First Mover Asia: Metaverse ETFs are underperforming gaming ETFs; Cryptos return to the red

Public interest continues to grow about the metaverse, but not as much in metaverse ETFs. Does crypto belong in everything?

Good morning. Here’s what’s happening:

Prices: Bitcoin and most other cryptos return to the red.

Insights: Metaverse ETFs are struggling to keep pace with gaming ETFs.

Technician's take: BTC's upside appears limited despite short-term support.

Prices

Bitcoin (BTC): $29,982 -3.4%

Ether (ETH): $2,030 -4.7%

Biggest Gainers

There are no gainers in CoinDesk 20 today.

Biggest Losers

Asset	Ticker	Returns	DACS Sector
Internet Computer	ICP	−9.4%	Computing
Filecoin	FIL	−8.3%	Computing
Cosmos	ATOM	−7.7%	Smart Contract Platform

Bitcoin and other cryptos falter

That didn't last long.

A day after bitcoin broke a week-long losing streak, the largest cryptocurrency by market cap and other major cryptos were in the red again on Monday.

Bitcoin was recently down over 3% over the previous 24 hours and has fallen seven consecutive weeks. Still, it spent much of the day near or above the psychologically important $30,000 level. "As far as the last 24 hours, we've seen a consolidation from six to eight weeks of sell-off," 3iQ Digital Asset's Head of Research Mark Connors told CoinDesk.

Bitcoin and other cryptos' performances dovetailed with equity markets, which dropped slightly on Monday and have been tumbling since last fall as inflation and supply chain issues continued to surge and investors became more risk averse. The tech-heavy Nasdaq dropped more than a percentage point on Monday.

Such growing cautiousness fanned last week by the collapse of the terraUSD stablecoin (UST), and the luna token that supports it, rocked altcoins particularly hard over the past week. On Monday, AXS and AVAX were recently down 12% and 8%, respectively. SOL declined more than 6%.

Ether, the second-largest crypto by market cap, fell over 4.6%, although it held fast above $2,000.

"In equities, you've taken almost a year of returns off so [there was] a rapid resetting as the Fed hiked [interest rates] in the first week of May," Connors said. "You've seen digital assets, bitcoin, ether and the rest of the altcoins fall. What's happened is there's been a stabilization. What people are assessing is whether the interest rate hike has been taken out. In our opinion, it hasn't.

Trading volume rose from the lower levels to which it hewed for the first few months of the year, a sign of a potential, and at least temporary upswing. But few analysts are predicting a more permanent departure from the the current bear market. The coming weeks may be particularly hard on stablecoins even as Terraform Labs CEO Do Kwon released a “revival plan” to save the Terra network. Kwon proposed forking Terra into a new chain without UST.

Connors said that investors would likely see three to nine months of "choppy markets," and that prices would likely drop, possibly with support in the $20,000 to $24,000 range. In this environment, he sees investors focusing more on Bitcoin and Ethereum. "Bitcoin dominance should and will happen when markets sell off," Connors said. "People go to quality, but it seems that Ethereium is now building up as a number two quality asset in the ecosystem."

Markets

S&P 500: 4,008 -0.3%

DJIA: 32,223 +0.08%

Nasdaq: 11,662 -1.2%

Gold: $1,824 +0.6%

Insights

Metaverse ETFs are struggling to keep pace with gaming ETFs

Sometimes a fancy new investment vehicle, most recently the metaverse, doesn’t perform as well on the market as last year’s model.

Metaverse exchange-traded funds (ETF) arrived last year shortly after the term entered our lexicon and became a favorite of venture capitalists. Because the metaverse is simply a mashup of gaming and crypto, these metaverse ETFs look a lot like gaming or eSports ETFs (the two terms are synonymous), which launched a few years ago.

They look like them because the metaverse is an ambiguous term; the shared online experience that is envisioned in Neil Stephenson's science fiction novel "Snow Crash" already exists on many multiplayer gaming platforms. Metaverse tokens don’t yet have listed proxies, so metaverse ETFs compensate for that by putting in publicly listed crypto companies like Galaxy (GLX.TO) or Block (SQ), the former Square. And that’s where the problem starts.

Roundhill Ball Metaverse ETF (TradingView)

That association with crypto means that METV, a metaverse ETF from Roundhill, is significantly underperforming ESPO, a gaming/eSports ETF from VanEck.

Gaming tech heavyweights, like GPU designer Nvidia (NVDS) or game engine developer Unity, are in both baskets and haven’t performed well on-year but the inclusion of the likes of Galaxy Digital – down over 60% year-to-date and planning a stock buyback [link] – really sinks the metaverse ETF.

Of course, this metaverse ETF is outperforming the metaverse tokens themselves: The Sandbox’s eponymous token (SAND) is down nearly 77% and Decentraland’s MANA is at 68% mainly because both have struggled to attract a player base that reflects their valuation.

There’s an irony here. The metaverse, which is a way to sell crypto-plus-gaming as a re-branded product, is doing better on the market than plain vanilla gaming itself.

Maybe crypto doesn’t belong in everything?

Technician's take

Bitcoin daily chart shows support/resistance. (Damanick Dantes/CoinDesk, TradingView)

Bitcoin (BTC) is stabilizing around the $30,000 price level after last week's sell-off. The cryptocurrency must remain above the $27,000-$30,000 support zone this week in order to generate a positive short-term momentum signal.

BTC was down by as much as 3% over the past 24 hours.

The relative strength index (RSI) on the daily chart is rising from oversold levels, which could keep buyers active at support. The RSI is also oversold on the weekly chart, although negative momentum could cap upside moves in price.

Immediate resistance is seen at $33,000 and $35,000, which is where a breakdown in price occurred earlier this month. That suggests a large number of sell orders could limit a relief rally over the next two weeks.

Further, the recent underperformance of alternative cryptos (altcoins) relative to bitcoin suggests a lower appetite for risk among crypto traders. Typically, alts decline by more than bitcoin during down markets because of their higher risk profile. The broader risk-off environment could keep BTC's short-term downtrend intact.

Important events

Cosmos Gateway Conference

Permissionless DeFi Conference

9:30 a.m. HKT/SGT(1:30 a.m. UTC): Reserve Bank of Australia minutes

8:30 p.m. HKT/SGT(12:30 p.m. UTC): U.S. retail sales (MoM/April)

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