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Nekodex by Perpetual Protocol 🥨Stealth Addresses Explained (And How To Use Them)
A simple explainer of stealth addresses, the plans for making them standardized for Ethereum and a walkthrough of how to use stealth addresses on Optimism today! When looking at the overall DeFi market, privacy-preserving protocols only make up a very small part of it by total value locked. According to statistics provided by DeFiLlama, just 0.52% of the entire TVL is attributed to privacy applications, with Aztec and Tornado Cash taking the lion’s share. Cryptocurrencies hold a lot of potent...
Nekodex by Perpetual Protocol 🥨The Arrival of Real Yield: Lazy River 2.0
The most anticipated feature on Perp is finally here: USDC fee sharing! As a big upgrade to our staking program on Optimism, Lazy River 2.0 will begin distributing a stablecoin yield to vePERP holders from the protocol’s revenue.To start earning yield, you’ll first need to hold some PERP on Optimism. Check out this guide which provides a walkthrough for bridging to Optimism (we recommend using Optimism Gateway) and view the exchanges where you can buy PERP here.With the arrival of real yield,...
Nekodex by Perpetual Protocol 🥨How to Hedge Against Impermanent Loss with Deribit’s Volatility Futures
In this guide, we’ll show you how you can hedge against impermanent loss when providing liquidity to Perp’s Bitcoin market using Deribit’s newly launched volatility futures product. Makers (AKA liquidity providers) on Perp can earn trading fees and liquidity mining rewards. However, as the price moves away from your entry point and traders consume the liquidity you provide, you face impermanent loss (or IL for short). But there are ways to hedge described in the article below. How to Mitigate...
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Nekodex by Perpetual Protocol 🥨Stealth Addresses Explained (And How To Use Them)
A simple explainer of stealth addresses, the plans for making them standardized for Ethereum and a walkthrough of how to use stealth addresses on Optimism today! When looking at the overall DeFi market, privacy-preserving protocols only make up a very small part of it by total value locked. According to statistics provided by DeFiLlama, just 0.52% of the entire TVL is attributed to privacy applications, with Aztec and Tornado Cash taking the lion’s share. Cryptocurrencies hold a lot of potent...
Nekodex by Perpetual Protocol 🥨The Arrival of Real Yield: Lazy River 2.0
The most anticipated feature on Perp is finally here: USDC fee sharing! As a big upgrade to our staking program on Optimism, Lazy River 2.0 will begin distributing a stablecoin yield to vePERP holders from the protocol’s revenue.To start earning yield, you’ll first need to hold some PERP on Optimism. Check out this guide which provides a walkthrough for bridging to Optimism (we recommend using Optimism Gateway) and view the exchanges where you can buy PERP here.With the arrival of real yield,...
Nekodex by Perpetual Protocol 🥨How to Hedge Against Impermanent Loss with Deribit’s Volatility Futures
In this guide, we’ll show you how you can hedge against impermanent loss when providing liquidity to Perp’s Bitcoin market using Deribit’s newly launched volatility futures product. Makers (AKA liquidity providers) on Perp can earn trading fees and liquidity mining rewards. However, as the price moves away from your entry point and traders consume the liquidity you provide, you face impermanent loss (or IL for short). But there are ways to hedge described in the article below. How to Mitigate...
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What can we learn from Ethereum’s seasonality trends? Is the existence of a ‘Santa Claus rally’ for the second largest crypto-asset by market capitalization confirmed by the data? Read on to find out more!
Seasonality is an important topic of research for financial markets, which refers to a trend that occurs in a specific time frame where prices behave in a similar manner and is repeated over time. According to economic theory, these predictable patterns shouldn’t exist, but of course, these theories make a lot of simplifying assumptions about human behavior.
Calendar effects and time-of-the-day effects are two notable examples of seasonal trends. The former refers to whether an asset rises or falls repeatedly during a particular day or month, while the latter refers to whether an asset tends to perform better or worse during certain times of the day.
