BarclayHedge Numbers Show Cryptocurrency Dive

BarclayHedge Numbers Show Cryptocurrency Dive

BarclayHedge says that its flash estimate for the Barclay CTA Index shows a 0.05% loss in June, and a 2% loss year to date.

More remarkably, the flash estimate shows a 16.23% drop in June and a 45.43% drop YTD for the CryptoCurrency Traders Index.

The founder and president of BarclayHedge, Sol Waksman, said in a statement Monday, July 16, that “trade war concerns sparked by economic sabre rattling shook grain markets while US pressure on its allies to boycott Iranian oil rallied energy prices to new highs of the year.” Due to the shaking on grain markets, then, agricultural traders were down 0.59% in June. Meanwhile Discretionary Traders were down 0.59% and Diversified Traders 0.21%.

Agricultural traders are still up YTD though: 1.14% Diversified Traders are down 3.08% for the year, and Discretionary Traders are up 2.36%.

But let’s get back to that big loss for the cryptos

Why are the cryptocurrency traders down so starkly YTD? The short answer: it was a bad half year for their underlying assets.

Bitcoins in particular peaked in December 2017, at $19,783. Their value seven months later is roughly one third of that, $6,632.

Ethereum has a similar chart pattern, but the peak came a little later. Ethereum peaked at $1,421.07 on January 13, after starting the year at $763.04. But since those impressive first two weeks, it has headed down. ETH was at $370 in early April. It rebounded somewhat, getting above $780, thus modestly net plus for the year, in early May. But that net plus didn’t last: ETH headed downward again, and in mid July is in the $450 neighborhood, or roughly 40% below the start of year price.

Well look at just one other currency for this mini-survey of the field: Ripple.

XRP experienced a big run-up last December and peaked on January 1 at $2.79. It collapsed immediately, getting to $0.47 in late March. Despite a brief rebound up to $0.86 later that spring, it was soon back below four bits and remains there in mid July.

So again, this has not been a good year for cryptocurrency traders because it has not been a good YTD for the asset class. But still (you might sensibly ask): why not? The BarclayHedge press release offers no particulars.

A Broader Pattern

In the case of the Mother of All Cryptos, Bitcoin itself, the bubble last year and the subsequent crash are part of a well-established pattern. As a writer for Bitcoin News recently put it, that asset “has a tendency to increase in price by an order of magnitude every 2-3 years,” as well as a tendency to decline 90% at the peak of a rally, which “scares investors out of the Bitcoin market, only to be followed by an even bigger rally.”

The first half year of 2018 was the scary part. If the pattern holds, we have already begun what they call in baseball as “rebuilding season” preparing for the order-of-magnitude-higher part again.

The other currencies don’t have a lengthy enough history to say with any confidence that they will follow the same pattern, but surely one cannot rule it out.  

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