Kraken Intelligence’s

August 2021 Monthly Market

Recap & Outlook Report

August 2021 Takeaways

In many regards, August was very much a continuation of late July, a market rally that catapulted BTC and many other large-cap altcoins back
up towards their all-time highs after succumbing to a devastating 3-month correction that initially appeared as the early innings of a bear
market. While BTC scored a second month of positive returns, reclaimed its 200-day simple moving average, and closed back above its Bull
Market Support Band (the 20-week exponential moving average and 21-week simple moving average), it was August's underperformer.
However, BTC outperformed a number of its peers when looking at risk-adjusted returns (Sortino ratio).

Newfound demand for ADA and SOL resulted in smart contracts (+60%) being the best performing sector in August. SOL surged +194%
thanks to bullish momentum and further DeFi & NFT adoption, while ADA entered into a parabolic uptrend following news that smart
contracts will be available on September 12. NFTs (+47%) and DeFi (+49%) also performed notably well.

Several signs surfaced showing that NFT adoption was alive and well; the 7-day moving average of OpenSea daily users, transactions, and
trading volume rose +289%, +309%, and more than +900%, respectively, NBA star Stephen Curry spent 55 ETH ($180K) on a Bored Ape
Yacht Club NFT, and Visa bought a CryptoPunk for 49.50 ETH (~$150K). DeFi adoption, innovation, and fundraising were also especially
strong; ETH and SOL's total value locked (TVL) leaped to an all-time high of $118B and $1.2B, respectively, Chainlink released its Cross-Chain
Interoperability Protocol, and BitDAO raised $365M via its governance token launch.

As exciting of a month as it was for BTC and many altcoins, it's unclear what to expect in September and the months ahead. For instance,
September is the worst-performing and least volatile month on record for BTC. However, when looking at BTC open interest, weekly inflows to
digital asset funds, Google Trends data, and subreddit subscriber data, one will see that overall market interest has yet to return to 2Q2021
levels despite the market's latest rally. But with BTC trading back above its Bull Market Support Band and a golden cross on the horizon, BTC
could send the market higher by invalidating what has historically been a negative-yielding month.

Although BTC has historically dictated the macro trend and remains the broader crypto market's safe-haven crypto, September could consist
of select altcoins dislocating from BTC amid neutral/positive price action. Over the past few months, various altcoins have stolen both market
share and mind share from the digital gold. For instance, ETH was front and center for many in August due to the protocol burning 155K ETH
($549M) in August and facilitating unprecedented NFT demand.

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Bitcoin (BTC) August 2021 Recap

• BTC’s +23% intramonth rally resulted in BTC realizing a 3-month high and moving back above $50K. Although BTC failed to hold onto
$50K, the bulls successfully reclaimed the 200-day simple moving average, a psychologically significant level of support, and scored a
second consecutive month of gains.

• Despite BTC finishing notably higher, annualized volatility was little changed month-over-month, up +3 percentage points at 61%.
Meanwhile, trading volume rose a respectable +17% to $136B after tumbling to an 8-month low of $116B in July.

notes: trading volumes summed across Kraken, Bittrex, Binance, Binance Jersey, Binance US, Bit nex, Bitstamp, Coinbase, Gemini, Poloniex
• BTC’s rally coincided with the 7-day moving average of it’s hash power rising from 110 TH/s to 126 TH/s in what remains a “v-shaped”
recovery since falling to a 3-year low of 85 TH/s on July 2. Similarly, BTC’s mining di iculty, which is a relative measure of how di icult it is
to mine a new block, saw its 3rd consecutive upward adjustment. The rise in hash rate and di iculty reflects miners coming back to the
network after being regulated out of China in May.

sources: Kraken Intelligence, Blockchain.info, CoinMetrics

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 Ethereum (ETH) August 2021 Recap
• On August 3, the percentage balance of ETH on exchanges hit a 3-year low of 12.8%, indicating that ETH's immediately marketable supply
continues to dwindle, and the likelihood of supply shock catapulting ETH higher is greater.

• On August 5, Ethereum's London hard fork activated; transaction fees are now composed of a fixed "base fee," which is required and
burned, and a voluntary tip to miners known as a "priority fee." Thanks to EIP-1559, more than 155K ETH ($549M) was burned as of month-
end.

notes: trading volumes summed across Kraken, Bittrex, Binance, Binance Jersey, Binance US, Bit nex, Bitstamp, Coinbase, Gemini, Poloniex
• Kraken donated $250K to the Ethereum Foundation on August 24 to support developer teams working to achieve critical milestones on the
Ethereum roadmap.

