Shalini Nagarajan

Bitcoin&#8217;s latest market fluctuations have left seasoned investors unperturbed.



Last week, within a span of 2 hours, bitcoin (<a href="https://blockworks.co/price/btc">BTC</a>) dropped over 10% to about $25,300. This marked the most significant BTC deleveraging instance since FTX&#8217;s downfall in Nov. 2022.



After the dip, Galaxy Research observed that smaller bitcoin addresses boosted their holdings. On-chain data indicated addresses with up to 10 BTC added more to their balances.



“Long-term holders have been net accumulating (on a rolling 30d basis) since March,” Galaxy’s Alex Thorn said in a <a href="https://www.galaxy.com/insights/research/bitcoin-holders-undeterred-amid-short-term-leverage-wipeout/">note</a> published Monday.



Looking ahead, Thorn identified three major factors that could amplify bitcoin&#8217;s volatility throughout the remainer of 2023.



<h2 class="wp-block-heading">Grayscale v. SEC outcome, other court cases</h2>



After the US Securities and Exchange Commission turned down Grayscale&#8217;s request to transform its bitcoin trust into an exchange-traded fund, Grayscale <a href="https://blockworks.co/news/grayscale-sues-sec-over-rejection-of-proposed-spot-bitcoin-etf">promptly took legal action</a> and filed a petition for review.&nbsp;



Grayscale views the upcoming verdict in this matter as a near-term potential catalyst.



“A win for Grayscale is unlikely to result in the approval of GBTC’s conversion to an ETF, but could require the SEC to reconsider Grayscale’s application,” Thorn wrote.



The SEC recently <a href="https://blockworks.co/news/coinbase-binance-suits-different">sued</a> Coinbase and Binance for alleged securities violations.



Decisions regarding dismissal requests in the SEC&#8217;s lawsuit against Coinbase and progress in several cases targeting Binance might also influence the market, Thorn noted.



<h2 class="wp-block-heading">Crypto regulatory bills</h2>



The US House is presently reviewing bills aiming to establish regulations geared towards<a href="https://blockworks.co/news/republicans-crypto-market-structure-bill"> crypto market structure</a> and the <a href="https://blockworks.co/news/house-stablecoin-markup">issuance of stablecoins</a>.



Thorn believes that if these bills gain enough support in the House to prompt Senate action, the crypto markets could see a positive reaction.



<h2 class="wp-block-heading">Bond markets and macro events</h2>



A deeper slump in the bond markets could pose challenges for risk assets, including bitcoin, Thorn wrote in the note.



However, macro events like additional banking system issues or ratings agency downgrades might boost bitcoin, similar to the uptick after Silicon Valley Bank&#8217;s collapse in March, he added.



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Start your day with top crypto insights from David Canellis and Katherine Ross. <a href="https://blockworks.co/newsletter/empire">Subscribe to the Empire newsletter</a>.

Bitcoin market catalysts on Galaxy’s charts

Sebastian Sinclair

Researchers from the US National Bureau of Economic Research have unveiled a direct link between rising crypto wealth and the increase in house prices at the county level.



Transaction-level data across millions of households was used to identify how fluctuations in individual crypto wealth have impacted household consumption, equity investment and local real estate markets.



The July <a href="https://www.nber.org/system/files/working_papers/w31445/w31445.pdf" target="_blank" rel="noreferrer noopener">paper</a>, titled &#8220;The Effects of Cryptocurrency Wealth on Household Consumption and Investment,&#8221; concluded crypto has “substantial spillover effects” on the real economy.



In the wake of 2017&#8217;s crypto surge, counties with a high prevalence of crypto wealth witnessed their house prices increase approximately 46 basis points faster compared to those without.



This represents roughly 12% of the standard deviation in the house price growth throughout 2018, per the study. The year 2017 saw a significant increase in bitcoin’s price, from $950 to $14,000, resulting in significant crypto wealth accumulation for those who had invested earlier in the asset’s life cycle.



When evaluated in terms of dollars, data showed house prices in counties with high crypto wealth were about $1,878 greater in the nine months succeeding the 2017 surge. This amounts to roughly a 1% uptick in prices when compared to the average county house price.



The research team also found the marginal propensity to consume (MPC) from unrealized crypto gains was more than double that of unrealized equity gains but less so than the MPC from cash flow shocks.



“While crypto may have limited spillover effects onto other financial assets, our results show that crypto investment does affect real assets,” the researchers said. “As a result, the distribution of crypto wealth has meaningful implications for the real economy.”



An increase in bitcoin&#8217;s value triggered substantial withdrawals from crypto exchanges, which were frequently directed toward real estate investments, the researchers noted.



Crypto investors continue to seek out novel ways to purchase real estate. Earlier this year, startup <a href="https://blockworks.co/news/real-estate-investors-buy-nft-home">Homebase told Blockworks</a> it had finalized the tokenized sale of its first single-family rental property — valued at $246,800.



Also, this year, property technology company <a href="https://blockworks.co/news/roofstock-sells-property-via-nft">Roofstock</a> became the first to facilitate the transaction of a single-family rental home via an NFT marketplace.



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Start your day with top crypto insights from David Canellis and Katherine Ross. <a href="https://blockworks.co/newsletter/empire">Subscribe to the Empire newsletter</a>.

Crypto wealth boosts house prices, NBER study finds

The world&#8217;s largest crypto is showing increased strength and trading activity during US market hours, according to recent data compiled by two industry firms.



In the last week, bitcoin (BTC) has witnessed “staircase-like gains,” forming a pattern of rising prices during US market hours. That tends to stabilize by day’s end, according to research from digital assets brokerage K33.



“US market hours are now the strongest market hours for BTC since the November bottom, after recovering from a challenging period between mid-Feb to mid-June,” K33 said in a <a href="https://k33.com/research/articles/btc-strength-concentrated-to-u-s-hours" target="_blank" rel="noreferrer noopener">research note</a> last week.



BTC has since climbed 62% year-to-date, 13% over the last 30 days and is up 1.5% on the week to $30,700. BTC remains fairly muted on the day — up 0.6%, data from <a href="https://app.blockworksresearch.com/assets" target="_blank" rel="noreferrer noopener">Blockworks Research</a> shows.



The asset’s behavior during US hours contrasts with the relatively stable trading activity during the Asian and European sessions. Since last November, bitcoin has seen more significant gains of 30% during US hours compared to Asia (21%) and Europe (17%).



The majority of the asset’s gains in recent weeks appear to be backed by renewed interest following <a href="https://blockworks.co/news/blackrock-bitcoin-etf-wolf">Blackrock’s spot bitcoin ETF application</a> last month, according to digital asset Australian trading firm Zerocap.&nbsp;



A flurry of spot ETF applications from major US-based financial services firms including WisdomTree, Valkyrie and Fidelity Investments have also helped drive optimism as they vie to become the first to offer such a product.



<h2 class="wp-block-heading">Net exchange outflows and equity correlation</h2>



As such, the accumulation of bitcoin by US traders can also be traced to consistent net outflows (more BTC leaving than entering) from US-based exchanges such as Coinbase, Kraken, and Gemini, Glassnode wrote in a <a href="https://insights.glassnode.com/the-week-onchain-week-26-2023/" target="_blank" rel="noreferrer noopener">report</a> last week.



