Crypto Market Quarterly Review Q3 2022

 

Crypto Market Quarterly Review Q3 2022

Q3 2022 was, very quietly, a decent quarter for crypto.
The Bitwise 10 Large Cap Crypto Index rose 10%, with many individual assets
posting substantially higher gains. Ethereum, for example, rose 31%, powered by
the success of “The Merge”—a technological upgrade to the Ethereum blockchain
that (among other things) cut its carbon footprint by more than 99%. And Lido, a
new constituent in the Bitwise Decentralized Finance Crypto Index, jumped 260%
as users flocked to its “liquid staking” service.1
These moves were all the more impressive given the rough macro environment,
which sent the S&P 500 skittering down more than 5%.
Crypto’s positive price trends were backed by a generally positive news flow. On
the regulatory front, the White House issued its first-ever “comprehensive
framework” on crypto, while Congress took important steps toward developing
thoughtful stablecoin rules. Meanwhile, venture capital continued to flow into the
space (albeit at a reduced rate), and multiple blockchains passed important
technological milestones.
All this progress, however, couldn’t overshadow the damage caused by the
implosion of Terra and 3AC, and the resulting crypto credit crisis in Q2. Q2 was
the worst quarter for crypto in 10 years, with the Bitwise 10 Large Cap Crypto
Index falling nearly 63%. With that framing, Q3’s recovery was modest at best.

1) Lido entered the Bitwise Decentralized Finance Crypto Index on July 29, 2022. For consistency, the returns figure
mentioned here refers to the asset’s performance over the entire calendar quarter.
2) Alchemy Finance, “Web3 Developer Report,” October 2022.

2

And to be fair: Q3 wasn’t without its bumps in the road. We saw threats of aggressive enforcement
actions from the U.S. Securities and Exchange Commission, and continued declines in user activity
across DeFi, NFTs, and other areas. Still, zooming out, we’re excited about the strength we’re
seeing in developer activity, one of the most fundamental gauges of growth in the space. Ethereum,
for example, saw a 143% increase YoY in crypto application deployments in Q3, with deployments
increasing a remarkable 14% in the two weeks following The Merge.2
As we forge ahead into Q4, investors are uncertain about what to expect. Will crypto continue the
modest recovery it started in Q3, or will negative macro news overwhelm the fundamentals and
send prices to new lows? And with crypto becoming an increasingly discussed—and hotly debated
—topic among regulators and lawmakers, what role if any will it play in the upcoming U.S. midterm
elections?
This report is a good place to start answering those questions. Examining both fundamental data
and qualitative news, it looks at the key trends developing in multiple areas of the crypto market:
Bitcoin, Ethereum and Emerging Layer 1 Blockchains, DeFi, NFTs, and Crypto Equities.
We hope you enjoy it.

Matthew Hougan
Chief Investment Officer

Gayatri Choudhury
Quantitative Analyst

David Lawant
Director of Research

Juan Leon
Crypto Research Analyst

Alyssa Choo
Crypto Research Analyst

Ryan Rasmussen
Crypto Research Analyst

Anais Rachel
Crypto Research Analyst

 

TABLE
OF CONTENTS

AUTHORS
Matthew Hougan
Chief Investment Officer

01 Market Overview

@Matt_Hougan

David Lawant
Director of Research
@dlawant

02 Bitcoin
03 Ethereum & Emerging Layer 1s (L1s)
04 Decentralized Finance (DeFi)
05 Non-Fungible Tokens (NFTs)
06 Crypto Equities

Alyssa Choo
Crypto Research Analyst

Anais Rachel
Crypto Research Analyst

Crypto Equities
@alyssachoo_

Ethereum & Emerging Layer 1s
@Anais_Rchl

Gayatri Choudhury
Quantitative Analyst

Juan Leon
Crypto Research Analyst

On-Chain Analytics
@GayatriPC_

Crypto Equities
@singularity7x

07 Crypto Fundamentals Guide
08 Glossary and Notes

Ryan Rasmussen
Crypto Research Analyst
Decentralized Finance (DeFi)
@RasterlyRock

3

 

01
MARKET
OVERVIEW

4

 

Q3 2022 Review: Following a difficult Q2, crypto posted a partial recovery in Q3, with all the major
Bitwise crypto indexes up by double digits … despite a down quarter for the S&P 500.
Performance of Bitwise Indexes and the S&P 500 Index, June 30 to September 30, 2022

Key Performance Indicators1
Quarter ending September 30, 2022
TOTAL CRYPTO MARKET CAP2

+0.05% QoQ
$925.38 billion
TRADING VOLUME

+16.63% QoQ
$734.09 billion
CORRELATION – SPY VS. BITWISE 103

+33.26% QoQ
0.66
BITCOIN DOMINANCE

-7.58% QoQ
39.52%
ETHEREUM DOMINANCE

+19.70% QoQ
17.32%

Source: Bitwise Asset Management with data from The Block, IEXCloud, and CoinMarketCap. For footnotes, index definitions and constituents, please see Glossary & Notes.
Performance of an index is not illustrative of any particular investment. It is not possible to invest directly in an index. Index performance does not include the fees and expenses that are charged by any Fund. Fund returns may differ materially from the
returns of the Index. Past performance is no guarantee of future results. Please refer to additional important disclosures at the back of this document.

MARKET OVERVIEW

5

 

Takeaway #1: Q3 saw significant regulatory and legislative headlines from the White House, Congress,
and the SEC alike. TL/DR: Progress on regulation is slow.
The White House issued its first-ever
“comprehensive framework for the responsible
development of crypto assets” in Q3. The document
painted in broad strokes, but was reasonably balanced
between investor protections and industry-friendly
provisions.
The SEC once again publicly asserted its claim to be
the lead regulator in crypto in Q3, and threatened
enforcement actions against crypto trading venues
(like Coinbase). SEC Chairman Gary Gensler reiterated
in a speech that he believes most crypto assets are
securities and that crypto trading venues need to
register as broker-dealers.
Congress emerged as a possible champion for
crypto, with multiple bipartisan bills circulating that
include significant pro-crypto provisions. Many
market observers believe we’ll need new legislation to
properly regulate crypto. Congress has been taking an
increasingly progressive stance toward the space.

MARKET OVERVIEW

6

 

7

Takeaway #2: Large institutions and corporations continued to embrace crypto at an increasingly rapid
pace. All of the events below happened in just over two months.

AUGUST 4

AUGUST 29

SEPTEMBER 13

SEPTEMBER 20

OCTOBER 5

OCTOBER 11

Coinbase and
Blackrock partnered to
offer direct crypto
exposure to
institutions through
Aladdin, Blackrock’s
end-to-end investment
management platform
used by over 50,000
institutional investors.
The offering will start
with bitcoin and will
expand to other crypto
assets according to
market demand.

In a push to make its
metaverse more
interoperable, Meta
introduced the ability
for users to cross-post
NFTs across
Facebook and
Instagram. The
company already
supports myriad
wallets that support
the Ethereum,
Polygon, and Flow
blockchains.

A consortium of
broker-dealers, global
market makers, and
venture capital firms
that include Charles
Schwab, Citadel
Securities, Fidelity
Digital Assets,
Paradigm, Sequoia
Capital, and Virtu
Financial announced
the creation of a new
crypto exchange
called EDX Markets.

Nasdaq announced a
new digital assets
business. Once
approved by the
NYDFS, the new
initiative will initially
focus on developing
advanced BTC and
ETH custody solutions
for institutional clients
and potentially offer
other solutions
thereafter.

Asset management
giant GoldenTree
announced a $5 million
investment in the
SushiSwap governance
token. This potentially
marks the first direct
activist investment from
a traditional institutional
investor in a DeFi
application.

BNY Mellon, the
oldest American
bank—which touches
more than 20% of the
world’s investable
assets—launched a
new digital assets
custody platform that
allows select clients
to directly hold BTC
and ETH side by side
with traditional
assets.