• Bill Gurley, general partner at Benchmark Capital, said he’s betting on Ethereum's success after the cryptocurrency network's community
won him over, “They seem to be open to change and are basically making several changes which I think will bring down fees and will be
very beneficial… The developer community is clearly in the Ethereum camp.”

sources: Kraken Intelligence, Bloomberg, CoinMetrics, Glassnode, WatchTheBurn,

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Cardano (ADA) August 2021 Recap

• On August 23, ADA soared to an all-time high of $2.97 before correcting down to $2.45 and finishing the month at $2.77. ADA’s remarkable
+110% return in August marks ADA’s best monthly performance since February when it roared +284%.

• IOHK, the parent company behind Cardano, announced that the network’s long-awaited Alonzo upgrade, which will enable smart contract
functionality, will go live on September 12. Earlier in the month, Cardano published a public testnet for users to test smart contracts.

notes: trading volumes summed across Kraken, Bittrex, Binance, Binance Jersey, Binance US, Bit nex, Bitstamp, Coinbase, Gemini, Poloniex
• After years of regulatory uncertainty, ADA earned its first listing on a Japanese crypto exchange. The listing marks a major geographical
unlock for the 3rd largest cryptoasset by market capitalization.

• August ended with ADA standing as the second most staked cryptoasset amongst Layer 1 blockchains with 70% ($66B) of all eligible
tokens staked across 787K stakers; this marks a -1 percentage point drop and an increase of 67K stakers month-over-month.

• The number of subscribers to the r/Cardano subreddit increased nearly +10% in August to 588K. Year-to-date, the subreddit’s subscriber
count has risen +510% and stands as the 854th largest subreddit world-wide.

sources: Kraken Intelligence, BitInfoCharts, CoinMetrics, Staking Rewards, Subreddit Stats, Twitter
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Dogecoin (DOGE) August 2021 Recap

• After trending lower for 3 months, a relief rally stopped DOGE from forming a death cross (its 50-day moving average falling below its 200-
day moving average), a bearish technical chart pattern indicating an imminent sell-o , and resulted in DOGE posting a +34% return.

• The Dogecoin Foundation was revived and announced that it would be reestablishing itself to support the DOGE community and promote
blockchain technology; the foundation said it'll announce new projects that will encourage DOGE’s adoption and utility. The foundation’s
advisory board includes Vitalik Buterin, Billy Markus, Max Keller, and Neuralink CEO Jared Birchall.

notes: trading volumes summed across Kraken, Bittrex, Binance, Binance Jersey, Binance US, Bit nex, Bitstamp, Coinbase, Gemini, Poloniex
• Mark Cuban outlined the value proposition of DOGE on Twitter, “The point about DOGE that people miss is that DOGE's imperfections and
simplicity are its greatest strengths. You can only use it to do 2 things: Spend It or HODL It. Both are easy to understand. And it's cheap to
buy. Which makes it a community anyone can join and enjoy.”

• On an Uncommon Core podcast, Three Arrows Capital Su Zhu said he is bullish on DOGE because of its a ordability, accessibility, and
brand recognition: ”Its memes are simple… The man who drinks beer can understand it, the girl who posts selfies can understand it and
she can just put her money in it and outperform everybody.”

sources: Kraken Intelligence,CoinMetrics, Dogecoin Foundation, Twitter, Uncommon Core

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Solana (SOL) August 2021 Recap

• SOL broke into the top 10 cryptoassets by market capitalization after surging +194% in August and surpassing UNI and DOT; SOL remains
on a 3-month winning streak, and August stood as SOL’s best monthly performance since February when the cryptoasset towered more
than +200%.  

• Newfound interest for Solana resulted in the layer 1 blockchain’s Google Trends score soaring to an all-time high in late August. Despite
recent price appreciation, SOL’s market cap was roughly 1/13 and 1/3 the size of ETH and ADA’s market cap, respectively, at month-end.

notes: trading volumes summed across Kraken, Bittrex, Binance, Binance Jersey, Binance US, Bit nex, Bitstamp, Coinbase, Gemini, Poloniex
• In mid-August, digital asset investment products saw net inflows of $21M, which marked the end of 6 straight weeks of outflows. SOL led
the pack with $7.1M in inflows, followed by ADA at $6.4M.