“After the LUNA debacle and for much of 2023, off-shore exchanges have seen net inflows, whilst on-shore exchanges are seeing net outflows, as US-based investors accumulate or stay neutral,” Glassnode said.



Bitcoin’s correlation with the US asset indices, including Nasdaq and the S&amp;P 500, has also turned negative for the first time since January 2021, K33 said.&nbsp;



This suggests US traders are investing in BTC for unique reasons specific to the crypto rather than following broader market trends.



<h2 class="wp-block-heading">Macro factors</h2>



Macroeconomic fundamentals leading up to the end of the quarter have been mixed, William Fong, Zerocap’s Treasurer told Blockworks.&nbsp;



“There has been a repricing of short-term bond yields, reflecting expectations of higher interest rates and a potentially longer hiking cycle for the US dollar,” Fong said.



To date, CME Group’s <a href="https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html?redirect=/trading/interest-rates/countdown-to-fomc.html" target="_blank" rel="noreferrer noopener">FedWatch Tool</a> indicates market participants have begun pricing in an 85% chance of a 25-point basis hike at the conclusion of the FOMC’s meeting on July 26.



A stronger US dollar relative to other currencies including the flailing Japanese Yen is offsetting part of the momentum in digital assets, Fong added. The dollar index (DXY) has rallied about 1.2% over the past 7 days.



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Start your day with top crypto insights from David Canellis and Katherine Ross. <a href="https://blockworks.co/newsletter/empire">Subscribe to the Empire newsletter</a>.

Bitcoin exhibits increased trading activity during US hours

Digital assets are sometimes hailed as a unique asset class that moves independently of others, but analysis from S&amp;P Global suggests crypto is not insulated from broader economic influences.



Of those macroeconomic factors, the impact of global market volatility was most pronounced.



In its <a href="https://www.spglobal.com/_division_assets/images/special-editorial/are-crypto-markets-correlated-with-macroeconomic-factors/are-crypto-markets-correlated-with-macroeconomic-factors.pdf?utm_medium=email&amp;utm_source=newsletter&amp;utm_campaign=newsletter_axioscryptocurrency&amp;utm_term=undefined&amp;utm_content=undefined&amp;gclid=undefined">report</a>, titled “Are crypto markets correlated with macroeconomic factors?” and published this month, the firm tries to address some of the industry’s biggest themes, such as whether crypto can serve as a hedge against inflation and the impact of the strength or weakness of the US dollar.



It also attempts to address the potential for financial stresses and market volatility to spill over into the industry, as well as the impact of monetary policy.



<h2 class="wp-block-heading">Traditional financial stress and market volatility</h2>



The study found a correlation between increased financial stress, market volatility and declining crypto prices. This suggests a potential contagion risk, where upheavals in traditional finance could spill over into the crypto market.



S&amp;P pointed toward two major macroeconomic impacts on digital assets including when the World Health Organization declared COVID-19 a global pandemic in March 2020.&nbsp;



Around that time, on March 12, bitcoin shed an incredible 39% — one of the worst single-day losses in the asset’s history.



Other incidents have also highlighted the contagion risks from traditional finance. That included this year’s banking crisis, when <a href="https://blockworks.co/news/circle-stand-behind-usdc">the failure of SVB briefly forced</a> two major stablecoins USDC and DAI to depeg roughly 13%.



Crypto prices have been found to have an inverse relationship with the VIX and OVX indexes, both used as a measure for volatility, suggesting that as market fear and volatility increase, crypto prices tend to fall.



Though, as current macroeconomic factors trends take shape, not all agree on their significance.



“Bitcoin’s price is showing resilience amid ongoing economic uncertainty, remaining strong and steady even with open questions around the debt ceiling, inflation, and upcoming interest rate decisions,” Alex Adelman, CEO and co-founder of Lolli told Blockworks via email.



The robust price trends exhibited by bitcoin reveal that investors persistently favor it as an independent asset, he said. Despite macroeconomic fluctuations, the asset has consistently upheld its value, reinforcing its appeal among investors, according to Adelman.



Others have argued that <a href="https://blockworks.co/news/federal-reserve-policy-confidence-banks">banking sector stress</a>, specifically, <a href="https://blockworks.co/news/banking-sector-versus-defi">may be a tailwind</a> for crypto.&nbsp;



<h2 class="wp-block-heading">Monetary and fiscal policy impacts</h2>



In its research, S&amp;P found the impact of monetary policy on crypto can also be significant. Expansionary monetary and fiscal policies that increase disposable income can boost investment in “risk on” assets like crypto.&nbsp;



Conversely, the prospect of tighter monetary policy, such as interest rate hikes, can increase financial stress and market volatility which, in turn, can send digital assets falling.



Unprecedented levels of monetary easing by central banks globally since 2008/09 have inflated the money supply to record levels, which have typically moved in tandem with bitcoin’s price.



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Start your day with top crypto insights from David Canellis and Katherine Ross. <a href="https://blockworks.co/newsletter/empire">Subscribe to the Empire newsletter</a>.

Deciphering Crypto Macro Correlations, S&P Global Highlights Volatility

The Congressional Research Service found that crypto did have a role to play in the failure of Silvergate, Silicon Valley and Signature Bank, but only an indirect one based on risk perception.



The non-partisan agency, which acts as a trusted resource for members of Congress, published a report on Tuesday, which showed that the banks had limited exposure to high-profile crypto company failures. However, it disclosed that more than 90% of Silvergate’s deposits came from crypto clients.



The financial world truly saw some March Madness when Silvergate announced it would be <a href="https://blockworks.co/news/silvergate-intends-wind-down-operations">winding down</a>, Silicon Valley Bank <a href="https://blockworks.co/news/silicon-valley-bank-meltdown-has-little-to-do-with-crypto">failed suddenly</a>, leaving the investment community reeling, and the smaller Signature Bank, was <a href="https://blockworks.co/news/signature-possession-nothing-to-do-with-crypto">shuttered by regulators</a>.&nbsp;



These banks were the victims of a deposit run, which means too many customers withdrew their funds and the banks couldn’t keep up, but their closure <a href="https://blockworks.co/news/chokepoint-2-0-efforts-effective">has been blamed</a> on their coziness with the crypto industry — <a href="https://blockworks.co/news/house-grapples-with-stablecoins">speciously</a> according to congressional testimony.



These were the highlights from the <a href="https://crsreports.congress.gov/product/pdf/IN/IN12148" target="_blank" rel="noreferrer noopener">Congressional Research report</a>:



<ul>
<li>Silicon Valley Bank, Silvergate and Signature were all in on the crypto action, providing services to firms in the industry.</li>



<li>Among them, Silvergate was king, counting more than 90% of its deposits coming from crypto clients. Meanwhile, Signature Bank had only 20% of deposits in digital assets. SVB claimed to have “minimal exposure,” but Circle’s announcement that it held $3.3 billion of stablecoin reserves at SVB caused a bit of a stir when USDC <a href="https://blockworks.co/news/new-circle-bank-after-usdc-depeg">temporarily depegged</a> from the US dollar.</li>



<li>Silvergate offered bitcoin-collateralized loans to industry participants, holding $302 million in bitcoin-collateralized loans at the end of Sept. 2022.</li>



<li>Both Silvergate and Signature offered payment networks that facilitate real-time payments among crypto clients</li>



<li>Banks had limited exposure to high-profile crypto company failures, including Celsius and FTX.</li>



<li>Silvergate had less than 10% exposure to FTX, while Celsius’ deposits at Signature were an inconsequential 0.1%.</li>



<li>Crypto firm withdrawals during the bank run were proportional to the banks’ total deposits.</li>



<li>The crypto market downturn caused the banks to lose more deposits as centralized crypto platforms and stablecoin issuers experienced redemptions</li>



<li>Banks had to sell what they thought were safe and sound investments at a loss to meet withdrawal demand.</li>



<li>In conclusion, withdrawals of crypto deposits forced banks to sell other assets at a loss.</li>
</ul>



The report concluded that the recent failures of crypto-friendly banks have fuelled debate about whether they are managing the liquidity risks of the market well.&nbsp;



While banking regulators previously clarified that banks were “neither prohibited nor discouraged” from banking crypto, banks may be reticent to bank the industry,” Paul Tierno, analyst in financial economics at the Congressional Research Service wrote.&nbsp;



“Hesitancy to bank crypto may also highlight broader uncertainty regarding what constitutes appropriate practices in the absence of a more robust regulatory framework.”