MARKET OVERVIEW

 

Takeaway #3: Crypto spot exchange volume continued to trend lower in Q3, hitting its lowest levels
since Q4 2020. But it remained significantly higher than during the 2019-2020 period.
Cryptocurrency Spot Exchange Volume, September 2018 to September 2022 (USD trillions)

Total spot exchange volume reached
$2.0 trillion in Q3 2020, dropping 7.2%
QoQ and 33.6% YoY. Despite a mild
recovery in the month of September, this
marked the lowest crypto spot volume by
quarter since Q4 2020.
Crypto businesses that depend on
trading volume are likely to continue to
show top-line weakness in Q3. The
prime example is Coinbase, which is
expected to report soft revenue figures
for Q3, according to the company’s
previous guidance.
Still, these numbers are significantly
higher than in 2019 and 2020. Despite
the drop, spot exchange volume in Q2
2022 was still 6.3x and 2.5x higher than
the average and maximum quarterly
volumes, respectively, for the 2019-2020
period. We view this as evidence of the
increased penetration crypto has been
gaining over the last few years.

Source: Bitwise Asset Management with data from the Block and CryptoCompare as of September 30, 2022.

MARKET OVERVIEW

8

 

9

Performance of Bitwise Crypto Indexes
CUMULATIVE RETURNS
ASSET

DESCRIPTION

3 MONTHS

YTD

1 YEAR

3 YEARS

Bitwise 10 Large Cap Crypto Index

Top 10 crypto assets by market capitalization, rebalanced monthly

10.12%

-61.45%

-58.40%

157.64%

Bitwise Decentralized Finance Crypto Index

Top 10 DeFi assets by market capitalization, rebalanced monthly

18.24%

-71.84%

-75.24%

–

Bitwise Blue-Chip NFT Collections Index

Top 10 art & collectibles NFT collections by market capitalization, rebalanced quarterly

11.18%

-64.50%

–

–

Bitwise 30 Crypto Innovators Index

Portfolio of 30 “picks and shovels” companies building out the core infrastructure for crypto to
thrive

15.58%

-69.51%

-69.55%

–

Ball Multicoin Bitwise Metaverse Index

Portfolio of the most important Metaverse-related crypto assets

15.44%

-17.08%

–

–

Source: Bitwise Asset Management as of September 30, 2022. For index definitions and constituents, please see Glossary & Notes.
Performance of an index is not illustrative of any particular investment. It is not possible to invest directly in an index. Index performance does not include the fees and expenses that are charged by any Fund. Fund returns may differ materially from the
returns of the Index. Past performance is no guarantee of future results. Please refer to additional important disclosures at the back of this document.

MARKET OVERVIEW

 

02
BITCOIN

10

 

Q3 2022 Review: Bitcoin rose 3.1% for the quarter. The move trailed the broader crypto market,
which rose 10.1%, helped by excitement around Ethereum’s “Merge.”
Performance of Bitcoin and the Bitwise 10 Large Cap Crypto Index, June 30 to September 30, 2022

Key Performance Indicators
Quarter ending September 30, 2022
BITCOIN MARKET CAP

-1.35% QoQ
$373.42 billion
TRADING VOLUME

+205.97% QoQ
$13.83 billion
HASHRATE

+4.81% QoQ
263.46 EH/s
MEDIAN TRANSACTION FEES

+6.98% QoQ
$0.46
LIGHTNING NETWORK CAPACITY

+22.49% QoQ
4.89k BTC

Source: Bitwise Asset Management, The Block, CoinMarketCap, and Coin Metrics as of September 30, 2022. For index definitions and constituents, please see Glossary & Notes.
Performance of an index is not illustrative of any particular investment. It is not possible to invest directly in an index. Index performance does not include the fees and expenses that are charged by any Fund. Fund returns may differ materially from the
returns of the Index. Past performance is no guarantee of future results. Please refer to additional important disclosures at the back of this document.

BITCOIN

11

 

12

Takeaway #1: The rising U.S. dollar was a dominant global force in Q3, crushing all other currencies.
Viewed through this lens, bitcoin held up remarkably well.
Performance of Select Global Currencies, Gold, and Bitcoin, June 30 to September 30, 2022

Q3 was tough for major global
currencies and gold. The top global
currencies (EUR, GBP, JPY, CHF) and the
Chinese Yuan all fell 3-8% against the
mighty U.S. dollar. Gold also declined 8%
in USD terms.
Bitcoin bucked the trend, rising 3.1%.
The move was so surprising The New York
Times ran an article with the headline:
“Currencies around the world are tumbling.
Except Bitcoin.”
According to legendary investor Stanley
Druckenmiller, bitcoin could stage a
comeback if investors lose faith in the
Federal Reserve’s commitment to battle
inflation. The billionaire investor noted that
the Bank of England switched from
quantitative tightening back to quantitative
easing in late September when its financial
markets buckled.

Source: Bitwise Asset Management with data from Bloomberg as of September 30, 2022. For footnotes and ticker definitions, please see Glossary & Notes.

BITCOIN

 

13

Takeaway #2: Despite the bear market, the Lightning Network keeps gaining traction, with its capacity
increasing by 22% in bitcoin terms over the previous quarter.
Lightning Network Capacity, January 2020 to September 2022 (BTC)

Bitcoin’s layer for fast and cheap
payments keeps gaining traction. The
total Lightning Network capacity increased
by 22% in Q3 2022 versus the previous
quarter and almost 198% versus the
previous year.
Support from myriad large companies is
likely spurring this growth. Just over the
last 3-6 months, companies like Block
(formerly Square), Robinhood, Shopify,
Kraken, and others announced
integrations.
The hefty growth is building on a low
base. The total amount of bitcoin allocated
to the Lightning Network is still under
0.1% of the total supply. We expect this
growth trend to remain in place and to
start to gain more share in investors’ minds
once penetration is higher.

Source: Bitwise Asset Management with data from Bitcoin Visuals as of September 30, 2022.

BITCOIN

 

14

Takeaway #3: Correlations between bitcoin and equity markets plateaued and started to dip in Q3. We
expect this reversal trend to persist in the medium to long terms.
Rolling 90-Day Correlations of Daily Returns Between Bitcoin and Other Major Risk Assets,1 January 2, 2019 to September
30, 2022

Correlations between bitcoin and
traditional assets started to rise in H2
2021. When the market moves to a binary
risk-on/risk-off environment, correlations
tend to rise across risk assets, including
crypto.
However, this trend stalled in Q2 and is
now showing early signs of a potential
reversal. The key motive force behind
such a reversal would be for investors to
start differentiating across the value drivers
of risk assets more generally.
The lone exception is bitcoin’s
correlation with gold, which continued
to rise. Although still relatively low at 0.23
on a rolling 90-day basis, bitcoin’s
correlation with gold is the highest it has
been since January 2021.

Source: Bitwise Asset Management with data from IEX Cloud as of September 30, 2022. For footnotes, please see Glossary & Notes.

BITCOIN

 

Performance of Bitcoin and Select Global Macro Assets
CUMULATIVE RETURNS
1

ASSET

DESCRIPTION

TICKER

PRICE

MARKET CAP
(USD TRILLIONS)

3 MONTHS

YTD

1 YEAR

3 YEARS

Bitcoin

First and leading crypto asset; digital gold

BTC

$19,485.47

$0.373

3.13%

-57.53%

-55.26%

135.16%

Oil (Brent crude)

United States Oil Fund

USO

$65.28

$137.311

-18.76%

20.09%

24.20%

-28.04%

Large Cap U.S. Equities

SPDR S&P 500 ETF

SPY

$357.18

$33.394

-4.93%

-23.93%

-15.51%

26.29%

Emerging Markets Equities

iShares MSCI Emerging Markets ETF

EEM

$34.88

$17.391

-13.02%

-27.99%

-29.14%

-9.50%

Gold

SPDR Gold Shares ETF

GLD

$154.67

$10.875

-8.19%

-9.53%

-5.82%

11.38%

10-Year Treasury

iShares 7-10 Year Treasury Bond ETF

IEF

$95.80

$8.794

-5.69%

-15.65%

-15.55%

-11.63%

Corporate Bonds Investment Grade

iShares iBoxx Investment Grade Corporate Bond
ETF

LQD

$102.11

$8.578

-6.15%

-21.24%

-20.94%

-13.13%

U.S. Dollar

U.S. Dollar Currency Index

DXY

112.12

$2.276

7.10%

17.19%

18.98%

12.82%

Corporate Bonds High Yield

iShares iBoxx High Yield Corporate Bond ETF

HYG

$71.04

$1.513

-1.72%

-15.25%

-14.59%

-6.14%

Commodities

Bloomberg Commodity Index

BCOM

$111.49

–

-4.75%

12.42%

10.65%

43.34%

Source: Bitwise Asset Management with data from Bloomberg, CoinMarketCap.com, CompaniesMarketCap.com, United States Federal Reserve, IEXCloud, OPEC, and SIFMA as of September 30, 2022.
Crypto asset performance does not include the fees and expenses that are charged by any Fund. Fund returns may differ materially from the returns of a crypto asset. Past performance is no guarantee of future results. Please refer to additional important
disclosures at the back of this document. For footnotes, please see Glossary & Notes.