• On August 24, Osprey Funds filed with the SEC for its “ Osprey Solana Trust,” an investment fund opened to accredited investors seeking
exposure to SOL. According to SEC records, Osprey has been working on launching a Solana trust since at least mid-June.

sources: Kraken Intelligence,CoinMetrics, Coinshares, Forbes, Medium, Twitter

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Polkadot (DOT) August 2021 Recap

• DOT rallied in the last remaining days of August and finished the month at levels last seen on May 19. In addition to DOT’s astonishing
+87% return in August, trading volume more than doubled to $16.5B after hitting a year-to-date low of $7.8B in July.

• Robert Habermeier, a co-Founder of Polkadot, announced that the sixth KSM parachain slot auction would begin on September 1, with four
additional parachain slot auctions to follow. Many market participants have interpreted the next batch of auctions as another sign that DOT
parachain auctions are around the corner.

notes: trading volumes summed across Kraken, Bittrex, Binance, Binance Jersey, Binance US, Bit nex, Bitstamp, Coinbase, Gemini, Poloniex
• Last month, Polkadot-based DeFi Hub Acala released EVM+, a new development environment compatible with popular Ethereum tools
such as MetaMask, Tru le, and Wa le. The release marks a major improvement to DOT’s interoperability with ETH. 

• August concluded with DOT holding rank as the third most staked cryptoasset amongst layer 1 blockchains with nearly 60% ($17B) of all
DOT staked, down from 62.5% in July. The number of stakers also fell -4% month-over-month to 78K.

sources: Kraken Intelligence, Acala, CoinMetrics, Medium, Staking Rewards

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What Happened In Crypto?

• For the second month in a row, the broader cryptoasset market
finished higher, thus cementing market participant's belief that the
summer slump was merely a bull market correction. Though BTC
underperformed its peers with an +18% return and a risk-adjusted
return of 5.5 (Sharpe ratio), its grind higher allowed its peers to
venture higher after feeling the brunt of the summer sell-o .

• In August, the altcoin's +43% rebound snapped a 2-month winning

streak for BTC, or what proved to be yet another market-wide
correction where market participants preferred to own BTC. The
altcoin's outperformance corresponded with BTC's dominance
resuming a downtrend after hitting a 2-month high of 50% in July. As
of the end of August, BTC's dominance stood at 41%. 

• Though NFTs remained the talk of the town in August, the sector
failed to outperform after leading in June and July. Instead, smart
contracts (layer 1 blockchains) outperformed with a +60% return and
a Sharpe ratio of 15.4, well above last month's reading of +20% and BTC Dominance vs. BTCUSD

sources: Kraken Intelligence, Cryptowatch, CoinGecko

5.5. Much of the outperformance could be attributed to ADA and SOL
towering +109% and +223%, respectively. Of the largest altcoins by
market cap, SOL was the best performer YTD with a return of
+5,885%.

• Privacy coins were the month's underperformer with a +23% return,

though not far behind centralized exchange coins at +29%. Privacy
coins have now underperformed for 3 straight months.

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What Happened In Crypto? Pt. 2

• BTC not only underperformed relative to some of the largest altcoins by market capitalization but also the 20 largest cryptoassets. BTC was
the worst-performing cryptoasset and came in well below the month’s average and median return of +61% and +36%, respectively.

• Because some cryptoassets are riskier than others, we can look at risk-adjusted returns to better assess whether the reward earned is
justified given its risk. Such can be done by comparing Sortino ratios, which compares a cryptoassets’ return relative to its downside
volatility. Accordingly, we’ll find that BTC outperformed 6 of the top 20 cryptoassets by market capitalization. However, BTC’s Sortino ratio of
6.3 came in well below the group’s average and median reading of 11.1 and 9, respectively.

• The Law of Large Numbers explains BTC’s relative underperformance, which states an asset cannot maintain the same growth rate the
larger it gets. The underperformance can also be attributed to a growing preference to own altcoins (like ETH, ADA, and SOL) instead of/in
addition to BTC. However, because BTC has historically outperformed in downturns, one could expect BTC to outperform if/when we see a
correction.