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Start your day with top crypto insights from David Canellis and Katherine Ross. <a href="https://blockworks.co/newsletter/empire">Subscribe to the Empire newsletter</a>.

US Congressional Research Finds Perception of Crypto Risk Spurred Bank Withdrawals

Jon Rice

When you’ve been around crypto for a while, you learn to be skeptical. Technology is neutral (despite the posturing of politicians), but people are not.



No matter how many tens of thousands of developers are out there building next-generation infrastructure layers and applications with positive intentions, some small minority will always find a way to put neutral technology to nefarious use. And others will simply be incompetent.



These things tend to come in waves, often driven by buzzword-abusing platforms masquerading as crowdfunding mechanisms. Crypto has been particularly susceptible to the machinations of the people behind these constructs: the Initial Coin Offering, the Initial Dex Offering, the DeFi rugpull, the NFT scams.



So when both CoinDesk and The Block ran a story yesterday on a project called ‘CryptoGPT,’ I was surprised. Like previous projects that have capitalized on trending terms (Squid Game Token, the innumerable and insufferable Doge clones) the project sounds scammy from its name alone.



And one look at the website for CryptoGPT reinforces that sense of deep skepticism.



Profiles of a team that appears to have no verifiable background in crypto? Check.



Lead investor is DWF Labs, which has gained a <a href="https://twitter.com/nay_gmy/status/1645426187160924161">reputation</a> in the industry for presenting over-the-counter trades as investments? Check.



Unverifiable claims about outrageous user growth that seem absurd (because, in all likelihood, they are)? Check.



Details on their “$10M raise” at a “$250 million valuation” continue to suggest that all is not what it seems at CryptoGPT. The Block reported that only $420,000 of DWF Labs’ commitment has actually been received by CryptoGPT. (Hey! A weed reference! That bodes well!)



And The Block <a href="https://www.theblock.co/post/225531/cryptogpt-raises-dwf-labs">added</a> that the investor is also the market maker. Which suggests that industry sources are correct: DWF Labs is very likely paying for discounted unlocked tokens, rather than truly investing in a company. “DWF Labs follows the vesting schedule that&#8217;s outlined in our tokenomics. The investment is done over a 285-day period, aligning with the vesting of those tokens,” The Block quoted co-founder Dejan Erja as saying.



A prominent market maker who discussed the situation with Blockworks today said that over-the-counter trades don’t make headlines — investments do. Media interest lends legitimacy to projects that seem otherwise to be inconsequential…which is why, he believes, DWF Labs has presented these trades to crypto-focused publications as investments.



And the strategy has worked. DWF Labs has managed to get stories about itself or its investments into CoinDesk on <a href="https://www.coindesk.com/business/2023/03/20/market-maker-dwf-labs-invests-20m-in-defi-liquidity-protocol-synthetix/">March 20</a>, <a href="https://www.coindesk.com/business/2023/03/21/alternative-internet-builder-tomi-raises-40m-to-attract-content-creators/">March 21</a>, <a href="https://www.coindesk.com/business/2023/03/23/radix-tokens-raises-10m-ahead-of-introducing-smart-contract-capability/">March 23</a>, <a href="https://www.coindesk.com/business/2023/03/29/market-maker-dwf-labs-emerges-as-top-crypto-investor/">March 29</a>, <a href="https://www.coindesk.com/business/2023/04/03/alchemy-pay-raises-10m-at-400m-to-push-south-korean-expansion-plans/">April 2</a>, <a href="https://www.coindesk.com/business/2023/04/05/dwf-labs-invests-16m-in-raca-to-spur-web3-gaming-ecosystem/">April 5</a>, <a href="https://www.coindesk.com/business/2023/04/10/ai-focused-blockchain-cryptogpt-raises-10m-funding-at-250m-valuation/">April 10,</a> and <a href="https://www.coindesk.com/business/2023/04/11/information-protocol-rss3-raises-10m-via-token-sale-to-dwf-labs/">April 11</a>.



Is that unusual? Not really. Unprecedented, maybe, but unusual doesn’t do the success of this strategy justice.



Back to CryptoGPT, and the website that should have tipped off anyone looking to cover their “raise.”



As Scott Melker put it in <a href="https://thewolfden.substack.com/p/the-wolf-den-711-bitcoin-is-risen?sd=pf">his newsletter</a>, &#8220;The first article published failed to mention that CryptoGPT has no affiliation with ChatGPT.&#8221; Which, as he notes, may be obvious to seasoned investors, but isn&#8217;t necessarily so to newcomers to crypto.



Their app ecosystem lead is ‘Art Bagdonas’ who’s apparently led multiple European startups, despite having virtually no online presence and looking very much like an AI-generated avatar… oh, and ‘Bagdonas’ could even be a reference to the term ‘Joey Bag O’Donuts’, Italian-American slang for a gentleman carrying a few extra pounds.



The hits keep on comin’.



Liberally plastering the logos of reputable projects all over your website? Check.



Nonsense statements such as “CryptoGPT innovates the core business model of blockchains” and “Apps onboard due to new cashflow from monetizing user data upon user consent” and “CryptoGPT is the Ethereum layer-2 that is the dedicated blockchain for AI development.” Check.



CryptoGPT even includes the following sentence on its website, and if this doesn’t scare the bejeezus out of you, I don’t know what will: “All the upside, zero of the downside.”



I’m not going to spend more time on CryptoGPT because I’ve been around crypto for years, and 2017 was full of projects that looked like this, sounded like this, and included helpful charts like this. 


<div class="wp-block-image">
<figure class="aligncenter"><img decoding="async" src="https://lh3.googleusercontent.com/Fw7s56DI2LgsvqowCvJLHDuvVPeMfLQe_gAuLO5R4D9TuZRodpU--jhRYU4vEszj1BzzA5g-P0nQHngwDi62GfH-aTeTAhNrMXAhOgulQOEmVAy7DxRcIrLzYosbkhKPvgel0fuIW83PlsoDEq6duUA" alt=""/><figcaption class="wp-element-caption">Source: CryptoGPT website. (Yes, really.)</figcaption></figure></div>


Blockworks doesn’t have the resources to deeply research every aspect of every project that appears in our inbox.



But we do apply a modicum of common sense to our coverage, attempting to filter out the more obvious red flags before we present a plethora of uncritical stories that culminate in covering a round that doesn’t look like a real round, led by an investor that doesn’t look like a real investor, for a project that doesn’t look like a real project.