BITCOIN

15

 

03
ETHEREUM &
EMERGING L1s

16

 

Q3 2022 Review: Layer 1 blockchains gained 27% in Q3 as positive news about The Merge and other
network upgrades overcame macro headwinds.
Performance of the Bitwise 10 Large Cap Crypto Index and Select Layer 1 Blockchains,1 June 30 to September 30, 2022

Key Performance Indicators
Quarter ending September 30, 2022
MARKET CAP OF SELECT LAYER 1
BLOCKCHAINS

+27.06% QoQ
$258.25 billion
MEDIAN DAILY TRANSACTION COUNT2

+63.31% QoQ
41.32 million
FEES GENERATED3

-77.27% QoQ
$2.97 million
L2 % OF FEES ON ETHEREUM4

-2.26 pp QoQ
2.68%
L2 TVL AS A % OF ETHEREUM TVL5

+2.88 pp QoQ
15.02%

Source: Bitwise Asset Management with data from CoinMarketCap, L2Fees.info, CryptoFees.info, Etherscan, Explorer.near, Avalanche, DeFi Llama, L2 Beat, and SnowTrace as of September 30, 2022. For footnotes, ticker names, index definitions and
constituents, please see Glossary & Notes.
Performance of an index is not illustrative of any particular investment. It is not possible to invest directly in an index. Index performance does not include the fees and expenses that are charged by any Fund. Fund returns may differ materially from the
returns of the Index. Past performance is no guarantee of future results. Please refer to additional important disclosures at the back of this document.

ETHEREUM & EMERGING LAYER 1S

17

 

18

Takeaway #1: Ethereum’s inflation fell by over 90% and its energy consumption dropped by over 99%
after The Merge. The transition was seamless.

ACTUAL ISSUANCE SINCE
THE MERGE

+8,674 ETH

HYPOTHETICAL
ISSUANCE HAD THE
MERGE NOT OCCURED

IMPACT IN
FIRST 15 DAYS1

+192,985 ETH
~$245,000,000

Source: Bitwise Asset Management with data from Ultra Sound Money and Ethereum.org as of September 30, 2022. For footnotes, please see Glossary & Notes.

ETHEREUM & EMERGING LAYER 1S

Ethereum delivered 100% network
uptime through The Merge. This was a
remarkable achievement that surprised
even some insiders. It’s akin to being able
to use your MacBook while it upgrades to
the latest macOS version. Ethereum now
runs on proof-of-stake, a consensus
mechanism that many doubted could
power a major blockchain.
ETH could be a deflationary asset if
usage rebounds. ETH is consumed
every time there is a transaction on the
blockchain. If network activity rebounds,
the blockchain could consume more ETH
than it issues, causing supply to shrink.
ETH’s energy reduction cut global
energy consumption by 0.2%
overnight. Ethereum now consumes less
energy than Paypal, YouTube, or Bitcoin.

 

Takeaway #2: It’s not just Ethereum—other blockchains are undergoing significant upgrades. The
shared vision is more functionality, lower costs, and more mainstream applications.
Key Blockchain Infrastructure Improvements Announced or Deployed, June 30 to September 30, 2022
BLOCKCHAIN

TYPE OF IMPROVEMENT

INITIATIVE

IMPACT

STATUS

Cardano

Scalability

Vasil Upgrade

Cardano now has lower transaction fees and higher speeds.

Implemented Q3 2022

Solana

Network Resiliency

Client Diversity

Cosmos

Security

Inter-Chain Security

Cosmos Hub validators will also be able to secure the independent
blockchains hosted in the Cosmos ecosystem.

In progress

Chainlink1

Decentralization

New Staking Program

Staking allows for community participation and, in turn, greater
decentralization and security; stakers will also earn rewards.

In progress

Solana is enhancing its decentralization, reliability, and throughput with
the addition of a second client (the software that helps secure the
blockchain).

Source: Bitwise Asset Management as of September 30, 2022. For footnotes, please see Glossary & Notes.

ETHEREUM & EMERGING LAYER 1S

In progress

19

 

20

Takeaway #3: Cosmos rallied 79% in Q3 as its “Layer 0” blockchain design, which competes with
Ethereum and Solana, gained traction.
A Hypothetical User Journey Through a “Layer 0” Ecosystem

A content creator shares content
without giving up ownership

General-Purpose
Blockchain
Borrowed funds can be used
across applications on another
blockchain

2

The content can be
turned into NFTs

DeFi Applications

4

Stored NFTs can
be moved and used
as collateral in DeFi

Decentralized Storage

3

NFTs can be stored without
needing to transfer them to
another ecosystem

LAYER 0

1

5

Non-Fungible Token
(NFT) Marketplace

Decentralized
Social Network

“Layer 0”
Blockchain

LEGEND

Independent blockchains

Layer 1s receive network
support from Layer 0

LAYER 1s

Independent “Layer 1”
blockchains can be
specialized or generalpurpose.

Blockchains face scalability challenges.
One solution is to split up the workload by
creating blockchains on top of a central
“Layer 0” blockchain that provides
ecosystem support.

Example of communication
between blockchains

Source: Bitwise Asset Management. For footnotes, please see Glossary & Notes.

ETHEREUM & EMERGING LAYER 1S

Layer 0s can allow for more specialized
Layer 1 blockchains. This may make it
easier for developers to build more
complex applications, such as
decentralized social networks, as well as
more generalized solutions.
Customized blockchains benefit from
each other’s features. Polkadot and
Cosmos are two examples of Layer 0s.1
They enable the creation of specialized
blockchains, each of which aims to
interoperate with one another seamlessly.

 

21

Performance of Ethereum and Select Layer 1 Blockchains
CUMULATIVE RETURNS
TICKER

COIN PRICE

MARKET CAP
(USD BILLIONS)

3 MONTHS

YTD

1 YEAR

3 YEARS

First and leading smart contracts platform

ETH

$1,337.99

$162.806

31.23%

-63.30%

-55.30%

650.67%

BNB Chain

Binance’s smart-contract blockchain; good
interoperability

BNB

$284.04

$45.850

33.87%

-44.07%

-25.81%

–

Cardano

Peer-reviewed approach; robust programming language

ADA

$0.43

$14.876

-3.05%

-66.59%

-79.51%

1,004.39%

Solana

Ethereum’s leading alternative; lower transaction fees

SOL

$33.74

$11.788

5.49%

-79.95%

-75.78%

–

Polkadot

Substrate to independent yet interoperable blockchains

DOT

$6.24

$7.085

-8.31%

-76.32%

-78.06%

–

Avalanche

Deploys subnets: scalable and interoperable blockchains

AVAX

$17.23

$5.089

6.10%

-83.90%

-73.66%

–

Cosmos

Connects independently secured, application-specific
blockchains

ATOM

$12.87

$3.727

-79.28%

-58.07%

-62.99%

410.09%

Near Protocol

Climate-neutral application network; high throughput

NEAR

$3.57

$2.839

10.10%

-75.00%

-47.80%

–

Algorand

Blockchain building an inclusive, borderless economy

ALGO

$0.35

$2.443

17.29%

-78.50%

-78.05%

39.91%

Flow

Entertainment application platform: blockchain games,
NFT collectibles

FLOW

$1.68

$1.748

16.75%

-80.78%

-89.20%

–

ASSET

DESCRIPTION

Ethereum

Source: Bitwise Asset Management with data from CoinMarketCap as of September 30, 2022.
Crypto asset performance does not include the fees and expenses that are charged by any Fund. Fund returns may differ materially from the returns of a crypto asset. Past performance is no guarantee of future results. Please refer to additional important
disclosures at the back of this document.