There’s a vast amount of research on seasonal trends for stocks and other traditional assets going back decades. But this is not the case for cryptocurrency markets, because of the limited data available. As a result, there’s less consensus around the existence and significance of these patterns for crypto-assets.
By looking at the data we have, the table below sheds light on the calendar effects for Ethereum, specifically whether the price tends to rise or fall in particular months. We can see that through January to May, the price of ETH tends to perform strongly with an average gain of more than 25% since the launch of Ethereum in 2015.
Source: CoinMetrics
However, it’s worth keeping in mind that the number of data points for cryptocurrencies like ETH is very limited compared to traditional assets. To come to a concrete conclusion on seasonal trends, it’s recommended to have at least ten years of data.
Nevertheless, a pattern is emerging that could continue for ETH in the future, where the price performs well in the first five months of the year, while in certain months like June and September, there tends to be a downturn.
One type of calendar effect that’s frequently studied for traditional markets is the “Santa Claus rally”. The table above shows an average gain of almost 10% for ETH during December, but with the festive season upon us, it’s worth exploring whether the “Santa Claus rally” is observed for cryptocurrencies.
A “Santa Claus rally” refers to the tendency of stocks and other asset classes to move higher at the end of the calendar year. Specifically, the stock market is observed to move higher in the last five days of the year and first two days of the new year in January. While there’s no concrete definition of a Santa Claus rally, one benchmark is the week prior to Christmas (December 18th) up until the first five days of the new year of the Gregorian calendar.
Richard Thaler, winner of the Nobel Prize in 2017 for his work on behavioral economics, reasoned that investor sentiment can affect their trading activity. With Christmas being one of the most widely celebrated holidays across the world, the festive cheer and optimism may have a positive effect on cryptocurrency markets.
Aside from sentiment, what else causes this phenomenon? Some likely explanations are:
Tax loss harvesting, since it is the end of the tax year in the United States.
During the holiday seasons, there’s less trading activity. Importantly, there’s lower participation from institutional investors, who settle their books near the end of the year, so the only traders left in the market during these times may be less informed.
End of year bonuses may be invested into stocks or in other assets, and during a time of lower trading volume, the actions of these investors splashing some cash may have more of an impact on asset prices.
In the following, we’ll examine whether there’s any sign of a Santa Claus rally for ETH-USD since its inception. The chart below shows the evolution of the price of Ethereum in the week before Christmas up until January 5th since 2015, with the price indexed to 100 for December 18th’s closing price.
Source: CoinMetrics
The price of ETH has a tendency to rise during this period, with 2015, 2019 and 2021 being the only years where a Santa Claus rally failed to materialize. Since 2015, the average price gain during this time period is 24.2%.
Another interesting takeaway is that Ethereum has appreciated over this period every year since 2015, except for 2021. The largest Santa Claus rally was observed in 2020, with a whopping 68.9% gain from December 18th, 2020 until January 5th, 2021.
Will there be a Santa Claus rally this year? While the past is no guide to the future and the data is limited due to Ethereum’s age, there is some evidence of a Santa Claus rally for ETH-USD. However, markets are mainly being driven by macroeconomic forces at the moment that could outweigh any observed seasonal trends.
Also, to make stronger conclusions, we’d need more data and to perform statistical tests to gauge the true significance of this festive period on prices. Nevertheless, even if a Santa Claus rally fails to materialize, January seems to be favorable to ETH bulls since it has displayed the strongest performance out of any month, meaning there could be some light at the end of the tunnel as the new year gets underway!
What can we learn from Ethereum’s seasonality trends? Is the existence of a ‘Santa Claus rally’ for the second largest crypto-asset by market capitalization confirmed by the data? Read on to find out more!