Do your own research. It’s not just a catchphrase.







Updated 4/11/23 at 5:15pm ET to note that CoinDesk covered another DWF Labs story today. 



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Start your day with top crypto insights from David Canellis and Katherine Ross. <a href="https://blockworks.co/newsletter/empire">Subscribe to the Empire newsletter</a>.

CryptoGPT Made Headlines Yesterday Because… Errrr… Hmmm

Macauley Peterson

Increased use of digital assets could help to improve the quality of life for society, but they also present challenges to the banking sector, the US Treasury said Wednesday.



Private digital assets, such as stablecoins issued by banks, as well as public central bank currencies, could harm financial stability, increasing the likelihood of sector-wide crises, according to a <a href="https://www.financialresearch.gov/working-papers/files/OFRwp-23-01_digital-currency-and-banking-sector-stability.pdf" target="_blank" rel="noreferrer noopener">report</a> published by the US Treasury Department&#8217;s Office of Financial Research (OFR).



Their proliferation could make it harder for banks to recapitalize following losses due to digital assets’ ability to depress spreads, meaning the difference between interest rates that banks charge for loans and the interest rates they pay to depositors.



The irony of the well-worn narrative is not lost on market observers, who witnessed a historic run on Silicon Valley Bank earlier this month, despite most of its issues stemming from poor risk management <a href="https://blockworks.co/news/dont-blame-crypto-for-banking-problems">and not its exposure</a> to the nascent asset class.



The OFR report sidesteps the contribution digital assets or CBDCs may make to bank runs and the disintermediation of bank deposits. The focus, instead, is on cases of systemic deleveraging and requisite financial fragility resulting from low levels of bank equity.



The adoption of digital assets can increase household welfare “significantly despite the decrease in financial stability,” the authors wrote — but only up to a point, after which financial instability can become harmful.



“The welfare-maximizing level of digital currency may be less than what would be provided by profit-maximizing issuers in a competitive market,” the report reads. It suggests regulation or other policy interventions may be necessary to square the interests of issuers with what’s best for society.



For instance, the authors caution, if digital assets move closer to a “perfect substitute” for deposits, their issuance is more likely to lead to welfare declines.



On average, digital currency issuance leads to an increase in asset prices and a decrease in their volatility, the report concludes.



In other words, the authors write, financial markets improve even as the financial sector suffers.



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Start your day with top crypto insights from David Canellis and Katherine Ross. <a href="https://blockworks.co/newsletter/empire">Subscribe to the Empire newsletter</a>.

Digital Assets May Be Good for Households But Bad For Banks

Digital assets have been found to move in cyclical patterns based on volatility, leading to larger outsized returns.



An exhaustive study conducted by researchers at risk management and trading platform The Risk Protocol (TRP) found bellwether bitcoin <a href="https://www.blockworksresearch.com/glossary#volatility">volatility</a> differed significantly depending on the time of day.



Measuring in Coordinated Universal Time (UTC), TRP said hours two and 15 through 18 were found to be the most volatile, <a href="https://riskprotocol.io/" target="_blank" rel="noreferrer noopener">the</a><a href="https://riskprotocol.io/#research" target="_blank" rel="noreferrer noopener"> </a><a href="https://riskprotocol.io/" target="_blank" rel="noreferrer noopener">study</a>, titled “The Nature of the Beast,” indicated.



Put differently, by analyzing the average absolute return and absolute return standard deviation, it was revealed that crypto tends to move most during the 9 am start of the day across Asia and the US.



&#8220;If you look at the volatility pattern in the US financial markets, it is typically U shaped, in the sense that it is higher at market opening and closing and lower in the middle,&#8221; TRP CEO Karamvir Gosal told Blockworks.



Gosal added: &#8220;If traders are building a large position in crypto or trying to unwind one, they want to do so in periods of low volatility.&#8221;



Volatility can be described as the degree of variation of a financial instrument&#8217;s price over time, and can manifest in either positive or negative moves.



It is often measured by the standard deviation of an asset’s returns over a certain period. In other words, the higher the volatility, the more the price of the asset fluctuates, which implies a greater risk for investors.



Volatility across Asia typically lasts for between five and six hours before dropping to its lowest point as parts of Europe approached late evening, the study found. Volatility then begins to pick up once again during US working hours, peaking by about 2 pm.



With people in the US starting a new trading day, “we would typically expect more trading activity during these hours,” TRP said.



Large levels of exchange trading volumes have been witnessed occurring during those times, which is consistent with the analysis, researchers said.



Ethereum, too, was also shown to have the same volatility patterns as bitcoin, which makes sense given their close correlation during major market moves.



“Findings are not too surprising given the regular working hours around the world,” TRP said. The study also found that, of the 50 digital assets it analyzed, Friday, offered up significantly higher volatility than other days.



To test the statistical significance of the results, the researchers conducted a mean difference test between Tuesday and other days and found the weekend offered the lowest levels of significant price changes.



The results are likely correlated to crypto’s round-the-clock trading times compared to traditional markets, meaning more people are likely to trade during days when they are at work taking a break during the weekend, they said.



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Start your day with top crypto insights from David Canellis and Katherine Ross. <a href="https://blockworks.co/newsletter/empire">Subscribe to the Empire newsletter</a>.

Bitcoin’s Price Movement is ‘Highly Predictable’ on Set Days, Study Finds

Ben Strack

<div id="highlights-block_6285486c715ef" class="highlights">
 <ul>
 <li>Blockworks Research will first focus on DeFi and seeks to expand its coverage to other sectors</li>
 <li>Web application’s offerings to include project and tokenomics analysis, daily briefs with market updates, and protocol and project models</li>
 </ul>
 
</div>



Blockworks has launched a research offering designed for a range of investors and industry watchers seeking to learn more about DeFi and other crypto sectors.&nbsp;&nbsp;



The media company’s co-founders, Jason Yanowitz and Michael Ippolito, unveiled <a href="https://www.blockworksresearch.com/" target="_blank" rel="noreferrer noopener">the new web application</a> Wednesday during the Permissionless event in Palm Beach, which Blockworks is co-hosting.



Founded in 2018, Blockworks has spent the past few years building out its events and conferences, as well as its podcast network, editorial brand and newsletter.



“We’ve been building this huge community of investors who are investing into crypto with this core thesis that crypto will eventually become one of the largest asset classes in the world,” Yanowitz said. “Now, it’s time to go deeper.”&nbsp;



Blockworks Research will focus on DeFi (decentralized finance) and seeks to expand its coverage to other sectors. The company will publish research on segments such as layer-1s, layer-2s, DAOs, gaming and NFTs — starting at the product and protocol level.



The company has a 10-person research team and plans to scale the unit over time, Yanowitz said.



The offering was designed for crypto executives seeking to keep up with industry development, as well as builders, investors and retail traders.



In addition to data, Blockworks Research will offer project and tokenomics analysis, daily briefs with market updates, protocol and project models, corporate access calls, governance updates and access to analysts.&nbsp;



The launch comes after the crash of Terra’s algorithmic stablecoin, UST, and the blockchain’s other native token, LUNA. Though the timing wasn’t planned, Ippolito said, the recent events are a good reminder of the need for better data and analysis.



“There’s definitely a lot of…following people and not doing their own research,” he said. “So one of the things we feel we can give back to the community is providing good primary research, and hopefully that can advance the space.”