August 2021 Returns - Top 20 August 2021 Risk Adjusted Returns (Sortino Ratio) - Top 20

sources: Kraken Intelligence, Cryptowatch

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What Happened? - DeFi

ETH DeFi Total Value Locked (TVL)
• In August, all eyes might have been on the NFT sector, but interest
and innovation with the DeFi ecosystem remained ripe. Fundraising
also persisted in August, thereby leading some market participants to
believe that a “DeFi Fall” may be around the corner.

• Notable developments included 1inch expanding to the Optimistic

Ethereum mainnet, the Avalanche Foundation launching "Avalanche
Rush” to o er $180M in incentives to lure more DeFi assets and
applications, Balancer introducing a new mechanism to improve
capital e iciency for LPs, DeFi trading platform dYdX launching its
governance token, and Chainlink releasing its Cross-Chain
Interoperability Protocol to enable cross-chain communication to
accommodate demand for interoperable blockchain solutions.

• Fundraising in August included BitDAO, a DAO founded in June by

Bybit, raising $365M via its governance token launch, Yield Guild SOL DeFi Total Value Locked (TVL)
Games raising $4.6M in a funding round led by a16z, Syndicate, a

sources: Kraken Intelligence, CoinDesk, CoinTelegraph, DeFiLlama, Twitter

decentralized finance organization focused on investing, raising $20M,
and Krystal, a crypto platform that o ers access to various DeFi
protocols, raising $6.6M in a seed funding round.

• Total value locked (TVL) in the ETH ecosystem leaped to an all-time

high of $124B on August 28 before finishing the month at $118B, a
+26% increase month-over-month.

• Total value locked (TVL) in the SOL ecosystem hit an all-time high of
$3.3B on August 31, up +175% from $1.2B on July 31 and +2,214% from
$149M on March 18. Automated Market Maker Raydium was the top-
ranked project with a TVL dominance of 35.2% ($1.04B).

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What Happened? - DeFi Pt. 2

DeFi Metrics - August 2021
• Despite the DeFi sector coming in second behind NFTs with a
monthly return of +49%, many of the largest DeFi projects by market
capitalization performed considerably well. The month’s top
performers were CAKE (PancakeSwap), UNI (Uniswap), SUSHI
(Sushiswap), and CRV (Curve), with a return of +42%, +35%, +35%,
and +31%, respectively.

• CAKE’s outperformance in August followed news that the platform will

soon launch a minimal viable product (MVP) version of its NFT
marketplace; users will only be able to buy and sell Pancake NFTs,
and fees from the marketplace will be used to buyback and burn
CAKE. PancakeSwap also unveiled a sneak peek into its upcoming
NFT collection, which will 1) require a PancakeSwap profile to
participate, 2) require users to pay the minting fee in CAKE, and 3)
result in all CAKE earned from minting to be burned.
DeFi Performance - August 2021
• Earlier in August, Uniswap became the first decentralized exchange in
history to surpass $1B in fees; as of month-end, the platform was
generating roughly $3M - $4M in fees per day. Irrespective of strong

sources: Kraken Intelligence, Cryptowatch, Token Terminal

demand for the platform, Uniswap caught flack after an address with
more than 10M UNI delegated its tokens to create a proposal that
grants analytics provider Flipside Cryptocurrency $25M to deliver
analytics for Uniswap. However, the proposal was later shot down.

• When comparing price-to-sales (P/S) and price-to-earnings ratios (P/

E) amongst the largest Ethereum DeFi platforms by TVL, one will find
that PancakeSwap is arguably the most “undervalued” with a P/S and
P/E ratio of 7x and 22x, respectively. This is well below the median
reading of 23x and 102x, respectively, and the lowest among peers.
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 What Happened? - NFTs

OpenSea Statistics (7D Moving Avg.)
• Interest in NFTs extended further in August with several celebrities
and corporations getting involved; soccer legend Lionel Messi
launched his own NFT collection, luxury fashion brand Burberry
launched its NFT collection, NASCAR partnered with blockchain-
based digital horse racing game ZED RUN to create a NASCAR-
branded digital horses on its racing platform, fantasy sports company
DraftKings rolled-out its NFT marketplace, Arizona Iced Tea
announced its purchase of a Bored Ape Yacht Club NFT, and NBA
star Stephen Curry spent 55 ETH ($180K) on a Bored Ape Yacht Club
NFT.

• Existing NFT platforms saw exceptionally robust growth in August.

