The most important crypto news in 2021 was the entry of institutional investors such as Tesla, hedge funds, and Wall Street banks into the cryptocurrency space.
This was a sign of acceptance of cryptocurrency into the mainstream financial system. It also seemed to drive up cryptocurrency prices. The crypto market capitalization grew by 185% in 2021, making 2021 a boom year for the cryptocurrency industry. This saw cryptocurrencies such as Bitcoin hit their all-time high after rising to a Bitcoin price of about $69,000.
The crypto crash has erased about $1.25 trillion from the cryptocurrency industry’s all-time high market cap. This has left some crypto traders with the question, “Is the entry of institutional investors into the cryptocurrency industry worsening the situation?”
There has been an increasing correlation between the stock and cryptocurrency markets and the presence of institutional investors has exacerbated that correlation. Crypto prices slip when stocks fail.
This has led to the highest inflation level in the US, and the prices are most likely to stay high for some time.
With stocks and sentiment decreasing, Bitcoin dropped by 18% in April, making it its worst April in history. So far in May, Bitcoin’s price has dropped by 29%. Bitcoin is now entrenched at the $30,000 mark, struggling to keep its price above this level.
Bitcoin should be immune from monetary policy and economic concerns. So, why would it be affected?
The reason is the institutional interest in Bitcoin, which also explains the increasing correlation between Bitcoin and the S&P 500. They consider Bitcoin as a diversification asset instead of a long-term investment vehicle, and that’s why institutional flows into and out of the crypto market have a greater impact on Bitcoin price than the accumulation of long-term investors. This makes Bitcoin’s performance more reflective of the entire market.
Will this Correlation Last Forever?
The increasing correlation between Bitcoin and S&P 500 is an indication that the Bitcoin price is acting as a risk asset. However, its long-term accumulation is continuing and accelerating. This means that investors increasingly see Bitcoin as a reliable way of storing value.
This group of investors is expected to grow and it will have a great influence on Bitcoin prices than institutional investors who regularly move their funds in and out of crypto markets. Eventually, this will cause the correlation between stocks and Bitcoin to reduce and Bitcoin will finally regain its full power.
Top-Performing Defi Coin
Although decentralized crypto exchanges have been around for some time, their lack of liquidity has made it difficult to satisfy some user needs. The DeFi sector is now worth $18.84 billion and is expected to keep on growing.
The following are the top-performing Defi coin during the crypto crash:
This Defi coin is unique in that it works like an order book as well as an automated market maker. It claims to be the first platform to combine the traditional order book feature with those of automated market makers.
The IDEX token has gained 54.3% in the last seven days, making it the best performing DeFi token. However, the token is still 90% away from its all-time high attained in Sep 2021. At the time of writing this article, IDEX was trading at $0.084626 with a market cap of $54.90 million. This is according to CoinMarketCap data.
- Kyber Network Crystal
The primary goal of Kyber Network is to provide easy access to liquidity pools and offer the best rates for decentralized exchanges, DeFi DApps, and other users. All Kyber transactions are on-chain, hence, they can be verified by any Ethereum block explorer.
According to Coin Market Cap, KNC is currently trading at $2.15, having gained about $34.3% in the last seven days. This makes it the second biggest DeFi gainer.
- Vesper (VSP)
Vesper platform acts as a “meta-layer” for DeFi, directing deposits to opportunities with the highest yields within the risk tolerance of the pool. It is currently the third-largest DeFi gainer, after gaining 42.4% over the past week.
However, VSP has fallen from its all-time high of $79.51 attained on March 26, 2021, to an all-time low of $0.703362 on May 12, 2022. It has however made a 65.7% recovery from its record low. The coin is currently trading at $0.9933, with a market cap of $8.79 million.
- Kava Lend (HARD)
This cross-chain money market facilitates lending and borrowing across blockchain networks. Lenders can earn yields by putting their money on the Kava Lend protocol, while borrowers can receive funds using collateral. HARD is currently trading at $0.25 with a market cap of $30,335,343.