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Start your day with top crypto insights from David Canellis and Katherine Ross. <a href="https://blockworks.co/newsletter/empire">Subscribe to the Empire newsletter</a>.

Blockworks Unveils New Research Offering

Jacquelyn Melinek

<div id="highlights-block_621f6168d370a" class="highlights">
 <ul>
 <li>About 1 in 4 women already own crypto, the survey found</li>
 <li>Other subsectors in the industry remain largely untapped by women as only 5% have bought an NFT or participated in crypto mining</li>
 </ul>
 
</div>



About one-third of women are planning on buying cryptocurrencies this year, according to a new survey conducted by BlockFi. Of those women, 60% said they plan on buying digital assets within the next few months.



That’s more than double the 29% of women who said, in a September 2021 survey, they would purchase within the next year. 



“There’s no better way to learn about something new than by doing — especially when diving into the seemingly complex world of crypto,” Flori Marquez, founder and senior vice president of operations of BlockFi, said in a statement. 



About one in four women already own cryptoassets, and of that group, a majority of them have never sold what they’ve bought.



The findings also showed women are buying bitcoin, dogecoin and ether the most — at 71%, 42% and 18%, respectively. However, other subsectors in this space remain largely untapped by women, as only 5% have bought a non-fungible token (NFT) or participated in crypto mining.



In general, the crypto sector is a heavily male-dominated industry. Out of the 121 leading crypto companies, only five of them, or 4.13%, had female founders, according to <a href="https://cryptohead.com/cryptocurrency-company-index/?msID=5717aa95-8a58-4454-9210-9f72fa4cd4a0" target="_blank" rel="noreferrer noopener">research</a> by Crypto Head. Of those founders — Marquez being one of them — all the companies also have at least one male founder, too.



<figure class="wp-block-image"><img decoding="async" src="https://lh4.googleusercontent.com/Nu87tROsif4_LwFU8AQdFN_KSrq-YCJdhr-PlI68I_p1_pqovr6rQH9Qm2KIBukFKrNqmxkXoGC_nKT82IWu6ngxoSDvpQjY07_XSKtQvrjtzI_TaWshx_s7MLyDCa3Atp5FdraY" alt=""/><figcaption>Source: Crypto Head</figcaption></figure>



The number of women in the industry is set to grow, though. The BlockFi survey found that 15% of women are interested in working in crypto, but only 10% plan on applying to crypto or blockchain-focused companies within the next year.&nbsp;



“It’s very exciting to know that women are becoming more aware of the benefits of owning crypto and expressing interest in working in the crypto sector,” Marquez said. “Now it’s our responsibility to continue to close the education gap and provide as many on-ramps as possible, so women can easily gain exposure to crypto markets and get comfortable doing more with their crypto.”&nbsp;



The survey was conducted by a third-party survey panel at the end of January and consisted of 1,031 female Americans between the ages of 18 and 65. This is the third edition of its “Real Talk” survey, which is focused on female Americans’ attitudes toward crypto, financial wellness and career aspirations.&nbsp;



&#8220;Crypto is becoming a part of everyday financial wellness, and we must continue to educate new adopters and make financial products that are simple and easy to use,&#8221; Marquez told Blockworks. &#8220;Mass adoption presents a significant opportunity to drive inclusion in the industry.



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Start your day with top crypto insights from David Canellis and Katherine Ross. <a href="https://blockworks.co/newsletter/empire">Subscribe to the Empire newsletter</a>.

Survey: One-third of Women Plan To Buy Crypto This Year

<div id="highlights-block_61f19d9467ff2" class="highlights">
 <ul>
 <li>The total value locked across layer-1 protocols jumped 1,237% from $18.7 billion at the beginning of 2021 to about $250 billion by year-end, according to DeFiLlama data </li>
 <li>Uniswap accounted for the &#8220;lion&#8217;s share&#8221; of volume with $779 billion traded on its protocol</li>
 </ul>
 
</div>



The number of clear-cut use cases for cryptocurrencies ballooned last year in a trend Coinbase expects to continue in 2022 — especially when it comes to DeFi, NFTs, the metaverse and play-to-earn gaming.



“We’ve now started to see the real use cases start to emerge, compared to a lot of old rhetoric that people rely on about Bitcoin and store of value,” David Duong, Coinbase’s head of institutional research, told Blockworks.&nbsp;



In the exchange’s institutional arm’s “<a href="https://www.coinbase.com/prime/2021-year-in-review?utm_source=twitter&amp;utm_medium=organic&amp;utm_campaign=in_i_m_w_m_awa_twi_soc_0_institutional-2021-year-review" target="_blank" rel="noreferrer noopener">2021 Year in Review</a>,” Duong said an area to watch is the U.S. regulatory landscape, which is “primed for more clarity in 2022.” Meanwhile, the move toward Web3 technologies is accelerating, he said.



“Well now we have a completely different environment we’re seeing new layer-1 chains and networks being developed, hosting a number of programs and platforms that really are going to represent a new shift for the world away from Web1, Web2 to a <a href="https://cms.blockworks.co/metaverse-will-empower-creators-ceo-says/" target="_blank" rel="noreferrer noopener">Web3</a> world,” Duong said.&nbsp;



 The total value locked (TVL) across layer-1 protocols jumped 1,237% from $18.7 billion at the beginning of 2021 to about $250 billion by the end, according to <meta charset="utf-8">DeFiLlama <a href="https://defillama.com/" target="_blank" rel="noreferrer noopener">data</a>.



<div class="wp-block-image"><figure class="aligncenter size-full is-resized"><img loading="lazy" decoding="async" src="https://blockworks-co.imgix.net/wp-content/uploads/2022/01/Coinbase-2021-report_Img0.png" alt="" class="wp-image-16084" width="835" height="424" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2022/01/Coinbase-2021-report_Img0.png?w=758 758w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/Coinbase-2021-report_Img0.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/Coinbase-2021-report_Img0.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/Coinbase-2021-report_Img0.png?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/Coinbase-2021-report_Img0.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/Coinbase-2021-report_Img0.png?w=80 80w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/Coinbase-2021-report_Img0.png?w=50 50w" sizes="(max-width: 835px) 100vw, 835px" /></figure></div>



The majority of the TVL is pooled into lending and borrowing protocols such as <a href="https://cms.blockworks.co/aave-arc-to-provide-30-financial-institutions-access-to-private-pools-of-defi-liquidity/" target="_blank" rel="noreferrer noopener">Aave</a> or Compound, as well as decentralized exchanges like <a href="https://cms.blockworks.co/uniswap-delegates-consider-liquidity-mining-to-kickstart-ethereum-layer-2-adoption/" target="_blank" rel="noreferrer noopener">Uniswap</a> and Curve, according to Duong.



Duong expects volatility to persist as crypto remains in the nascent stages of Web3 adoption.



As of Jan. 25, the total TVL on DeFi protocols declined about 19% from the end of 2021 to $201.9 billion.&nbsp;



“Overall it’s still a growth number. These things will fluctuate like anything in the world — there’s no straight linear growth,” Duong said. 