ETHEREUM & EMERGING LAYER 1S

 

04
DEFI

22

 

23

Q3 2022 Review: DeFi blue chips1 rose 18%, with liquid staking emerging as a key new product
category (as shown by LDO’s 261% gain).
Performance of Bitwise Decentralized Finance Index, Its Constituents, and the Bitwise 10 Large Cap Crypto Index, June 30 to
September 30, 2022

Key Performance Indicators
Quarter ending September 30, 2022
TOTAL DEFI MARKET CAP2

+25.61% QoQ
$45.07 billion
TOTAL VALUE LOCKED (TVL)3

+7.61% QoQ
$83.45 billion
REVENUE4

-49.43% QoQ
$221.22 million
DEX TRADING VOLUME

-49.16% QoQ
$185.40 billion
STABLECOIN SUPPLY

-1.66% QoQ
$142.45 billion

Source: Bitwise Asset Management with data from CoinMarketCap, CoinGecko, Coin Metrics, The Block, and DeFi Llama as of September 30, 2022. For footnotes, tickers, index definitions and constituents, please see Glossary & Notes.
Performance of an index is not illustrative of any particular investment. It is not possible to invest directly in an index. Index performance does not include the fees and expenses that are charged by any Fund. Fund returns may differ materially from the returns
of the Index. Past performance is no guarantee of future results. Please refer to additional important disclosures at the back of this document.

DEFI

 

24

Takeaway #1: Liquid staking cemented its position as a significant new DeFi primitive post-Merge,
with DeFi staking deposits hitting an all-time high in Q3.
Liquid Staking as a Percentage of Total DeFi TVL (Total Value Locked), January 2020 to September 2022

Staking services enable investors to
deposit crypto assets and earn yield.
Decentralized staking services like Lido
offer liquidity on staked assets, which
would otherwise be locked, by issuing a
separate, tradable token that tracks the
principal and yield.
Lido has established a dominant
position with 31.0% of market share of
all staked ETH. The staking protocol has
generated more than $375 million in
cumulative revenue.
Staking is one of the first financial
services where a DeFi protocol is
beating out centralized financial
service providers. For instance, Lido
has a larger market share in staking than
Coinbase.

Source: Bitwise Asset Management with data from The Block and Defi Llama as of September 30, 2022.
There are a variety of risks associated with staking, which may vary depending on the staking method that is used. In general, risks consist of a combination of counterparty, smart-contract and execution risks. Additionally, staking may involve penalties
for going offline, including “slashing” (partial or full loss) of staked of ETH and forced ejection from the network.

DEFI

 

25

Takeaway #2: The value settled using stablecoins set a record in Q3 at $2.3 trillion, despite the
bear market.
Stablecoin Activity,1 January 2017 to September 2022 (USD trillions)

Stablecoins are one of crypto’s killer
apps, and usage is holding steady
despite the bear market. There is
currently more than $140 billion in
stablecoin Assets Under Management
(AUM), and stablecoin transaction volume
hit a record $2.3 trillion in Q3.
Users displayed a growing interest in
decentralized stablecoins like DAI. One
possible reason: Rising concerns about
the ability of centralized stablecoins (like
USDC and USDT) to sanction individual
transactions.
Rising interest rates could make
stablecoin issuance an increasingly
attractive business. Stablecoin issuers
can invest collateral assets and reserve
assets to earn yield. As rates rise, that
income may become significant.

Source: Bitwise Asset Management with data from Coin Metrics and CoinGecko as of September 30, 2022. For footnotes, please see Glossary & Notes.
There are a variety of risks associated with investing in and using stablecoins. In general, risks consist of a combination of counterparty, smart-contract. and execution risks, among others. Certain types of stablecoin designs, including undercollateralized
and algorithmically structured, have resulted in significant loss of investor capital and may be subject to attention from regulators and/or lawmakers.

DEFI

 

26

Takeaway #3: Blue-chip DeFi protocols like Uniswap and Aave are increasingly focusing on
monetization and business diversification.
Annual Revenue of the Top Five DeFi Applications, October 2021 to September 2022 (USD billions)

Sector leaders are actively exploring
new ways to monetize their
businesses. For example, in Q3, Uniswap
explored redirecting a portion of the $1.3
billion/year in user fees to the Treasury,
rather than passing 100% of fees through
to liquidity providers.
Multiple protocols explored new ways
to diversify their business offerings as
well. For example, both Aave and Curve
explored launching their own stablecoins
to capture more value in their protocols.
Some protocols began integrating
“real-world” assets, expanding beyond
the digital realm. MakerDAO approved a
$100 million loan for a U.S. community
bank that will post a portfolio of real
estate, consumer, and other loans as
collateral. It also chose to invest $500
million of its reserves into short-term
Treasuries and corporate bonds.

Source: Bitwise Asset Management with data from The Block and Crypto Fees as of September 30, 2022.

DEFI

 

27

Performance of the Top 10 DeFi Assets
CUMULATIVE RETURNS
TICKER

COIN PRICE

MARKET CAP
(USD BILLIONS)

3 MONTHS

YTD

1 YEAR

3 YEARS

UNI

$6.36

$4.916

32.04%

-62.19%

-72.22%

–

Leading platform for lending and borrowing

AAVE

$74.36

$1.050

-35.61%

-70.31%

-72.90%

–

Maker

Lending app supporting the DAI stablecoin

MKR

$749.00

$0.723

-13.83%

-67.48%

-67.11%

66.52%

Lido DAO

Leading decentralized staking service provider

LDO

$1.57

$0.494

-260.72%

-49.39%

-65.85%

–

Curve

Leading decentralized exchange for stablecoins

CRV

$0.93

$0.487

40.72%

-82.13%

-59.71%

–

Yearn Finance

Pioneers of automated asset management

YFI

$8,099.62

$0.443

55.24%

-74.07%

-72.10%

–

Loopring

Decentralized exchange with built-in Layer 2

LRC

$0.30

$0.394

-20.78%

-85.02%

-18.65%

808.23%

Compound

Lending app that pioneered governance tokens

COMP

$61.03

$0.336

35.79%

-68.56%

-80.22%

–

Convex Finance

Yield-boosting platform for staked assets

CVX

$5.00

$0.333

27.79%

-89.79%

-40.81%

–

0x

Trading app that routes through other exchanges

ZRX

$0.27

$0.227

-19.30%

-65.73%

-69.51%

31.23%

ASSET

DESCRIPTION

Uniswap

Leading decentralized exchange for trading assets

Aave

Source: Bitwise Asset Management with data from CoinMarketCap as of September 30, 2022.
Crypto asset performance does not include the fees and expenses that are charged by any Fund. Fund returns may differ materially from the returns of a crypto asset. Past performance is no guarantee of future results. Please refer to additional important
disclosures at the back of this document.

DEFI

 

05
NFTs

28

 

Q3 2022 Review: NFT trading volume fell off a cliff. Price performance, however, broadly held up.
Venture funding and major brand partnerships were bright spots in an otherwise difficult quarter.
Performance of the Bitwise Blue-Chip NFT Collections Index, Its Constituents, and the Bitwise 10 Large Cap Crypto Index, June
30 to September 30, 2022

Key Performance Indicators
Quarter ending September 30, 2022
MARKET CAP (TOP 10 COLLECTIONS)1

+10.85% QoQ
$3.10 billion
TRADING VOLUME2

-84.86% QoQ
$2.11 billion
MEDIAN DAILY TRANSACTIONS2

-57.30% QoQ
63,562
MEDIAN DAILY TRADERS2

-13.24% QoQ
43,891
OPENSEA DOMINANCE

–22.88 pp QoQ
39.14% of NFT trading volume

Source: Bitwise Asset Management with data from @hildobby via Dune Analytics, The Block, and CryptoSlam as of September 30, 2022. For footnotes, index definitions and constituents, please see Glossary & Notes.
Performance of an index is not illustrative of any particular investment. It is not possible to invest directly in an index. Index performance does not include the fees and expenses that are charged by any Fund. Fund returns may differ materially from the
returns of the Index. Past performance is no guarantee of future results. Please refer to additional important disclosures at the back of this document.