Blockchain streaming music service Audius (which has 5M monthly
active users) partnered with TikTok to allow artists to share songs to
TikTok and NFT marketplace SuperRare introduced independent

sources: Kraken Intelligence, Coindesk, Cryptowatch, DappRadar, Decrypt, Twitter

storefronts, a decentralized autonomous organization (DAO),
NFTs Performance - August 2021
“sovereign smart contracts,” and its RARE curation token. Not only
that, but Rarible launched an open-source toolkit for developers to
create custom NFT storefronts and marketplaces and Mark Cuban’s
NFT platform Lazy teamed up with Polygon, an Ethereum scaling
solution, to o er cheaper transactions.

• Activity on NFT marketplace OpenSea exploded; the platform’s 7-day

moving average of daily users, transactions, and trading volume rose
+289%, +309%, and more than +900%, respectively.

• Of the largest NFT tokens, WAX was the month’s outperformer with a
gain of +119%, while FLOW underperformed with a +4% return.

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What Happened? - NFTs Pt. 2

Top Ethereum NFT Collections by Volume - August 2021
• NFT collections Mutant Ape Yacht Club, 0N1 Force, and Pudgy
Penguins broke into the top 10 Ethereum NFT collections by total
volume traded. 

• CryptoPunks and Bored Ape Yacht Club held rank as the two most
popular collections on the Ethereum blockchain; their market caps
soared from $1.01B and $217M to $4.1B and $1.7B, respectively. A jump
in value for both collections followed news that Visa bought a
CryptoPunk for 49.50 ETH (~$150K), and international art auction
house Christie’s will host its first Bored Ape Yacht Club auction on
Sept. 17. 

• CryptoPunks had their biggest day ever on Aug. 28, with more nearly
$150M worth of punks swapping hands at an average price of $409K.
As of month-end, the CryptoPunk floor (lowest price available) was
Crypto Punk Sales on Larva Labs - August 2021
95 ETH (~$350K).

sources: Kraken Intelligence, Decrypt, Larva Labs, Rarity, The Block, Twitter
• Singapore-based crypto investment fund Three Arrows Capital drew
attention to the sector after word broke that they bought Art Blocks
Ringers #879 for a record 1,800 ETH (~$5.8M). Later in the month,
pseudonym NFT trader Vincent Van Dough announced an NFT-
focused investment fund with Three Arrows Capital. The fund is
seeking to raise $100M to “gain exposure to the cultural paradigm
shift being ushered in by NFTs.”

• August ended on a high note after United Talent Agency announced

that it signed with CryptoPunks, Meebits, and Autoglyphs to allow
the firm to represent the crypto-art projects from Larva Labs for film,
TV, video games, and publishing projects. 

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What Happened? - NFTs Pt. 3

Top Solana NFT Collections by Volume - August 2021
• Solana NFTs attracted new users amid many collections launching,
SOL soaring in price, and exuberant transactions fees on Ethereum.
As of month-end, the market cap of Solana NFTs exceeded $400M,
with the three most popular Solana NFT collections being
Degenerate Ape Academy, Aurory, and SolPunks.

• Degenerate Ape Academy launched earlier in the month, with all

10,000 apes selling out in less than 10 minutes for a total value of 60K
SOL ($6.5M). Later in the month, an ape was sold for 3575 SOL
($386K) and took rank as the largest sale for a Solana NFT.

• On August 30, Solana NFT marketplace Solanart announced that

they surpassed 1M SOL ($108M) in trading volume since launching
two months prior. The marketplace supports trading for many of the
most popular Solana NFT collections, including Degenerate Ape
Academy, Aurory, SolPunks, Frakt, and Bold Badgers.

• Aurory, a player-vs.-environment/player-vs.-player gaming project Google Trends Score for “NFTs”

using NFTs and powered by Solana and Serum, hosted its highly-
anticipated NFT drop on August 31. The 10,000 NFT collection sold
out in less than 5 seconds at a mint price of 1 SOL ($108), though the

sources: Kraken Intelligence, Solanaysis, Twitter

project intended on selling each NFT at 5 SOL ($540).

• Although the NFT sector continues to reflect strong demand from

new and existing users, signs of a frothy market are beginning to
surface - as evidenced by Google Trend searches for “NFTs” hitting a
1-year high. Accordingly, market participants should consider the
possibility of NFT valuations potentially correcting in the month(s)
ahead.

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What Happened? - L1s & L2s

Layer 1s Development Activity (7D MA)
• Real-time market data provider Pyth launched on Solana, bringing
real-time “sub-second interval” price feeds for DeFi developers.