Decentralized exchanges (DEXs) gathered over $1 trillion in cumulative volume last year, with Uniswap taking “the lion’s share,” the report found. For reference, the Uniswap protocol has traded over $779 billion across 86 million trades, according to its <a href="https://uniswap.org/" target="_blank" rel="noreferrer noopener">website</a>.&nbsp;&nbsp;



Though DEX trading volumes typically trail centralized exchanges, there have been instances where Uniswap surpasses Coinbase in trading activity.&nbsp;



Duong declined to share projections for DeFi protocol TVL levels for 2022, but said, “I do think it’s going to continue to grow. The space as a whole has a lot of opportunities still with DEXs, AMMs, and liquidity pools, which are in their initial stages.” 



He expects more users to turn to DEXs like Uniswap as the yield possibilities of liquidity pools rise and there’s less concern about token volatility.&nbsp;



“If you look at Uniswap and returns from liquidity pools compared to traditional finance, those yields are very attractive and people are starting to realize that more and more,” he said. “That search for yield has definitely benefited crypto and Uniswap is evidence of that.”.



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Start your day with top crypto insights from David Canellis and Katherine Ross. <a href="https://blockworks.co/newsletter/empire">Subscribe to the Empire newsletter</a>.

Coinbase: DeFi Growth Spikes as Crypto Shifts to Web3 Technologies

<div id="highlights-block_61e9dd4f589c2" class="highlights">
 <ul>
 <li>A report by Bitwise Asset Management and ETF Trends found that 94% of financial advisors fielded crypto questions from clients in 2021 </li>
 <li>There was a roughly even split between advisers considering an investment in crypto equities versus direct crypto investments this year</li>
 </ul>
 
</div>



Financial advisors increasingly included crypto in client portfolios last year, according to <a href="https://static.bitwiseinvestments.com/Research/Bitwise-ETF-Trends-2022-Benchmark-Survey.pdf">a recent survey</a> — and even more money managers plan to deploy capital in the space this year.



The findings, released by Bitwise Asset Management and ETF Trends on Thursday, indicate that the percentage of financial professionals investing client funds in crypto rose from 9% to 15% over the past year. Most holdings, for now, are small, with 80% of respondents capping digital assets to 5% of a given portfolio.&nbsp;



<div class="wp-block-image"><figure class="aligncenter size-large"><img loading="lazy" decoding="async" width="1024" height="708" src="https://blockworks-co.imgix.net/wp-content/uploads/2022/01/Advisor-Crypto-Survey-Chart-2-1024x708.jpg" alt="" class="wp-image-15807" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2022/01/Advisor-Crypto-Survey-Chart-2-1024x708.jpg?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/Advisor-Crypto-Survey-Chart-2-1024x708.jpg?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/Advisor-Crypto-Survey-Chart-2-1024x708.jpg?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/Advisor-Crypto-Survey-Chart-2-1024x708.jpg?w=372 372w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/Advisor-Crypto-Survey-Chart-2-1024x708.jpg?w=378 378w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/Advisor-Crypto-Survey-Chart-2-1024x708.jpg?w=317 317w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/Advisor-Crypto-Survey-Chart-2-1024x708.jpg?w=80 80w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/Advisor-Crypto-Survey-Chart-2-1024x708.jpg?w=50 50w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/Advisor-Crypto-Survey-Chart-2-1024x708.jpg?w=1470 1470w" sizes="(max-width: 1024px) 100vw, 1024px" /></figure></div>



“Crypto has gone from a tulip craze-style fad to a real, lasting phenomenon,” ETF Trends Managing Editor Lara Crigger told Blockworks. “Advisors can&#8217;t just ignore the questions anymore. They must be proactive about crypto education, not just for their clients but for themselves.”



The survey included 619 responses from independent registered investment advisors, broker-dealer representatives and financial planners in the US.&nbsp;



<h3 class="wp-block-heading">Allocations to the space grow</h3>



To go along with the 15% of advisors that invested in crypto last year, an additional 14% said they will “probably” or “definitely” have crypto holdings this year.&nbsp;



The expected increase comes as 94% of advisors reported receiving questions from clients about crypto in 2021, up from 81% the year before



Crigger said she expects advisors adding crypto to their clients’ investment mix to rise sharply, noting that 47% of advisors said they have personal crypto holdings — a near-doubling from the year before.&nbsp;



“Seems like an odd mismatch, perhaps, but I think advisors aren&#8217;t willing to put their clients in something that they haven&#8217;t experienced for themselves,” she said. “Right now, they&#8217;re conducting hands-on research, using their own accounts. If it makes sense, they&#8217;ll apply that knowledge to their clients&#8217; portfolios.”&nbsp;



More advisors than now, however, are remaining on the sidelines, citing volatility concerns, plus a lack of regulatory clarity.&nbsp;



<div class="wp-block-image"><figure class="aligncenter size-large is-resized"><img loading="lazy" decoding="async" src="https://blockworks-co.imgix.net/wp-content/uploads/2022/01/Advisor-Crypto-Survey-Chart-737x1024.jpg" alt="" class="wp-image-15808" width="553" height="768" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2022/01/Advisor-Crypto-Survey-Chart-737x1024.jpg?w=737 737w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/Advisor-Crypto-Survey-Chart-737x1024.jpg?w=216 216w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/Advisor-Crypto-Survey-Chart-737x1024.jpg?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/Advisor-Crypto-Survey-Chart-737x1024.jpg?w=185 185w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/Advisor-Crypto-Survey-Chart-737x1024.jpg?w=188 188w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/Advisor-Crypto-Survey-Chart-737x1024.jpg?w=158 158w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/Advisor-Crypto-Survey-Chart-737x1024.jpg?w=58 58w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/Advisor-Crypto-Survey-Chart-737x1024.jpg?w=36 36w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/Advisor-Crypto-Survey-Chart-737x1024.jpg?w=944 944w" sizes="(max-width: 553px) 100vw, 553px" /></figure></div>



Though more than half of respondents said they’re concerned about volatility, the same number believe that bitcoin will top $100,000 within five year. Just 15% last year estimated the cryptocurrency would rise that high over the same period.&nbsp;



Bitcoin traded around $42,600 at 4 p.m. ET on Thursday, up 1.8% over the last 24 hours.



<h3 class="wp-block-heading">Ways to invest in crypto</h3>



Though the US Securities and Exchange (SEC) approved <a href="https://cms.blockworks.co/what-does-demand-for-bitcoin-futures-etfs-look-like-in-2022/">bitcoin futures-based ETFs</a> to hit the market in October, the agency <a href="https://cms.blockworks.co/when-will-the-sec-approve-a-spot-bitcoin-etf/">has not yet approved</a> an ETF that would invest in bitcoin directly.&nbsp;



The SEC on Thursday denied a bitcoin ETF proposed by First Trust and SkyBridge Capital, according to a<a href="https://www.sec.gov/rules/sro/nysearca/2022/34-94006.pdf"> filing</a>.



The survey found that 82% of advisors said they’d prefer investing in a spot bitcoin ETF versus a futures-based alternative&nbsp; — which could be a long ways off in the U.S.&nbsp;



Meanwhile other advisors are focused on investing in the stocks of companies with exposure to digital assets. About 46% were bullish on buying crypto-related equities, compared to 45% interested in buying crypto outright.&nbsp;



The outlook on blue-chip crypto stocks such as Coinbase has become more rosey lately as companies look to diversify their revenue streams. Bank of America Research Analyst Jason Kupferberg said in a research note earlier this month that he’s upgraded Coinbase to a buy rating as the company plans to add products this year.&nbsp;



<meta charset="utf-8"><a href="https://cms.blockworks.co/ark-invest-coinbase-is-an-attractive-long-term-play/">Research professionals at Ark Invest have said</a> that Coinbase’s position as a crypto on-ramp and its additional planned launches make it an attractive long-term play. The firm bought about 200,000 shares of Coinbase across three of its ETFs over a two-day span earlier this month.