NFTs

29

 

30

Takeaway #1: NFT trading volume collapsed more than 80% on Ethereum. Interestingly, Solana
volume showed signs of a rebound.
NFT Trading Volume on Ethereum and Solana, January 2022 to September 2022 (USD billions)

Ethereum volume collapsed. The most
established NFT projects, such as
CryptoPunks and Bored Ape Yacht Club,
are based on Ethereum. Their collective
trading volume fell 81% in Q3.
Solana volume did better. By comparison,
trading in Solana-based NFTs fell “only”
63%, and showed signs of strength in
September. Of note: Volume on Ethereum
remains 5x that of Solana.
What’s the difference? Solana is more
game-focused and emphasizes
lower-cost NFTs. It is cheaper to process
transactions on Solana than Ethereum,
which has attracted a different type of NFT
and different NFT users.

Source: Bitwise Asset Management with data from The Block and CryptoSlam as of September 30, 2022.

NFTs

 

31

Takeaway #2: Amid an overall decline in venture funding for crypto, funding for NFT and Web3 gaming
showed resilience.
Venture Funding for Blockchain/Crypto by Category, January 2022 to September 2022 (USD billions)

Venture funding for NFT and Web3
gaming jumped 66% in August over July,
the last months we have data for. This is
notable, given the general decline in
blockchain/crypto venture activity.
Notable deals include gaming and
Metaverse apps. Raises in Q3 included
$200 million by mobile gaming firm Limit
Break, $56 million by Metaverse avatar
platform Ready Player Me, $54 million by
NFT platform Doodles, and $50 million by
NFT group Proof Collective.
NFT use cases are changing. Collectively,
the new deals point to an evolution in the
usage of NFTs—from digital art and
collectibles to gaming, Metaverse
applications, and more utility-focused
applications.

Source: Bitwise Asset Management with data from The Block as of September 30, 2022.

NFTs

 

Takeaway #3: One major area of growth: Big brands, sports, and media companies announced new
partnerships to launch NFT strategies.
Major NFT Partnership Announcements, June to September 2022

Apple onboarded NFT apps and games onto its App Store.

Meta launched support for Ethereum, Polygon, and Flow
NFTs across both Instagram and Facebook.

Starbucks unveiled Starbucks Odyssey, an NFT-based rewards
program on Polygon.

Ticketmaster partnered with Flow to let event organizers issue
NFTs tied to tickets.

Reddit partnered with Polygon to launch an NFT-based avatar
marketplace.

Tiffany & Co. announced “NFTiff,” an exclusive digital pendant
collection in partnership with CryptoPunks.

FIFA teamed up with Algorand to debut an NFT marketplace
ahead of the 2022 World Cup.

Epic Games listed its first NFT-powered Web3 game,
Blankos Block Party, in partnership with Mythical Games.

The PGA Tour partnered with NFT marketplace Autograph for
a multi-year NFT platform deal.

Snoop Dogg and Eminem performed a Metaverse show with
Bored Ape Yacht Club NFTs at MTV’s Video Music Awards.

Source: Bitwise Asset Management.

NFTs

32

 

33

Performance of the Top 10 Art & Collectibles NFT Collections
CUMULATIVE RETURNS
ASSET

DESCRIPTION

ITEMS IN
COLLECTION

FLOOR PRICE

MARKET CAP
(USD MILLIONS)

3 MONTHS

YTD

1 YEAR

3 YEARS

Bored Ape Yacht Club

Pioneers of community engagement on- and offline

10,000

$104,363

$1,043.631

-10.77%

30.49%

99.97%

–

CryptoPunks

Original and most iconic NFT collection

10,000

$84,226

$842.263

-4.55%

-3.15%

-41.44%

-64.68%

Mutant Ape Yacht Club

Collection of “mutated” ape avatars

20,000

$21,100

$391.132

-12.54%

36.36%

262.20%

–

CloneX

Customizable avatar wearables for the Metaverse

20,000

$8,362

$162.106

-34.89%

74.03%

–

–

Moonbirds

Animated owls with unique “nesting” perks

10,000

$13,874

$138.736

-62.14%

-44.44%

–

–

Chromie Squiggle

First collection released on Art Blocks platform

10,000

$14,704

$136.472

13.42%

61.62%

-8.42%

–

Azuki

Anime-inspired collection bridging the Metaverse

10,000

$12,778

$127.778

1.70%

2.36%

–

–

Doodles

Colorful line-drawn avatars empowering community

10,000

$10,035

$100.349

-43.48%

43.86%

–

–

VeeFriends

NFT collection by entrepreneur Gary Vaynerchuk

10,255

$7,974

$81.778

-21.61%

-44.26%

-67.79%

–

Meebits

Three-dimensional pixelated avatars with audio

20,000

$3,947

$78.941

-36.17%

-0.01%

-21.05%

–

Source: Bitwise Asset Management with data from nftpricefloor.com as of September 30, 2022.
Crypto asset performance does not include the fees and expenses that are charged by any Fund. Fund returns may differ materially from the returns of a crypto asset. Past performance is no guarantee of future results. Please refer to additional important
disclosures at the back of this document.

NFTs

 

06
CRYPTO
EQUITIES

34

 

35

Q3 2022 Review: Crypto equities partially recovered in Q3 after a challenging Q2; companies showed
a wide dispersion of returns.
Performance of the Bitwise Crypto Innovators 30 Index, Its Top 10 Constituents, and the S&P 500 Index, June 30 to
September 30, 2022

Key Performance Indicators1
Quarter ending September 30, 2022
MARKET CAP

+36.91% QoQ
$27.60 billion
TRADING VOLUME

+3.89% QoQ
$125.68 billion
REVENUE – LAST REPORTED

-22.01% QoQ
$1.76 billion
NET INCOME – LAST REPORTED

-332.98% QoQ
-$4.28 billion
PRICE-TO-BOOK RATIO – LAST REPORTED

+79.40% QoQ
2.82x

Source: Bitwise Asset Management with data from IEXCloud and Bloomberg as of September 30, 2022. For footnotes, tickers, index definitions and constituents, please see Glossary & Notes.
Performance of an index is not illustrative of any particular investment. It is not possible to invest directly in an index. Index performance does not include the fees and expenses that are charged by any Fund. Fund returns may differ materially from the
returns of the Index. Past performance is no guarantee of future results. Please refer to additional important disclosures at the back of this document.

CRYPTO EQUITIES

 

36

Takeaway #1: Despite lower bitcoin prices, mining hashrate continued creeping up. This created
potential challenges for the less efficient miners and opportunities for the more efficient ones.
Bitcoin’s Hashrate, July to September 2022 (EH/s)

Q3 remained a harsh environment for
bitcoin miners. Hashrate—the amount
of computing capacity directed at mining
bitcoin—increased by 25%, reaching an
all-time-high of 267 EH/s on October 11.
This difficult short-term environment
has focused investor attention on
profitability and balance sheet
liquidity. The game is: Who can survive
(and build market share) through the
crypto winter? Not everyone will make it:
Compute North, a data center owner that
hosts miners including Marathon Digital
Holdings, filed for Chapter 11 bankruptcy
in Q3 2022.
Strong miners with deep balance
sheets and lower costs should emerge
in an improved position, as weaker
competitors are culled from the herd.

Source: Bitwise Asset Management with data from The Block and Coin Metrics as of September 30, 2022.

