Key Takeaways (October 2022)

September 2022 October 2022

Market Recap & Outlook Market Recap & Outlook

Rebounding from September’s performance, October 2022 trended positively for crypto assets overall.

➤ BTC gained +6% for the month. Historically, October is a positive month for BTC performance with a
historical median return of +15%. BTC’s October 2022 volatility (32%) was significantly lower than in
September 2022 (64%) and well below its October historical median volatility (58%).

➤ ETH recorded a gain of +20% for October 2022. ETH’s 53% volatility outpaced BTC’s 32%.

➤ All sectors saw positive returns over the month ranging between +1% to +69%. Meme Coins massively
outperformed returning +69%, led by Dogecoin’s 114% rally towards the end of the month. Following
Meme Coins, Ethereum and the Exchange sector performed the best, returning +20% and +15%,
respectively. The Layer-1 sector, which excludes BTC and ETH, made only modest gains, returning +1%.

➤ DeFi assets saw mixed returns, ranging from -17% to +49%. SUSHI performed the best at +49% while
COMP fell the most, losing -17%.

➤ NFT market activity on OpenSea continued to slow down in October. Average daily users and average
daily transactions fell -11.0% and -13.8% MoM, respectively. NFT volume also saw a decrease with
average daily volume dropping -18.2%.

➤ BTC correlations with risk-on and risk-off assets remained positive in October. BTC’s positive correlation
with gold remained mostly stable throughout the month and at times neared its 2022 all-time high
established in September. In terms of risk on-assets, BTC’s positive correlation with major U.S. equity
markets decelerated during the last week of October. BTC’s inverse correlation with the U.S. dollar index
(DXY) strengthened during the month.

➤ Both BTC and ETH whale activity were quiet in October 2022. The amount of BTC held by whales
starting the month at ₿7.89M and closing at ₿7.90M, and the amount of ETH held by whales started off
and closed the month at Ξ81.5M.

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 Bitcoin (BTC) October 2022
Market Recap & Outlook

Performance

➤ BTC gained +6% for the month of October 2022.

Starting the month at $19,315, BTC jumped to a daily
closing high of $20,774 on October 26 before closing
the month at $20,495.

➤ BTC’s annualized volatility started the month off at 65%,

plummeted to 27% on October 22, and then closed the
month out at 32%.

➤ On October 10, Bitcoin network's mining difficulty

experienced a +13.6% adjustment to a new all-time high
following a -2.1% decrease in late September 2022. The
network's mining difficulty rose again during its next
adjustment on October 28 by +3.4%. Bitcoin's hash rate
also dropped to 256 EH/s during the same time.
Increasing mining difficulty levels indicate increased
competition among crypto miners working to introduce
new blocks.

Source: Blockchain.com and The Block.

Source: Kraken Intelligence based on data from CoinGecko and Coin Metrics.

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 Ether (ETH) October 2022
Market Recap & Outlook

Performance

➤ ETH soared during the month of October, returning

+20%. Starting out the month at $1,311, ETH spiked to
$1,619 on October 29 before closing the month at the
month at $1,573.

➤ Like BTC, ETH’s annualized volatility also decreased

through October, starting off the month at 78% and
closing at 54%, with a momentary slide to 32% on
October 22.

➤ On October 14, Ethereum developers announced the

launch of a Pre-Shanghai testnet called Shandong. The
Shanghai upgrade is slated to happen sometime in 2023
and will be Ethereum's first upgrade post Merge. A host
of Ethereum Improvement Proposals (EIP) are being
considered for inclusion in the Shanghai upgrade to
address efficiency and scalability issues. The most
anticipated proposal for inclusion is EIP 4895, which will
allow users who staked ETH on the Beacon chain to
withdraw their stake, along with any rewards earned.

Source: CoinDesk.
Source: Kraken Intelligence based on data from CoinGecko and Coin Metrics.

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What Happened in Crypto? October 2022
Market Recap & Outlook

Sector Breakdown (Oct. 2022)

➤ All sectors gained in October 2022. Meme Coins

massively outperformed returning +69%, led by
Dogecoin’s 114% rally towards the end of the month.

➤ Following Meme Coins, Ethereum and the Exchange

sector also led, returning +20% and +15%, respectively.
The Layer-1 sector, which excludes BTC and ETH, made
only modest gains returning 1%.

➤ When looking at 90D performance, Meme Coins also

Note: Beta is measured relative to Bitcoin. Layer-1 sector excludes Bitcoin and Ethereum. DeFi and Digital Culture sectors
outperformed the market with a return of +55%. DeFi correspond to CF Benchmark's DeFi Composite Index-London and Digital Culture Composite Index-London portfolio indices,
respectively. Digital Culture includes Metaverse, NFTs, Music and Gaming.

and Digital Culture performed the worst, plunging -19% Source: Kraken Intelligence based on data from CoinGecko and CF Benchmarks.

and -17%, respectively. BTC Dominance and BTCUSD

➤ In terms of risk-adjusted returns (Sharpe ratio) , ETH
outperformed BTC (6.9 versus 3.7). Yet both ETH and
BTC underperformed on a risk-adjusted basis relative to
the Exchange (8.6) and Meme Coins sectors (8.0).