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Start your day with top crypto insights from David Canellis and Katherine Ross. <a href="https://blockworks.co/newsletter/empire">Subscribe to the Empire newsletter</a>.

Survey: Financial Advisors Increasingly Allocating to Crypto

Sam Reynolds

<div id="highlights-block_616476f903ba2" class="highlights">
 <ul>
 <li>Critics of Tether often point to its frequent USDT minting near periods of market volatility to suggest a conspiracy that Tethers are minted in order to stabilize, and prop up the market</li>
 <li>CrossTower research suggests that Tether minting has had no material impact on price and rather follow capital flow</li>
 </ul>
 
</div>



Is Tether issuance timed to support the rise of the price of bitcoin during periods of market volatility? No, says a new paper from CrossTower Research.&nbsp;



A <a href="https://newrepublic.com/article/160905/tether-cryptocurrency-scam-enrich-bitcoin-investors" target="_blank" rel="noreferrer noopener">common belief</a> amongst those skeptical of the merits of the digital asset market is that Tether (USDT) is minted in large measure to <a href="https://www.theverge.com/22620464/tether-backing-cryptocurrency-stablecoin" target="_blank" rel="noreferrer noopener">support the growth</a> in the price of bitcoin.



Tether Limited certainly lends itself to conspiracy. With its outsized role in the broader crypto market — USDT accounting for 70% of all volume on centralized exchanges — and opaque structure with <a href="https://www.bloomberg.com/news/features/2021-10-07/crypto-mystery-where-s-the-69-billion-backing-the-stablecoin-tether" target="_blank" rel="noreferrer noopener">questionable holdings</a>, it has been <a href="https://www.bloomberg.com/news/features/2021-10-07/crypto-mystery-where-s-the-69-billion-backing-the-stablecoin-tether" target="_blank" rel="noreferrer noopener">described recently</a> as a company that seems to be “practically quilted out of red flags.”



But often reality is less interesting than imagination.&nbsp;



Tether is currently the fourth-largest digital asset by market cap, according to <a href="https://www.coingecko.com/en" target="_blank" rel="noreferrer noopener">CoinGecko data</a>, with $69 billion USDT in circulation. Its closest stablecoin competitor, <a href="https://cms.blockworks.co/celsius-reportedly-borrowed-1b-from-tether-with-bitcoin-as-collateral/" target="_blank" rel="noreferrer noopener">Circle’s</a> USDC, has a market cap of just over $33 billion.&nbsp;&nbsp;



<h3 class="wp-block-heading">The Tether tie</h3>



The belief that there was, or is, some deliberate relationship between Tether mints and the price of bitcoin first began in 2018 when an anonymous report was published — “<a href="https://www.tetherreport.com/" target="_blank" rel="noreferrer noopener">The Tether Report”</a> — which claimed that 40% of bitcoin price growth could be attributed to Tether.



<a href="https://poseidon01.ssrn.com/delivery.php?ID=542020096000010096113080070065068102026044031032057003066126105028004098107026113066031056003008104040034096126064110019002088027091046046045108065096110108089017004077083060020091016071122113080065025003122025122064019075070109077066024085027070005102&amp;EXT=pdf&amp;INDEX=TRUE" target="_blank" rel="noreferrer noopener">Another paper</a> from University of Texas at Austin finance professors John Griffin and Amin Shams argued that even though the positive price action from Tether minting was small, sometimes just 1%, if timed correctly during periods of market volatility there were “substantial aggregate price effects” downstream.&nbsp;



“These distortive effects, when unwound, could have a considerable negative impact on cryptocurrency prices,” they wrote. “Our findings support the historical narrative that dubious activities are associated with bubbles and can contribute to further price distortions.”



CrossTower notes that many of the crypto derivatives and futures contracts are denominated in USDT, which has contributed to the growth of the stablecoin alongside the popularity of crypto derivatives.



CrossTower points to Tether’s use in dodging Chinese capital controls as one of its many utilities which have led to its continued market dominance despite the numerous questions around it.&nbsp;



“With growing institutional investment into the crypto market, we would expect an increase in the amount of Tether being created,&#8221; the company stated in the report.



<h3 class="wp-block-heading">Price action</h3>



According to CrossTower’s analysis of pricing data, Tether mints do not follow weak price action, nor do they have a material impact on price.



<blockquote class="wp-block-quote">CrossTower found that Tether’s mints, usually occurring on a Monday, followed lower bitcoin and ether prices that occurred simply because of reduced crypto trading over the weekend. However, other mints that occurred were related to positive price action in the 30 days or seven days preceding the mint.&nbsp;</blockquote>



When minting occurs, pricing action doesn’t change much over a median average. CrossTower noted that those days during which mints preceded a positive price move occurred during a broader bull market trend.



CrossTower says that, for bitcoin, the mean price increase on the day of minting ranged from 1.5% to 1.9%; however the day before the mean price increase ranged from 1.0% to 1.9% — the day-to-day price increase was not materially different from the broader trend.&nbsp;



Furthermore, the day after the mint, CrossTower’s research showed bitcoin&#8217;s gains were rather subdued, with a mean price increase ranging from 0.7% to 1.2%.



<div class="wp-block-image"><figure class="aligncenter size-full"><img loading="lazy" decoding="async" width="996" height="469" src="https://blockworks-co.imgix.net/wp-content/uploads/2021/10/2021-10-11-Tether_crop.jpg" alt="" class="wp-image-9211" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2021/10/2021-10-11-Tether_crop.jpg?w=996 996w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/2021-10-11-Tether_crop.jpg?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/2021-10-11-Tether_crop.jpg?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/2021-10-11-Tether_crop.jpg?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/2021-10-11-Tether_crop.jpg?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/2021-10-11-Tether_crop.jpg?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/2021-10-11-Tether_crop.jpg?w=80 80w" sizes="(max-width: 996px) 100vw, 996px" /><figcaption>Price movement around a Tether mint day for mint sizes &gt;$100M; Source: CrossTower Research</figcaption></figure></div>



“All in, our findings suggest that USDT mints could have led to higher bitcoin, but largely disproves the notion that these mints were predicated on negative price performance in the&nbsp; days before,” wrote CrossTower. “We note that there are simply too many confounding factors that make it difficult to attribute the price movements of bitcoin solely to mints of Tether. It could also simply reflect that Tether mints are reflective of real inflows into the crypto ecosystem.”



This story was updated on October 11, 2021, at 5:27 pm ET



<hr class="wp-block-separator"/>



Are you a UK or EU reader that cant get enough investor-focused content on digital assets?<a target="_blank" href="https://cms.blockworks.co/events/das-london/" rel="noreferrer noopener">Join us</a>&nbsp;in London on November 15th and 16th for the Digital Asset Summit (DAS) London. Use code ARTICLE for £75 off your ticket.&nbsp;<a target="_blank" href="https://cms.blockworks.co/events/das-london/" rel="noreferrer noopener">Buy it now</a>.