• Wormhole, a communication bridge between Solana and DeFi

networks (Binance Smart Chain, Terra, and Ethereum), began
supporting inter-blockchain messages to exchange tokens, NFTs, and
price data across networks.

• The number of smart contracts deployed on The Internet Computer

surpassed 5,000, up +150% month-over-month.

• NEO launched its Neo N3 mainnet, bringing a new architecture,

native contracts, and an improved economic model to its network.

• Chainlink launched on Arbitrum One, a beta version of Layer 2

Ethereum scaling solution Arbitrum, to give developers access to
financial market data on-chain and enhance app functionality. Layer 1s & 2s Performance - August 2021

sources: Kraken Intelligence, Cryptowatch, Reddit, Santiment, The De ant

• Optimism, a Layer 2 Ethereum scaling solution, announced support
for USDC stablecoin. Users can now deposit and transfer USDC via
Optimism at a significantly faster pace and lower cost.

• Ethereum scaling project Polygon (formerly Matic Network) acquired

Hermez Network, a ZK-Rollups-based Ethereum layer 2 scaling
solution, for $250M.

• Developer activity for layer 1 blockchains plunged into month-end,

which can be attributed to summer seasonality. Nonetheless, ADA
remained the most active repository amongst peers, with DOT trailing
close behind. 

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Industry Highlights & News

• August 2: Enterprise software company NCR acquires crypto software provider and ATM-network firm LibertyX.

• August 3: SEC Chairman Gary Gensler agrees with his predecessor Jay Clayton who once said, "every ICO I've seen is a security,” HSBC
blocks its UK customers from Binance credit card purchases, Bitwise Investments announces two funds for AAVE and UNI.

• August 5: ETH’s London hard fork goes live, JPMorgan launches an in-house BTC fund for wealthy clients, it’s reported that Fidelity
purchased a $20M stake in Marathon Digital Holdings, Invesco files with the SEC to list an ETF with exposure to BTC futures, E-
commerce platform Shopify announces it will enable P2P crypto payments at over 2M global merchants.

• August 9: Circle says it plans to be “a full-reserve national commercial bank,” Tether provides a breakdown of its $63B in reserves.

• August 10: The US Senate passed its $1T bipartisan infrastructure bill that classifies crypto miners, validators, developers, node

sources: Kraken Intelligence, Bloomberg, CoinDesk, CoinTelegraph, Financial Times, MicroStrategy, The Block, Twitter, WSJ
operators as brokers, AMC chairman and CEO Adam Aron says infrastructure will soon be ready to accept BTC payments, VanEck files a
prospectus with the SEC for a BTC strategy ETF.

• August 11: Neuberger Berman approves its $164M commodities-focused mutual fund to invest indirectly in BTC and ETH.

• August 13: Kryptoin Investment Advisors files a proposal with the SEC for an ETF pegged to ETH.

• August 17: Galaxy Digital files with the SEC for a BTC futures ETF, Alibaba launches an NFT marketplace allowing trademark holders to
sell tokenized licenses to their intellectual property, the Lightning Network has surpassed 25,000 active nodes.

• August 19: Japan's Liquid Global Exchange says warm wallets were hacked for $90M, SEC Chairman Gary Gensler says the agency
could regulate DeFi projects, Wells Fargo registers a passively-managed, private BTC fund with US regulators, SEC filings reveal that
Wells Fargo and JPMorgan are working with NYDIG to o er BTC exposure to their clients.

• August 20: SEC filings show BlackRock has invested $383M invested in BTC mining companies as of the end of 2Q.

• August 23: Bitcoin payment processor OpenNode announces that Substack has integrated their BTC API to support BTC payments for
their online publishing platform, AdvisorShares submits an application to the SEC for a BTC futures ETF.

• August 24: Nasdaq-listed MicroStrategy purchases 3,907 BTC for ~$177M at an average price of ~$45,294, Bitcoin technology company
Blockstream raises $210M in a Series B funding round at a $3.2B valuation. 

• August 26: Data indicates that asset managers and companies have accumulated roughly 6% BTC's circulating supply, SEC filings show
Morgan Stanley bought more than 6.5M shares of Grayscale Bitcoin Trust (GBTC) across more than a dozen funds for $240M.

