Asset Volatility Overview - Vol 5

Here we are at the fifth episode of the Market Volatility Overview, the series that analyzes the markets of interest for MetalSwap, such as commodities or the world of DeFi. In today's episode, we will see how the commodity market is going through a period of consolidation after the significant decline observed in the last 12 months, and much more! If you haven't read the previous episode, I suggest you catch up on it now.

Commodities - Market Overview

Bloomberg Commodity Index

To analyze the commodity market this month, it is necessary to examine the performance of the US dollar, which, as we can see from the following chart, has been quite negative in recent trading weeks. It is important to analyze the movement of the dollar because all commodities are quoted in relation to it. Therefore, a decrease in its value, like the one we have seen in the last ten days, inevitably leads to a generalized increase in these assets. To delve further into the specifics, we can analyze the correlation between the dollar and certain commodities.

Correlation is a metric that shows how the prices of two different assets move in relation to each other. If the correlation is equal to 1, then the two assets move in the same way. If the correlation is equal to -1, the two assets move in completely opposite directions. Just to give a few examples, in the last 15 days, crude oil has a correlation of -0.91, gold even -0.97, and copper -0.89. The only positive correlations are related to agricultural commodities such as corn and soybeans, which have correlations with the US dollar in the last 15 days of +0.67 and +0.22, respectively. These data explain the increase in prices in the commodity market, as evident from the Bloomberg Commodity Index.

US dollar chart

Analysis of assets on MetalSwap's dApp

Bitcoin

Bitcoin price action

In the last episode, we talked about the market's fear stemming from the SEC's accusations against centralized exchanges like Binance and Coinbase. After 30 days, the market sentiment has completely reversed, and investors are feeling euphoric again. This shift occurred as numerous American investment banks submitted their applications for the issuance of the first spot ETF on Bitcoin in the United States. Over the past 30 days, we have witnessed a rise in prices from $25,500 to $31,400, once again highlighting the extreme volatility of this asset. In general, we are continuing to witness an extremely nervous market that is at the mercy of news, whether positive or negative.

Ether

The number of ETH being staked for block validation is increasing every day, and currently, we have reached 24,165,447 ETH, with the percentage of coins staked relative to the circulating supply surpassing 20%. Lido still remains the dApp with the highest number of ETH staked, accounting for 32.02% of all staked ETH. You can monitor all the metrics related to ETH staking in this Dune dashboard.

Speaking about the price of ETH, in the past 30 days it has risen from a low of $1717 to a high of $2015. It currently sits in a middle zone around $1900 while the number of coins deposited within centralized exchanges and ready to be traded has reached a new low around 12.5% of all available supply.

Dashboard ETH

Gold

Gold price action

We are currently experiencing a period of low volatility for gold, as it has slowed down around $1920 after the price movements seen in May. In the short term, as we have seen in the analysis of commodities, the price of gold is influenced by the performance of the US dollar. However, in the long term, other factors affecting the price include macroeconomic data such as interest rate expectations and US inflation.

In the past week, we have seen positive data, such as lower-than-expected inflation and subdued expectations for future rate hikes. These factors will definitely impact the long-term movement of this commodity.

As in previous episodes, it is essential to analyze the COT (Commitments of Traders) report to gauge the sentiment among different participants using gold for various purposes. There are three types of investors: commercial traders who engage with gold without speculative intentions, non-commercial traders who are large funds opening significant positions with the aim of making profits, and small traders with smaller capital. As we have come to understand, commercial traders usually open short positions to protect themselves in case of price decreases. To gain further insight into the price of gold, it is more interesting to analyze the non-commercial and small traders, who in this case represent a bullish view for this asset.

COT report

OP

OP price action

It has been an incredible month for the OP token, as its value has increased by 33% in just the past month, reaching and surpassing the important price level of $1.55.

As you may know, MetalSwap has won a grant of 30k OP tokens, and currently, they are being distributed to anyone who opens hedging positions or provides liquidity in OP blockchain pools. With the price surge, the incentive offered by the dApp becomes even more enticing.

Furthermore, it is now possible to open hedge positions on this asset, which has proven to be extremely volatile even in the last month.

What happened in the derivatives DeFi ecosystem?

Taking a look at the defiLlma tool, we can see that the Total Value Locked (TVL) of DeFi has remained around $41.6 billion. This is interesting because unlike what has happened with more capitalized assets like BTC or ETH, which have seen significant increases since the beginning of 2023, this rise has not been observed in the world of DeFi, which seems to still be in a bear market. Based on the numbers, we can conclude that investors are still not feeling confident about investing in this sector, which remains full of opportunities but also risks.

TVL DeFi

It has been a month of general upward movement for all the assets analyzed in this episode. However, as we have seen, the Total Value Locked (TVL) in DeFi has not shown signs of recovery yet.

MetalSwap is continuing its development and is currently the only DeFi solution that offers the possibility to hedge against the volatility of specific assets through customized strategies at incredibly low costs.

Goodbye Volatility!

-The DeFi Foundation

✎ What is MetalSwap? 

MetalSwap is a decentralized platform that allows hedging swaps on financial markets with the aim of providing a coverage to those who work with commodities and an investment opportunity for those who contribute to increase the shared liquidity of the project. Allowing the protection for an increasing number of operators. 

With MetalSwap we enable hedging swap transactions through the use of Smart Contracts, AMM style.