➤ BTC dominance was relatively flat over the course of

September, starting and closing the month at 38%.
Historically, BTC dominance trends increased during
downtrends in the crypto market.

Source: Kraken Intelligence based on data from CoinGecko and CoinMarketCap.

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 DeFi Overview October 2022
Market Recap & Outlook

DeFi Metrics (Oct. 2022)

➤ MakerDAO, Lido Finance, and Curve ranked in the top 3 DeFi
protocols by total value locked (TVL) during October. Looking at
the Market Cap-to-TVL ratio, SushiSwap was the lowest ranked
this month. Turning to the 30D revenue change, SushiSwap and
MakerDAO had the greatest revenue gain at +58% and +25%,
respectively, while Compound had the greatest 30D revenue loss
of -17%.

➤ October 2022 performance for DeFi was mixed, with top assets
posting performances between -17% to +49%. SUSHI gained the
most, returning +49% while COMP fell the most, losing a -17%
drop in value.
Note: At the time of writing, Uniswap and Balancer data was not available.
Source: Kraken Intelligence based on data from Token Terminal.
DeFi Performance (Oct. 2022)

Innovation & Developments

On October 9, Ethereum development company Nethermind
warped the decentralized exchange (DEX) Uniswap onto the
Ethereum Layer-2 (L2) network StarkNet, allowing users to access a
form of Uniswap on Starknet. On October 24, Aave launched a Lido
Staked Ethereum, or stETH, earn strategy through its frontend for
borrowing DAI, MakerDAO's stablecoin.

Headwinds
On October 6, BNB Chain suffered a $100M exploit on its cross-
chain bridge and halted operations momentarily. On October 11,
Mango, a Solana-based decentralized platform, suffered a $100M
exploit in an economic attack known as oracle price manipulation.
Source: Kraken Intelligence based on data from CoinGecko.
Source: CoinDesk, Decrypt, and The Block.

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 NFT & GameFi Overview October 2022
Market Recap & Outlook

OpenSea Stats (7-day moving average)

➤ NFT market activity on OpenSea continued to slow down in
October. Average daily users and average daily transactions fell -
11.0% and -13.8% MoM, respectively. NFT volume also saw a
decrease with average daily volume dropping -18.2%.

Innovation & Developments

• Ethereum NFT project Moonbirds plans to transition community
governance to a DAO in early 2023. Project creator Proof plans to
seed the DAO with $2.6 million worth of crypto funds and NFTs.
• Solana NFT project DeGods switched to a 0% royalty model and will
no longer earn royalties on the sales of its NFTs. Other NFT Source: Kraken Intelligence based on data from DappRadar.
marketplaces that dropped creator royalties recently include
LookRare, SudoSwap, X2Y2, and Magic Eden. Top NFT Collections on Ethereum (Oct. 2022)

Capital Raises
Uniswap Labs ($165M) was the most notable capital raise this
month. The company planned to use the capital to invest more in its
non-fungible token (NFT) launch, amongst other projects. Other
capital raises this month include: Improbable ($111M), Horizon
($40M), Stardust ($30M), ChainSafe ($18.8M), Zoop ($15M),
Mercury ($7.5M), Exclusible ($5M), Gomu ($5M), Stems ($4M),
Otterspace ($3.7M), Yoloyolo ($3.5M), Acade2Earn ($3.2M), Azuki
($2.5M), Paragraph ($1.7M), and Mintify ($1.6M).
Source: CoinDesk, Decrypt, and BeInCrypto. Source: Kraken Intelligence based on data from Rarity Tools.

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 Industry Highlights & News October 2022
Market Recap & Outlook