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BTC Correlations
BTC 90D Rolling Correlation - Risk-On Assets
• BTC’s relentless march higher in June corresponded with its rolling 90-day
correlation with risk-on assets bouncing o a 3-year low in early July and
continuing to mean revert higher throughout August. Despite the
uncertainty surrounding monetary policy, a surge in COVID-19 Delta
variant cases, and fears of inflation, equities were able to post one of their
strongest Augusts on record - hence BTC’s correlation with risk assets
turning positive and hitting multi-month highs.

• Given BTC’s strong correlation with stocks and their valuations residing
near multi-decade highs, as evidenced by the Cyclically Adjusted PE Ratio
(CAPE) ratio trading at 39x vs. a historical average of 16.9x, BTC appears to
be at risk of reversing trend if/when a correction in stocks comes. Note
that September has historically been the weakest month for stocks, and
Jerome Powell said in August that the economy is at a point where it no
longer needs as much policy support, both of which could have negative
BTC 90D Rolling Correlation - Risk-O Assets
implications for the market.

• An early August rally in the U.S. dollar and bond yields turned BTC’s
correlation with both assets positive and up a reading of 0.31 and 0.29
(slightly positively correlated), respectively. Meanwhile, a rebound in the
price of gold and subsequent stalling into month-end caused its

sources: Kraken Intelligence, Cryptowatch, IEX

correlation with BTC to turn negative after briefly being positive for the first
time since March 2021.

• Given BTC’s now positive correlation with risk-on and risk-o assets, the
shift in correlation does not seem to be entirely causal. Historically, BTC
has possessed opposing correlations amongst the two groups of assets
given their intended purpose and respective risk profile.

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History Says… BTCUSD Monthly Returns
• For being a month that's usually underwhelming, BTC's +14% return stood
as its 3rd best August on record and came in well above the average and
median reading of +3% and -6%, respectively. Meanwhile, annualized
volatility was little changed month-over-month and was in line with the
median reading of 64%.

• Looking ahead, we'll see that September is, much like stocks, the worst-
performing month on record with an average and median return of -7%
BTCUSD Monthly Volatility
and -8%, respectively. As a matter of fact, since 2011, there have only been
three instances when BTC posted a positive return - the most recent being
2016 when BTC advanced +6%. 

• September might be the worst performing month on record, but it is also

the least volatile month when comparing averages (60%) and median
readings (50%). Trailing close behind September is October, with an
average reading of 66% and a median reading of 54%. Should history
repeat, one could expect September to be relatively underwhelming and Historical 3Q Returns
slightly negative-yielding.

• In terms of historical 3Q performance, one will find that BTC's quarter-to-

date return of 34% currently places it as the fourth-best 3Q on record.
Additionally, when analyzing 3Q21's performance relative to other quarters,

sources: Kraken Intelligence, Cryptowatch

we'll find that 3Q21 is trending most similarly to 3Q17 and 3Q20 with a
correlation of 0.92. However, with 3Q17 returning +77% and 3Q20 posting
a +18% return, the divergence in performance is inline what we already
know: BTC’s 3Q performance has considerable variability.

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 Just Gettin’ Started

• Although BTC and the broader crypto market rallied considerably higher in August and appears to be back in a bull market after having sold
o more than -50% over the summer, signs suggest overall market interest has yet to return to levels seen in April/May when BTC and
altcoins were setting new all-time highs. Said di erent, the latest rally appears to have legs.

• Turning to BTC futures open interest, or the total number of futures contracts held by market participants, we’ll find that as of month-end,
open interest stood at $33.2B. While this figured ballooned more than $10B in August, leverage (open interest) has yet to return to the market
in the size we saw in April and May.

• Additionally, if we look at weekly digital asset fund flows for BTC and ETH, we’ll find that crypto investment funds have yet to attract the
same amount of institutional demand that they did in 1Q21 and 2Q21. Assuming the market remains in an uptrend, we could see a
resurgence in institutional demand that could fuel the market to new all-time highs.

Bitcoin Futures Open Interest Weekly Digital Asset Fund Flows Weekly

sources: Kraken Intelligence, Cryptowatch, CoinShares

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Just Gettin’ Started Pt. 2

• Not only does institutional interest look relatively thin, but we can look at Google Trends scores and daily new subscribers to various crypto
subreddits to get a sense of overall interest in crypto from retail market participants.

