index for 2020 from “mildly bullish” to “neutral.” The report’s prognosis follows a sudden crash in cryptocurrency prices in the last two days. Taken together, the two developments do not bode well for traders, at least in the short-term.
“The current setting of the Multi-Factor Market Index at ‘neutral’ may be at least partly due to uncertainty regarding how bitcoin and other cryptoassets may react to upcoming investment product launches, together with holidays such as Christmas and New Year’s Eve,” the report’s authors state.
Why did SFOX revise its crypto market index?
Various factors have played a role in the exchange’s decision to revise its assessment of the markets.
First, there’s the decline in crypto market valuations on a monthly basis. Amidst the crash and tumble of markets, prices for leading cryptocurrencies on a month-to-month basis fell. According to SFOX’s calculations, Litecoin was the biggest loser, shedding 25% of its overall price while Bitcoin, even with a hefty 15% decline in its price, lost the least. The falling prices were further exacerbated by collapsing trading volumes at cryptocurrency exchanges, according to the report.
Be the first to get Decrypt Members. A new type of account built on blockchain.
The second factor influencing the downgrade was the closure of crypto-focused hedge funds. A new report by Crypto Hedge Fund Research states that 70 new crypto hedge funds have closed this year. The current situation presents a dramatic contrast to the one two years ago, when crypto hedge funds touted their outsized returns to distinguish their products from other industries.
But their departure also means that valuable liquidity and trading volumes, already in short supply in crypto markets, exits with…