Seasonality is an important topic of research for financial markets, which refers to a trend that occurs in a specific time frame where prices behave in a similar manner and is repeated over time. According to economic theory, these predictable patterns shouldn’t exist, but of course, these theories make a lot of simplifying assumptions about human behavior.
Calendar effects and time-of-the-day effects are two notable examples of seasonal trends. The former refers to whether an asset rises or falls repeatedly during a particular day or month, while the latter refers to whether an asset tends to perform better or worse during certain times of the day.
There’s a vast amount of research on seasonal trends for stocks and other traditional assets going back decades. But this is not the case for cryptocurrency markets, because of the limited data available. As a result, there’s less consensus around the existence and significance of these patterns for crypto-assets.
By looking at the data we have, the table below sheds light on the calendar effects for Ethereum, specifically whether the price tends to rise or fall in particular months. We can see that through January to May, the price of ETH tends to perform strongly with an average gain of more than 25% since the launch of Ethereum in 2015.
Source: CoinMetrics
However, it’s worth keeping in mind that the number of data points for cryptocurrencies like ETH is very limited compared to traditional assets. To come to a concrete conclusion on seasonal trends, it’s recommended to have at least ten years of data.
Nevertheless, a pattern is emerging that could continue for ETH in the future, where the price performs well in the first five months of the year, while in certain months like June and September, there tends to be a downturn.
One type of calendar effect that’s frequently studied for traditional markets is the “Santa Claus rally”. The table above shows an average gain of almost 10% for ETH during December, but with the festive season upon us, it’s worth exploring whether the “Santa Claus rally” is observed for cryptocurrencies.
A “Santa Claus rally” refers to the tendency of stocks and other asset classes to move higher at the end of the calendar year. Specifically, the stock market is observed to move higher in the last five days of the year and first two days of the new year in January. While there’s no concrete definition of a Santa Claus rally, one benchmark is the week prior to Christmas (December 18th) up until the first five days of the new year of the Gregorian calendar.
Richard Thaler, winner of the Nobel Prize in 2017 for his work on behavioral economics, reasoned that investor sentiment can affect their trading activity. With Christmas being one of the most widely celebrated holidays across the world, the festive cheer and optimism may have a positive effect on cryptocurrency markets.
Aside from sentiment, what else causes this phenomenon? Some likely explanations are:
Tax loss harvesting, since it is the end of the tax year in the United States.
During the holiday seasons, there’s less trading activity. Importantly, there’s lower participation from institutional investors, who settle their books near the end of the year, so the only traders left in the market during these times may be less informed.
End of year bonuses may be invested into stocks or in other assets, and during a time of lower trading volume, the actions of these investors splashing some cash may have more of an impact on asset prices.
In the following, we’ll examine whether there’s any sign of a Santa Claus rally for ETH-USD since its inception. The chart below shows the evolution of the price of Ethereum in the week before Christmas up until January 5th since 2015, with the price indexed to 100 for December 18th’s closing price.
Source: CoinMetrics
The price of ETH has a tendency to rise during this period, with 2015, 2019 and 2021 being the only years where a Santa Claus rally failed to materialize. Since 2015, the average price gain during this time period is 24.2%.
Another interesting takeaway is that Ethereum has appreciated over this period every year since 2015, except for 2021. The largest Santa Claus rally was observed in 2020, with a whopping 68.9% gain from December 18th, 2020 until January 5th, 2021.
Will there be a Santa Claus rally this year? While the past is no guide to the future and the data is limited due to Ethereum’s age, there is some evidence of a Santa Claus rally for ETH-USD. However, markets are mainly being driven by macroeconomic forces at the moment that could outweigh any observed seasonal trends.
Also, to make stronger conclusions, we’d need more data and to perform statistical tests to gauge the true significance of this festive period on prices. Nevertheless, even if a Santa Claus rally fails to materialize, January seems to be favorable to ETH bulls since it has displayed the strongest performance out of any month, meaning there could be some light at the end of the tunnel as the new year gets underway!
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