Sep 12, 2022
Pre-Merge Dynamics Rippling Through Markets
The world's most popular programmable blockchain is set for a major upgrade this week: the Ethereum blockchain will switch over its process for executing transactions and mining to a Proof-of-Stake (PoS) consensus mechanism. This change may seem to be superficial at first glance, but it has so far had a profound impact on crypto markets.
Firstly, we have seen ETH dominate its competitors since the Ethereum Foundation publicly announced their planned 'Merge' timeline in mid-July. So-called ETH Killers, such as Cardano (ADA), Tezos (XTZ), and Polkadot (DOT), have underperformed their blue-chip competitor by 34 percentage points on average and in absolute terms. The ETH Killers cohort has historically set themselves apart by utilizing more advanced protocol mechanisms (such as PoS). Lately, investors seem to be discounting this historical 'edge' given that ETH will now have mostly the same features that make these competitors faster and more efficient, but without ETH's much larger, more established user-base.
This bullish ETH sentiment has helped the crypto market stabilize much quicker during the most recent August pullback. Taking a closer look, price action in the DeFi space has been especially resilient. This is due to that fact that the Ethereum blockchain remains the most critical for Finance protocols. Currently, DeFi tokens running on Ethereum attribute to $35B of the $60B in total value locked (TVL), according to defillama.com.
Outside of the obvious benefits of higher speed and bandwidth, the decision to adopt a PoS blockchain will allow environmentally conscious institutions to utilize Ethereum at a much larger scale, pathing the way for mass institutional adoption. When comparing the max drawdown over the current quarter, we have seen the relative outperformance of DeFi protocols fend off the 20% threshold much better than the broader market.
If you are interested in learning more about how the upcoming merge has been impacting crypto markets, then please click here to read our latest attribution report on our flagship indices.
The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell any of the underlying instruments cited including but not limited to cryptoassets, financial instruments or any instruments that reference any index provided by CF Benchmarks Ltd. This communication is not intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. Please contact your financial adviser or professional before making an investment decision.
Note: Some of the underlying instruments cited within this material may be restricted to certain customer categories in certain jurisdictions.
Factor Friday - March 20, 2025
The market's strongest four-week rally of 2026 saw liquidity top weekly factor rankings for the first time, signaling broadening risk appetite beyond value and growth. Downside beta's lead is eroding fast. The rotation is encouraging, but with YTD losses at -28.4%, a full risk-on pivot is premature.
Mark Pilipczuk
The M2-Bitcoin Relationship: What the Data Actually Shows
Global M2 has grown over 12% in the past year while Bitcoin has declined roughly 12%. We analyzed two decades of cross-asset data to determine whether this is a temporary dislocation or a structural regime change in how Bitcoin responds to monetary expansion.
Gabriel Selby
Hashi Brings Bitcoin-Backed Credit to Sui, Priced by CF Benchmarks
Hashi will unlock institutional Bitcoin participation at scale, bringing core financial services like credit origination and lending to a transparent, compliant environment on Sui using both Bitcoin and stablecoins as collateral.
Ken Odeluga