CRYPTO EQUITIES

 

37

Takeaway #2: Staking opportunity shows the power of Coinbase’s massive installed user base, and
the ability for the firm to evolve its business model.
Coinbase Revenue Breakdown, Q2 2020 to Q2 2022 (% of Total Revenue)

Coinbase is moving its business model
from transaction-based revenue to
services revenue. This follows the path
trodden by Charles Schwab and other
discount brokers in the equity markets,
creating stickier, more diversified, and
more resilient revenue streams. While
Transaction revenue fell 60% vs. Q2 2021
at Coinbase, Subscription and Services
revenue rose 50%. Around 46% of the
company’s Subscription and Services
revenue is made up of blockchain
rewards, which is primarily comprised of
staking revenue.
We believe the market is undervaluing
Coinbase’s staking opportunities.
Coinbase currently takes 25% of all
staking revenue. With most blockchains
moving to a staking model, the long-term
revenue opportunity is significant.

Source: Bitwise Asset Management with data from Coinbase as of Q2 2022.

CRYPTO EQUITIES

 

38

Takeaway #3: Circle’s SPAC is expected to close in Q4 2022, providing public access to the emerging
leader of the stablecoin boom.
Total USDC Assets Under Management (AUM), September 2018 to September 2022 (USD billions)

Circle is scheduled to go public
between Q4 2022 and early 2023
through a SPAC merger with Concord
Acquisition Group valued at $9 billion.
Circle is the co-creator of USDC, which
we believe will soon be the world’s
largest stablecoin.
USDC is one of the fastest-growing
stablecoins in the world. USDC
issuance is up 85% YoY as of Q2 2022,
and there is now more than $55 billion in
USDC in circulation.
Circle’s business model is leveraged to
rising rates. The company earns income
on the collateral backing its stablecoin.
As rates rise, the revenue opportunity is
significant. Circle has $43.5 billion of
reserves in U.S. Treasuries. At current
yields, Circle would earn $722 million in
annual revenue.1

Source: Bitwise Asset Management with data from The Block and Coin Metrics. For footnotes, please see Glossary & Notes.

CRYPTO EQUITIES

 

39

Performance of the Top 10 Constituents in the Bitwise Crypto Innovators 30 Index
CUMULATIVE RETURNS
ASSET

DESCRIPTION

TICKER

PRICE

MARKET CAP
(USD BILLIONS)

3 MONTHS

YTD

1 YEAR

3 YEARS

Coinbase

Most established crypto exchange platform

COIN

$64.49

$14.520

37.15%

-74.45%

-71.65%

–

MicroStrategy

Bitcoin proxy via its BTC treasury holdings

MSTR

$212.26

$2.400

29.19%

-61.02%

-63.30%

43.06%

Silvergate Capital

Most established crypto and fintech bank

SI

$75.35

$2.385

40.76%

-49.16%

-34.76%

–

Hut 8 Mining

Leading crypto miner

HUT CN

$2.50

$0.485

33.83%

-77.32%

-78.81%

–

Galaxy Digital Holdings

Crypto financial services and investment management

GLXY CN

$5.86

$1.947

21.33%

-74.13%

-71.61%

–

Riot Blockchain

Leading U.S. crypto miner

RIOT

$7.01

$1.083

67.30%

-68.61%

-72.72%

293.82%

Bakkt Holdings

Crypto trading and rewards platform

BKKT

$2.28

$0.601

8.57%

-73.21%

–

–

Marathon Digital Holdings

Leading U.S. crypto miner

MARA

$10.71

$1.251

100.56%

-67.41%

-66.09%

512.00%

Canaan

Crypto mining rig manufacturer

CAN

$3.28

$0.613

1.86%

-36.31%

-46.32%

–

HIVE Blockchain Tech

Leading crypto miner

HIVE CN

$5.21

$0.428

25.75%

-94.30%

-94.37%

–

Source: Bitwise Asset Management with data from IEXCloud and Bloomberg as of September 30, 2022. For index definitions and constituents, please see Glossary & Notes.
Performance of an index is not illustrative of any particular investment. It is not possible to invest directly in an index. Index performance does not include the fees and expenses that are charged by any Fund. Fund returns may differ materially from the
returns of the Index. Past performance is no guarantee of future results. Please refer to additional important disclosures at the back of this document.

CRYPTO EQUITIES

 

07
CRYPTO
FUNDAMENTALS
GUIDE

40

 

41

Overall crypto market: Market capitalization and dominance
Crypto Assets Total Market Capitalization, June 2013 to September 2022 (USD
trillions)

Bitcoin and Ethereum Dominance (% Share of Total Crypto Market), September 2021
to September 2022

Source: Bitwise Asset Management with data from The Block and CoinGecko as of September 30, 2022.

Source: Bitwise Asset Management with data from The Block and CoinMarketCap as of September 30, 2022.

OVERALL CRYPTO MARKET

 

Bitcoin: Select on-chain indicators
Bitcoin Held, by Length of Holding, January 2020 to September 2022 (millions)

Number of Entities Holding Bitcoin by Profile, January 2020 to September 2022
(millions)

Source: Bitwise Asset Management with data from Chainalysis as of September 30, 2022.

Source: Bitwise Asset Management with data from Chainalysis as of September 30, 2022.

Share of Bitcoin Supply in Profit or Loss, January 2020 to September 2022

Top 10 Net Receivers (Positive Values) and Top 10 Net Senders (Negative Values),
January 2020 to September 2022 (USD millions)

Source: Bitwise Asset Management with data from Chainalysis as of September 30, 2022.

Source: Bitwise Asset Management with data from Chainalysis as of September 30, 2022.

BITCOIN

42

 

43

Bitcoin: Liquidity and on-chain flows
Total Spot Trading Volume in Select Exchanges, September 2020 to September 2022
(USD billions)

Total CME Futures Contracts Trading Volume, September 2020 to September 2022
(USD billions)

Source: Bitwise Asset Management with data from The Block and CryptoCompare as of September 30, 2022.

Source: Bitwise Asset Management with data from The Block and Coinglass as of September 30, 2022.

Spot Exchanges Deposits, 60-Day Moving Average, September 2020 to September
2022 (BTC)

Flow From Miners to Exchanges (1 Hop), 60-Day Moving Average, September 2020 to
September 2022 (BTC)

Source: Bitwise Asset Management with data from Coin Metrics as of September 30, 2022.

Source: Bitwise Asset Management with data from Coin Metrics as of September 30, 2022.

BITCOIN

 

Bitcoin: Key network operational statistics
Total Bitcoin Active Addresses, 60-Day Moving Average, January 2018 to September
2022 (millions)

Total Bitcoin Hashrate, January 2018 to September 2022 (EH/s)

Source: Bitwise Asset Management with data from Coin Metrics as of September 30, 2022.

Source: Bitwise Asset Management with data from Coin Metrics as of September 30, 2022.

Median Transaction Fees, 30-Day Moving Average, January 2018 to September 2022
(USD)

Total Bitcoin Locked in Public Lightning Channels, January 2020 to September 2022

Source: Bitwise Asset Management with data from Coin Metrics as of September 30, 2022.

Source: Bitwise Asset Management with data from The Block and Bitcoin Visuals as of September 30, 2022.

BITCOIN

44

 

45

Ethereum and Emerging L1s: Usership, TVL in DeFi, and NFT trading volume by blockchain
Daily Total Transaction Count per Blockchain, Seven-Day Moving Average, July to
September 2022 (millions)

Daily Number of New Addresses by Blockchain, Seven-Day Moving Average, July to
September 2022 (millions)

Source: Bitwise Asset Management with data from The Block, ChainCrunch, Flowscan, Coin Metrics, Subscan,
Nearblocks, and Blockscan as of September 30, 2022. Note: Avalanche only includes its C-Chain due to missing data.

Source: Bitwise Asset Management with data from The Block, Flowscan, Subscan, and Nearblocks as of September 30,
2022.

Market Share of DeFi Total Value Locked by Blockchain, January 2021 to September
2022

Market Share of NFT Trading Volume by Blockchain, January 2021 to September 2022

Source: Bitwise Asset Management with data from The Block and DeFi Llama as of September 30, 2022.

Source: Bitwise Asset Management with data from The Block and CryptoSlam as of September 30, 2022.