• Looking at Google Trends scores for Bitcoin, Ethereum, Cardano, Dogecoin, Solana, and Polkadot searches, one will find that searches for
these terms roared amid crypto's 1Q and 2Q rally. Excluding Cardano and Solana, which have higher score due to their August
outperformance, Google searches for crypto assets have declined since the first half of 2021.

• Shifting gears over to daily new subscribers by subreddit, we can see that the aggregate number of new subscribers to these selected
cryptoasset subreddits has yet to enter the same uptrend that we saw as asset values exploded higher towards the end of 4Q20.

• All things considered, one could argue that while we've seen the market post generous returns, interest has yet to return to "mania" like
levels, and interest in the market is starting to pick up again. That said, we ought to brace for a surge in demand as we head into year-end.

Google Trends Scores by Keyword Daily New Subscribers by Subreddit

sources: Kraken Intelligence,, Cryptowatch, Google, Subreddit Stats

kraken.com/subscribe/intelligence 21

Feel The Burn EIP-1559’s Impact on ETH Issuance (August 5 - 31)

• On August 5, Ethereum's much-awaited London hard fork went live.
Part of the upgrade included EIP-1559, which reduced transaction fee
volatility and resulted in fees now being comprised of a "base fee,"
which is required and is burned in every block produced, and a
voluntary tip fee. While many were expecting the rollout to be bullish,
few anticipated the substantial size of the fee burns. More than 155K
ETH ($549M) was burned in August, resulting in a 43% reduction in
ETH issued versus the status quo rate.
ETH Burned by Project (August 5 - 31)
• When looking at the top 10 projects by ETH burned, 49% of all ETH
burned in August was driven by NFTs project; this is consistent with
NFTs remaining top of mind for the broader market and explains high
demand to transact on the Ethereum network and correspondingly
high fees.

• Although EIP-1559 doesn't reduce the cost of transactions, it is

sources: Kraken Intelligence, Glassnode, Watch The Burn, Ultrasound.money

designed to reduce fee volatility so users don't have to worry about
paying more for gas than expected. Consider that the mean ETH fee
volatility plunged from 736% to 428% in August following the London
hard fork.
Mean ETH Fee Volatility
• There may be no telling when demand for NFTs will soften and
subsequently reduce the amount of ETH burned. Still, last month's
burn, reduction in fee volatility, and excessive demand for NFTs
proved that Ethereum remains in high demand and is perhaps on the
path to becoming a deflationary asset should ETH burned surpass
ETH issued.

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Game On
• Last July, we noted that BTC was on the cusp of entering back into a bull market after climbing back into the Bull Market Support band (the
20-week exponential moving average and 21-week simple moving average) for the first time since May.

• Lo and behold, BTC succeeded in securing a weekly close above the support band in the first week of August. As the month progressed,
BTC proved that what was once resistance is now support after successfully backtesting and bouncing o of the 21W SMA. Accordingly, one
could argue that BTC is back in a bull market given how BTC has trended in the past when trading above/below the band.

• Should BTC fail to hold onto the support band at roughly $42,600, one could expect downward pressure to send BTC towards its 50-week
simple moving average at $36.5K, a level last seen in early July.

BTCUSD - Critical Support & Resistance Levels

sources: Kraken Intelligence, Cryptowatch

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A Golden Cross?
Historical Performance of Golden Crosses
• In May, BTC formed a death cross (50-day simple moving average falling
below the 200-day simple moving average) during a market-wide
correction amid a flurry of negative headlines, unfavorable technicals, and
an over-leveraged market. Almost 4 months later, BTC is on pace to form a
golden cross (50-day simple moving average climbing above the 200-day
simple moving average) in September.

• For a golden cross to not occur, BTC would need to fall, on average, more
than $345 per day. If BTC were to trend sideways in September, we could
expect to see a golden cross take place as early as September 15.
Assuming BTC keeps appreciating at a similar pace as August, on average,
$190 per day, a golden cross would then occur on September 14. Needless
to say, a golden cross appears to be on the horizon.

• While the golden cross is a technical chart pattern that's regarded to be

BTCUSD (1D)
indicative of a major rally on the horizon, its value has historically
confirmed that BTC is in an uptrend/bull market.

• Since BTC's inception, we've seen 7 instances where BTC has formed a
golden cross. On average, BTC is little changed in the month that follows a
golden cross. However, the average 90-day and 180-day return following a
golden cross has been +13% and +42%, respectively.

sources: Kraken Intelligence, Glassnode

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