<hr class="wp-block-separator"/>

CrossTower Research: Tether Mints Follow Strong Price Action

<div id="highlights-block_61018fdacf0d4" class="highlights">
 <ul>
 <li>Bitcoin continued to show low correlation to other benchmarks during the time frame. Its 12-month correlation was closest to ethereum’s daily returns at 67.2%, followed by the S&#038;P 500 asset at a much lower 14.1% correlation, the data showed. </li>
 <li>Coinbase noted that many major ETF issuers believe the US SEC could give the “go-ahead” to the crypto ETFS in 2021 or 2022.</li>
 </ul>
 
</div>



The first half of 2021 was one of the most active periods on record for crypto, said Brian Foster, a member of Coinbase’s Institutional Sales, Trading, and Prime Services team and Coinbase Ventures, in the company’s H1 2021 Review <a href="https://assets.ctfassets.net/c5bd0wqjc7v0/4kKRqK0SCt0DDDjXuo5NRX/fc893f70e08204df25df490d7bcf3e88/Coinbase-Institutional-H1-2021-in-Review.pdf" target="_blank" rel="noreferrer noopener">report</a>.&nbsp;



The first six months brought in new all-time highs in asset prices, user adoption and trader activity, Foster said.&nbsp;



“Crypto saw continued price volatility — total market capitalization began the year at $769 billion, peaked at $2.4 trillion in May, and ended the period at $1.4 trillion, registering a net gain of 86% year to date,” he added.&nbsp;



At the end of the first half, bitcoin stored $657 billion in global wealth as institutional investors, such as traditional hedge funds, endowments and corporates increased their exposure over the period. Compared to other asset classes, bitcoin increased 280% in the last 12 months, even after declining from mid-April highs of about $64,000, according to the report.&nbsp;



<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="512" height="217" src="https://blockworks-co.imgix.net/wp-content/uploads/2021/07/unnamed-6.jpg" alt="BTC vs. other assets in last 12 months" class="wp-image-5946" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2021/07/unnamed-6.jpg?w=512 512w, https://blockworks-co.imgix.net/wp-content/uploads/2021/07/unnamed-6.jpg?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2021/07/unnamed-6.jpg?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2021/07/unnamed-6.jpg?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2021/07/unnamed-6.jpg?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2021/07/unnamed-6.jpg?w=80 80w" sizes="(max-width: 512px) 100vw, 512px" /></figure>



As other assets also increased at lower percentages, bitcoin continued to show low correlation to other benchmarks during the time frame. Its 12-month correlation was closest to ethereum’s daily returns at 67.2%, followed by the <a href="https://cms.blockworks.co/sp-dow-jones-brings-crypto-to-wall-street/" target="_blank" rel="noreferrer noopener">S&amp;P</a> 500 asset at a much lower 14.1% correlation, the data showed.&nbsp;&nbsp;



<h3 class="wp-block-heading">Ethereum outperforms</h3>



In general, ethereum outperformed benchmark assets, including bitcoin in H1 with the crypto-asset appreciating 895% in the 12-month period compared to bitcoin’s appreciation of 280%. Ethereum rose about 210% over the 6-month period ending June 30, the data showed.&nbsp;



A handful of factors contributed to ethereum&#8217;s outperformance, mainly increased usage of decentralized finance protocols built on Ethereum, which validated the network’s value as a global financial utility and platform for developers alike, the report wrote.



Additionally, investor optimism grew as Ethereum’s transitions to <a href="https://cms.blockworks.co/celsius-to-launch-eth2-staking-pool-gives-users-more-ethereum-for-their-ethereum/" target="_blank" rel="noreferrer noopener">ETH 2.0</a>, which will introduce a new proof-of-stake consensus to turn ethereum into a yielding asset, and the launch of <a href="https://cms.blockworks.co/singapores-qcp-capital-predicts-market-volatility-from-eip-1556-upgrade/" target="_blank" rel="noreferrer noopener">EIP-1559</a>, which is expected to decrease the supply of ethereum by burning its gas fees as the network is used.&nbsp;



<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="512" height="216" src="https://blockworks-co.imgix.net/wp-content/uploads/2021/07/unnamed-5.jpg" alt="Coinbase report showing daily returns of assets" class="wp-image-5947" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2021/07/unnamed-5.jpg?w=512 512w, https://blockworks-co.imgix.net/wp-content/uploads/2021/07/unnamed-5.jpg?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2021/07/unnamed-5.jpg?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2021/07/unnamed-5.jpg?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2021/07/unnamed-5.jpg?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2021/07/unnamed-5.jpg?w=80 80w" sizes="(max-width: 512px) 100vw, 512px" /></figure>



Overall, the first half of 2021 brought ethereum’s five-year performance total return to 17.962% for the period. Many of Coinbase’s large institutional clients — including hedge funds, endowments and corporations — increased or added first-time exposure to ethereum during that time period as they believe the asset has long-term power equivalent to bitcoins, just in a differentiated way in their portfolios, it said.&nbsp;



<h3 class="wp-block-heading">ETF outlook&nbsp;</h3>



Many new applications for ETFs have been filed with the US Securities and Exchange Commission in recent months from firms like <a href="https://cms.blockworks.co/global-x-adds-to-stack-of-bitcoin-etfs-proposed-to-sec/" target="_blank" rel="noreferrer noopener">Global X</a>, <a href="https://cms.blockworks.co/ark-files-for-bitcoin-etf/" target="_blank" rel="noreferrer noopener">Ark Investment Management</a>, <a href="https://cms.blockworks.co/sec-delays-approval-of-vaneck-bitcoin-etf-again/" target="_blank" rel="noreferrer noopener">VanEck</a> and investment banking company <a href="https://cms.blockworks.co/goldman-files-for-defi-and-blockchain-equity-etf/" target="_blank" rel="noreferrer noopener">Goldman Sachs</a>.



Over a dozen applications to list a bitcoin ETF have been knocked down by the US SEC in the past on the basis of exchange rules “designed to prevent fraudulent and manipulative acts and practices, to protect investors and the public interest,&#8221; said the report.



But, Coinbase’s institutional practice monitored developments in the crypto exchange-traded fund market and said it expects an eventual US crypto ETF approval, but did not clarify when. It also noted that many major ETF issuers believe the SEC could give the “go-ahead” to the crypto ETFS in 2021 or 2022.&nbsp;



“There are a number of factors driving this optimism,” the report said.&nbsp;



The new chairman of the SEC, Gary Gensler, is seen as a knowledgeable person in the crypto space and more likely than previous chairmen to allow a crypto ETF to list. Additionally, desire for cryptocurrencies have boomed recently among both institutional investors and retail investors, with growing demand for exposure without the need to directly buy, hold or sell underlying assets.&nbsp;



While the market is continuously changing, Coinbase’s report said a growing base of well-known institutions have begun to engage with crypto and the regulated bitcoin futures market has grown substantially over time, giving the industry more credibility. In regards to growth, the CME’s monthly notional trading volumes increased from $6 billion in June 2020 to over $34 billion in June 2021, up over 466% year on year.  



Want more investor-focused content on digital assets? <a target="_blank" href="https://cms.blockworks.co/events/digital-asset-summit-2021-2/" rel="noreferrer noopener">Join us</a> September 13th and 14th for the Digital Asset Summit (DAS) in NYC. Use code ARTICLE for $75 off your ticket. <a target="_blank" href="https://cms.blockworks.co/events/digital-asset-summit-2021-2/" rel="noreferrer noopener">Buy it now</a>.