ETHEREUM AND EMERGING LAYER 1s

 

46

Ethereum and Emerging L1s: Select operational indicators for Ethereum L2 solutions
Total Value Locked (TVL) on Ethereum’s Scalability Solutions, June 2021 to September 2022 (USD billions)

Source: Bitwise Asset Management with data from @eliasimos via Dune Analytics as of September 30, 2022.

Share of Daily Transactions on Ethereum and Its Top Scaling Solutions, July to
September 2022

Average Fee Per Transaction on Ethereum and Its Top Scaling Solutions on
September 30, 2022
LAYER 1 VS. LAYER 2

AVERAGE FEE PER
TRANSACTION (USD)

% OF ETHEREUM’S FEE

Ethereum

Layer 1

$1.29

100%

Arbitrum

Layer 2

$0.05

4.20%

Optimism

Layer 2

$0.06

4.53%

Layer 2 Aggregator

$0.01

0.43%

NETWORK

Polygon
Source: Bitwise Asset Management with data from Etherscan, Polygonscan, Arbiscan, and Optimism as of September
30, 2022.

Source: Bitwise Asset Management with data from CryptoFees.info, Etherscan, Optimistic.etherscan.io, and Arbiscan.io, as of
September 30, 2022.

ETHEREUM AND EMERGING LAYER 1s

 

Ethereum and Emerging L1s: Total value locked (TVL) by L2 scaling solution
Total Value Locked in Ethereum Scaling Solutions by Technology Type, October 2021 to September 2022 (USD billions)

Source: Bitwise Asset Management with data from The Block and Zerion as of September 30, 2022.

Total Value Locked in Optimistic Rollups by Layer 2, October 2021 to September 2022
(USD billions)

Total Value Locked in ZK-Rollups by Layer 2, October 2021 to September 2022 (USD
billions)

Source: Bitwise Asset Management with data from The Block and Zerion as of September 30, 2022.

Source: Bitwise Asset Management with data from The Block and Zerion as of September 30, 2022.

ETHEREUM AND EMERGING LAYER 1s

47

 

DeFi: Total value locked (TVL) and revenue of the leading projects
Total Value Locked (TVL) in DeFi by Sector, January 2020 to September 2022 (USD
billions)

Revenue Generated by DeFi Applications, July 2020 to September 2022 (USD
millions)

Source: Bitwise Asset Management with data from The Block and Defi Llama as of September 30, 2022.

Source: Bitwise Asset Management with data from The Block and CryptoFees.info as of September 30, 2022.

Relative Share of Total Value Locked in DeFi by Blockchain, January 2020 to
September 2022

Relative Share of DeFi Revenue on Leading DeFi Applications, July 2020 to
September 2022

Source: Bitwise Asset Management with data from The Block and Defi Llama as of September 30, 2022.

Source: Bitwise Asset Management with data from The Block and CryptoFees.info as of September 30, 2022.

DEFI

48

 

49

DeFi: Activity indicators for the top trading and lending applications
Trading Volume by Decentralized Exchange, January 2020 to September 2022 (USD
billions)

Deposits and Loans on Aave, Compound and Maker, January 2020 to September
2022 (USD billions)

Source: Bitwise Asset Management with data from The Block and CoinGecko as of September 30, 2022.

Source: Bitwise Asset Management with data from The Block, Compound Finance, and Dune Analytics as of September
30, 2022.

Share of Trading Volume on Leading Crypto Exchanges, January 2020 to September
2022

Liquidations Across Lending Protocols, January 2020 to September 2022 (USD
billions)

Source: Bitwise Asset Management with data from The Block, CoinGecko and CryptoCompare as of September 30, 2022.

Source: Bitwise Asset Management with data from The Block, Parsec and Flipside as of September 30, 2022.

DEFI

 

DeFi: Activity indicators for staking and stablecoins
Staked ETH on Ethereum Using Staking Services1 Versus Other Methods, November
2020 to September 2022 (ETH millions)

Total Circulating Supply of Stablecoins by Type, January 2017 to September 2022
(USD billions)

Source: Bitwise Asset Management with data from @hildobby via Dune Analytics as of September, 2022.
For footnotes, please see Glossary & Notes.

Source: Bitwise Asset Management with data from The Block and Coin Metrics as of September 30, 2022.

Relative Share of Total Value Staked on Ethereum by Entity, November 2020 to
September 2022

Value of Stablecoin Transfers, January 2017 to September 2022 (USD trillions)

Source: Bitwise Asset Management with data from @hildobby via Dune Analytics as of September 30, 2022.

Source: Bitwise Asset Management with data from Coin Metrics and CoinGecko as of September 30, 2022.

DEFI

50

 

NFTs: Trading volume by category and marketplace
Trading Volume of NFTs by Category, January 2021 to September 2022 (USD billions)

Trading Volume on NFT Marketplaces, January 2021 to September 2022 (USD
billions)

Source: Bitwise Asset Management with data from The Block and CryptoSlam as of September 30, 2022.

Source: Bitwise Asset Management with data from The Block and CryptoSlam as of September 30, 2022.

NFTs

51

 

NFTs: Trading volume and sales of the leading art and collectibles projects
Art and Collectibles: Trading Volume by Project, January 2021 to September 2022 (USD
billions)

Art and Collectibles: Number of Sales by Project, January 2021 to September 2022
(thousands)

Source: Bitwise Asset Management with data from The Block and CryptoSlam as of September 30, 2022.

Source: Bitwise Asset Management with data from The Block and CryptoSlam as of September 30, 2022.

NFTs

52

 

53

NFTs: Trading volume and sales of the leading gaming projects
Gaming NFTs: Trading Volume by Game, January 2021 to September 2022 (USD millions)

Gaming NFTs: Number of Sales by Game, January 2021 to September 2022 (thousands)

Source: Bitwise Asset Management with data from The Block and CryptoSlam as of September 30, 2022.

Source: Bitwise Asset Management with data from The Block and CryptoSlam as of September 30, 2022.

NFTs

 

Crypto Equities: Key financial highlights for select companies
2022 Median Revenue Growth Estimates of Select Constituents of the Bitwise Crypto
Innovators 30 Index as of September 30, 2022

2022 Median Profit Margin Estimates of Select Constituents of the Bitwise Crypto
Innovators 30 Index as of September 30, 2022

Source: Bitwise Asset Management with data from Bloomberg as of September 30, 2022.

Source: Bitwise Asset Management with data from Bloomberg as of September 30, 2022.

Price-to-Equity Ratios of Select Constituents of the Bitwise Crypto Innovators 30
Index as of September 30, 2022

Price-to-Book Ratios of Select Constituents of the Bitwise Crypto Innovators 30
Index as of September 30, 2022

Source: Bitwise Asset Management with data from Bloomberg as of September 30, 2022.

Source: Bitwise Asset Management with data from Bloomberg as of September 30, 2022.

CRYPTO EQUITIES

54

 

Crypto Equities: Industry highlights and key company metrics for miners
Share of Bitcoin Network Hashrate by Country, September 2019 to September 20221

Total Mining Revenues by Type, January 2020 to September 2022 (USD millions)

Source: Bitwise Asset Management with data from the Cambridge Centre for Alternative Finance
For footnotes, please see Glossary & Notes..

Source: Bitwise Asset Management with data from The Block and Coin Metrics as of September 30, 2022.

Current and Projected2 Hashrate as of September 30, 2022 (EH/s)

Bitcoin Miner Leverage Ratios, April to June 2022

Source: Bitwise Asset Management with data from companies as of September 30, 2022.

Source: Bitwise Asset Management with data from companies as of Q2 2022.

CRYPTO EQUITIES

55

 

Crypto Equities: Key financial and operational highlights for Coinbase
Coinbase Revenue by Type, Q2 2020 to Q2 2022 (USD billions)

Coinbase Quarterly Transacting Users, Q2 2020 to Q2 2022 (millions)

Source: Bitwise Asset Management with data from Coinbase as of Q2 2022.

Source: Bitwise Asset Management with data from The Block and Coin Metrics as of September 30, 2022.

Coinbase Volume by Customer Segment, Q2 2020 to Q2 2022 (USD billions)

Coinbase Trade Volume Share by Crypto Asset, Q2 2020 to Q2 2022

Source: Bitwise Asset Management with data from The Block and Coinbase as of September 30, 2022.

