Source: TradingView, CNBC, Bloomberg, Messari
I Can’t Believe Everything We Expected Happened
There have been two distinct selloffs in digital assets this year.
The first one occured after the TRUMP token was launched in mid-January, the fraudulent launch of the Argentinian LIBRA token followed, along with ongoing withdrawals from Pump.fun meme tokens. As a result, the Solana blockchain experienced a significant downturn in digital assets from mid-January to mid-February, with AI tokens and meme tokens driving the declines. Most digital assets other than BTC and XRP sold off 30-90% during this time period, even as stocks and gold continued to hit all-time highs. The graph below shows the Total2 Index (Crypto excluding BTC) vs Gold and the Nasdaq-100 (NDQ), and the divergence between mid-January and mid-February.
Separately, digital assets also sold off due to the broader tariff-induced market selloff, from mid-February through early-April, which had very little to do with digital assets and more to do with a broader risk-off sentiment. Had digital assets not already been so weak prior to this move, they might have performed differently, but the macro sell-off made crypto an easy prey. The same graph below shows how Gold continued its ascent from mid-February through April 8th, but both digital assets and the NDQ suffered steep drawdowns.
The second sell-off led to one of the fastest sentiment shifts on record, as Wall Street strategists and funds went from record bullishness to record bearishness and global recession calls, in the blink of an eye. Even though all of the tariff fears could easily be erased with just a few positive headlines, without any long-lasting economic damage (something we’ve written about for the past few weeks), bears are now in disbelief that these concerns have gone away so quickly. Last week, and into Sunday night, were no exception, as trade de-escalations are in full force. According to weekend headlines, a US/UK trade deal seems to already be done, with a US/China deal seemingly next. Meanwhile, we have an India / Pakistan ceasefire, and rumors that Putin is looking to sit down with Ukraine. The macro fears are subsiding, which means the second of the two sell-offs is starting to be erased. Once again, we look at the same graph, this time from April 8th to the present. While digital assets have clearly been the fastest horse from the bottom, neither crypto nor equities have fully recovered from the mid-February pre-tariff levels. And digital assets (excluding BTC) are still nowhere near the mid-January highs.
Since the April 8th lows, digital assets have been flying. And last week was no exception, with another 10%+ move higher, this time led by the red-headed stepchild of crypto, Ethereum (ETH +39% w-o-w).
Source: Arca Internal Calculations
But YTD, there are only a handful of digital assets that are actually higher. Bitcoin, of course, is one of them (BTC +10% YTD), and a small, eclectic group of assets are as well (MPL/SYRUP +71%, FARTCOIN +41%, MKR +20%, EOS +14%, TRX +4%, XRP +3%). But most digital assets, even after the massive 4-week rally, are still down 10-50% YTD. For example, ETH is still -25% YTD, SOL -10%, AAVE -30%, UNI -48%. Gaming and AI are still -50-80% YTD.
So the question is, after the market fully recovers from the tariff-induced selloff (and it seems this is happening), will the crypto-specific sell-off that happened prior to the tariffs also retrace? Net/net, if the tariffs turn out to be a nothing burger, then nothing has changed since the beginning of the year other than prices. In fact, for crypto specifically, you could argue the only changes have been positive (tons of positive regulatory improvements combined with massive buildouts from TradFi and Fintech incumbents).
So perhaps the next trade really is this simple. Sort by “down YTD”, and just pick the best assets that are down the most.
Meanwhile…. Happy Mother’s Day from Bitcoin
The mother of all assets appreciates your kindness on her special day.
ETH stole the spotlight last week, rising 39%, leading to a
record level of short futures liquidations. While this coincided with the successful Pectra upgrade, the explanation for ETH’s rise is likely more simple. Almost every long/short fund in crypto has been using ETH as the short leg for their pair trade, and the relentless recovery of crypto assets has had shorts scrambling.
Plus, with BTC price now back above $100K for the 8th time, one can’t help but look at how far ETH is from its price the first time this happened.
If the easy trade is now “buy any asset still down YTD”, long ETH is the easiest trade there is.
Stablecoin Growth Continues Despite GENIUS Act Blockage
Senate Democrats
blocked the GENIUS Act last week, a bipartisan bill aimed at creating a regulatory framework for stablecoins, due to concerns over insufficient protections against fraud, money laundering, and potential conflicts of interest tied to President Trump’s crypto ventures, particularly World Liberty Financial’s $2 billion stablecoin deal with an Abu Dhabi-backed fund. The stablecoin bill would create a comprehensive federal regulatory framework for stablecoin issuers, giving much-needed clarity and laying a foundation for the wide distribution of the U.S. dollar on blockchain rails. The deal is not dead, but if they don’t come to a compromise in the next few weeks, it very well could be. For a refresher on the Genius Act,
Alex Thorn at Galaxy Digital has been our go-to resource.
While this is certainly a blow for regulation, the growth of stablecoins continues unabated. Most recently, Meta is reportedly exploring the use of stablecoins to pay content creators, and Stripe expanded stablecoin-funded accounts to over 100 countries using USDC.
Stablecoin growth continues to be the biggest application on major chains. The top three chains – Ethereum, TRON, and Solana – control over 90% of all natively minted stablecoins. Tether's volume is over double that of all other stablecoins combined, and it will routinely clear $20B in volume daily in 2025. If you need any further proof that the Fat Protocol Thesis is dead, Tron (TRX) has a market cap of $25 billion, while there is over $70 billion of stablecoins issued on the Tron network (mostly USDT).