• Oct. 3: New York Digital Investment Group (NYDIG) raises $720 million for its Institutional Bitcoin Fund.
• Oct. 4: Asset management giant Fidelity launches a new $5M Ethereum Index Fund, allowing clients access to ETH.
• Oct 5: Asset management giant GoldenTree invests roughly $5M in SushiSwap.
• Oct. 6: European Union confirms their sweeping ban on providing crypto services to Russia as the bloc tightens sanctions.
• Oct. 6: Crypto investment firm Blockwater Technologies defaults on $3.4M crypt loan from decentralized lending protocol TrueFi.
• Oct. 10: European Union's landmark digital asset legislation, Markets in Crypto Assets (MiCA), passes committee vote in European
Parliament and paves the way for a Europe-wide regulatory approach to crypto.
• Oct. 11: Mango, a Solana-based decentralized finance platform, suffers a $100M exploit.
• Oct. 11: The U.S. Securities and Exchange Commission (SEC) rejects WisdomTree's most recent attempt to list a spot bitcoin ETF.
• Oct. 13: The U.S. Bureau of Labor Statistics releases its Consumer Price Index (CPI) for September, which rose +8.2% YoY.
• Oct. 17: Layer 1 blockchain Aptos, the brainchild of several ex-Meta employees, launches its mainnet after four years of technical
development and much anticipation.
• Oct. 17: Ethereum developers launches Shandong, the testnet for Ethereum’s next major upgrade, Shanghai.
• Oct. 19: The U.S. Internal Revenue Services (IRS) releases 2022 tax guidelines, which clarifies the tax treatment of NFTs.
• Oct. 24: Rishi Sunak announces to take over as the next U.K. Prime Minister following Prime Minister Truss's exit.
• Oct. 25: U.K. lawmakers vote to recognize cryptoassets as regulated financial instruments and products as part of a proposed
amendment to the draft of the Financial Services and Market Bills
• Oct. 27: The U.S. Bureau of Economic Analysis releases its Q3 GDP report, which shows that the U.S. economy grew at an annual rate
of 2.6% in Q3, its first increase in 2022.
• Oct. 27: Elon Musk completes the acquisition of Twitter.
• Oct. 31: Hong Kong unveils plans to allow the sale of crypto exchange-traded funds (ETFs) to investors.
Source: Coindesk, The Block, Decrypt, Reuters, and Wall Street Journal.

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Bitcoin Correlations October 2022
Market Recap & Outlook

BTC Correlations (Jan. 1-Oct. 31 2022)

Rolling 30-day Pearson correlation of daily log returns
➤ BTC’s 30-day correlation with the S&P 500 (0.54) and
Nasdaq (0.49) remained positive but rapidly declined
during the last week of October. BTC-S&P 500 and
BTC-Nasdaq 30-day correlations ended the month at
some of their lowest levels this year.

➤ Turning to risk-off assets, BTC’s 30-day correlation

with gold (0.44) and U.S. Treasuries (0.21) remained
positive this month.

➤ The BTC-Gold 30-day correlation remained mostly

stable throughout October and at times neared its
2022 all-time high (0.56) established in September. It
ended the month below its initial October levels.

➤ The BTC-U.S. Treasuries 30-day correlation

fluctuated more than any other correlation pair
analyzed in October, hitting a low of 0.10, high of
0.29, and ending the month at 0.21 BTC Correlations (Oct. 1-31 2022)
Descriptive stats of rolling 30-day Pearson correlation of daily log returns
➤ BTC’s decelerating positive correlation with major
U.S. equity markets and its relatively stable
correlation with gold in October, occurred against the
backdrop of BTC’s strengthening negative correlation
with the U.S. dollar index (DXY).

Source: Kraken Intelligence based on data from Coin Metrics, Yahoo Finance, and Google Finance.
Note: Correlation calculations exclude U.S. TradFi non-trading days. CV = coefficient of variation.

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History Says.. October 2022
Market Recap & Outlook

BTCUSD Monthly Returns

➤ BTC performed below the historical average for the

month of October with a +6% return. Historically,
October is a positive month for BTC performance with a
historical median return of +15%.

➤ So far in 2022, BTC has underperformed its historical

monthly returns for every month except for March, July,
and September.

➤ Historically, October outperformed September as

measured by the monthly median return. October 2022
(+6%) outperformed September 2022 (-3%), which is in BTCUSD Monthly Volatility
line with the historical trend.

➤ October 2022 (32%) was less volatile than September

2022 (64%).

➤ BTC’s October 2022 volatility (32%) was well below its

October historical median volatility (58%).

Note: Whiskers extend to the furthest data point in each wing within 1.5 times the interquartile range. Points beyond whiskers are
generally considered outliers.

Source: Kraken Intelligence based on data from CoinGecko.

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What The Whales Are Doing October 2022
Market Recap & Outlook

Whale Addresses: BTC and ETH

To gauge sentiment among whales over the course of

October we look to the amount of BTC and ETH held in
whale wallets. Note that we define a “whale” as a wallet
with more than ₿1,000 or Ξ10,000.

➤ BTC whale activity remained relatively quiet in October.

The amount of BTC held by whales remained flat,
starting the month at ₿7.89M and closing at ₿7.90M.
However, the number of BTC whales increased from
2,125, to 2,132.

➤ ETH whale activity was also relatively quiet. The amount Number of Whales: BTC and ETH
of ETH held by whales started and closed the month at
Ξ81.5M. However, the number of ETH whales
decreased over the course of the month, starting off at
1,294 and closing at 1,268.

Source: Kraken Intelligence based on data from Coin Metrics.

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