Source: Bitwise Asset Management with data from The Block and Coinbase as of September 30, 2022.

CRYPTO EQUITIES

56

 

08
GLOSSARY
& NOTES

57

 

Crypto Glossary

AUM: Assets under management. Refers to the total market value of assets handled by an
entity, fund, or platform.
Client: The software, run by a network of computers, that helps secure a blockchain. Because a
client can face outages that in turn can inhibit network participation, client diversity (i.e., having
more than one client running throughout the network at a time) is increasingly becoming an
important area of focus for many blockchains.
Crypto Assets: Digital assets deployed by blockchains or crypto applications that can be used
for protocol governance, network usage fees, and network security. Like other assets, they can
be traded on exchanges or held as a store of value.
Decentralized Finance (DeFi): Crypto-enabled applications that use blockchain technology to
execute a broad range of financial services with little or no reliance on centralized institutions like
banks, notaries, or auditors. DeFi protocols aim to provide financial services in a much more
efficient, transparent, and accessible fashion than their traditional counterparts.
DEX: A decentralized exchange, or DEX, is an automated platform that lets users exchange
crypto assets without the need for a trusted third party. DEXes are the crypto equivalent of
traditional exchanges like the New York Stock Exchange or Nasdaq. They can also be
contrasted with centralized crypto brokerages like Coinbase or FTX, which have a conventional
corporate structure. The decentralized structure of a DEX allows any individual to act as a market
maker and provide liquidity on the platform, earning yield.

Dominance: A measure of the market share of a crypto asset, blockchain, or application in a
given metric (e.g., market capitalization, daily usership, or developer activity, among others). For
example, Bitcoin’s Market Cap Dominance refers to the market share of Bitcoin’s market cap
share relative to the total market cap of all crypto assets.
Fee Burn: To use a blockchain, users pay a transaction fee, typically using the blockchain’s
native crypto asset. Some blockchains take that transaction fee and permanently remove it from
circulation, a process known as “burning” the fee. During periods of high usage, large amounts
of crypto assets can be “burned,” which can result in the asset becoming deflationary.
Hashrate: A measure of the computational power being used to secure a proof-of-work
blockchain. The higher the hashrate the more resilient the network is to attacks.
Layer 0s: An emerging network design that hosts various Layer 1 blockchains within the same
ecosystem for scalability and interoperability gains.
Layer 1s: The main blockchain on which applications are built. Bitcoin, Solana, Ethereum, and
many others follow this design.
Layer 2s: Adjacent technologies that address the challenge of high network fees by processing
transactions off the main “Layer 1” blockchain, like Ethereum.
The Merge: Ethereum’s transition from proof-of-work to the more energy-efficient proof-of-stake
consensus mechanism.

GLOSSARY & NOTES

58

 

Crypto Glossary

Metaverse: An ongoing evolution of the internet where immersive virtual worlds will interoperate
with one another, as well as the physical world, in a seamless experience. In the Metaverse,
participants will experience events synchronously in settings that are not limited by physical
boundaries.
Network Resiliency: A blockchain’s ability to remain functional and protect itself from exploits.
Decentralization and security are key components of network resiliency.
NFTs (Non-Fungible Tokens): A technology through which an individual can register the
ownership of a digital good on a blockchain. As such, NFTs act as certificates of ownership,
provenance, and authenticity in the digital world.
Proof-of-Work (PoW): Popularized by Bitcoin, PoW is a method by which energy-hungry
machines compete to process transactions and secure the network. This process is known as
“mining” and is conducted by crypto “miners.”
Proof-of-Stake (PoS): The transaction validation mechanism of choice for most of the newer
blockchain networks. It replaces PoW’s energy-hungry machines with financial commitments in
the blockchain’s native asset.

Stablecoins: A stablecoin is a crypto asset that is pegged to the value of a real-world asset. For
example, one USD Coin (USDC) is always intended to be worth one U.S. dollar.
Staking/staking service provider: Staking involves making a financial commitment to a
blockchain in its native asset to secure the network, typically in exchange for yield. Staking
service providers lower the financial and technological barriers associated with staking by
pooling and staking crypto assets on behalf of customers.
Total Value Locked (TVL): The amount of capital deployed on DeFi applications.
Validator: An entity or network of entities that propose and validate transactions on a
proof-of-stake blockchain. Validators represent key infrastructure for proof-of-stake blockchains:
As the number of validators on a network increases, the network becomes more decentralized
and, as a result, more secure.
Wallet: Crypto wallets are a key piece of infrastructure that enable users to store, receive, and
transmit their crypto assets. They also allow users to interact with crypto applications, like DeFi
and NFT applications, among others. Wallets can be either hardware or software.

Rollups: Blockchain scaling solutions that execute transactions off of the Layer 1 blockchain
(often on Layer 2s) and then post the data back to the Layer 1 for final consensus. Rollups are
mainly used on Ethereum.
Scalability: The ability for a blockchain to handle high transaction volumes at low costs.

GLOSSARY & NOTES

59

 

60

Bitwise Crypto Index Constituents

As of September 30, 2022
Bitwise 10 Large Cap Crypto Index
The Bitwise 10 Large Cap Crypto Index captures the 10 largest eligible crypto assets by
free-float-adjusted market capitalization.
62.99%
2.02%
0.86%
0.62%

Bitcoin (BTC)
Solana (SOL)
Avalanche (AVAX)
Chainlink (LINK)

27.25% Ethereum (ETH)
1.22% Polkadot (DOT)
0.81% Uniswap (UNI)

2.46%
1.14%
0.64%

Bitwise Crypto Innovators 30 Index (XBITQ)
11.05%
5.32%
4.74%
3.98%
2.84%
2.27%
1.62%
1.51%
1.43%
1.26%

Cardano (ADA)
Polygon (MATIC)
Cosmos (ATOM)

Bitwise ex Bitcoin Large Cap Crypto Index
The Bitwise 10 ex Bitcoin Large Cap Crypto Index captures the assets in the Bitwise 10 Large
Cap Crypto Index, excluding bitcoin.
73.61% Ethereum (ETH)
3.29% Polkadot (DOT)
2.19% Uniswap (UNI)

6.64%
3.09%
1.72%

Cardano (ADA)
Polygon (MATIC)
Cosmos (ATOM)

5.45%
2.32%
1.69%

Coinbase (COIN)
Riot Blockchain (RIOT)
Marathon Digital (MARA)
Hive Blkchn. (HIVE CN)
Bitfarms (BITF CN)
Cleanspark (CLSK)
Mercadolibre Inc (MELI)
Visa (V)
Bit Digital (BTBT)
Greenidge Generation
Holdings (GREE)

Solana (SOL)
Avalanche (AVAX)
Chainlink (LINK)

Bitwise Decentralized Finance (DeFi) Crypto Index
The Bitwise Decentralized Finance Crypto Index is designed to provide investors with a clear,
rules-based, and transparent way to track the value of the rapidly emerging Decentralized Finance space.
52.25%
5.37%
4.02%
2.47%

Uniswap (UNI)
Curve (CRV)
Loopring (LRC)
0x (ZRX)

11.43% Aave (AAVE)
5.35% Lido (LDO)
3.69% Convex Finance (CVX)

7.36%
4.83%
3.23%

Maker (MKR)
Compound (COMP)
Yearn Finance (YFI)

GLOSSARY & NOTES

10.88% MicroStrategy (MSTR)
4.96% Hut 8 Mining (HUT CN)
4.48% Bakkt Holdings (BKKT)
3.09% Core Scientific (CORZ)
2.84% Argo Blockchain (ARB LN)
1.73% Interactive Brokers (IBKR)
1.58% PayPal Holdings (PYPL)
1.49% Nvidia Corp (NVDA)
1.39% Block Inc (SQ)
0.55% Terwulf (WULF)

9.83%
4.85%
4.24%
2.92%
2.84%
1.69%
1.52%
1.48%
1.32%

Silvergate Capital (SI)
Canaan (CAN)
Galaxy Digital (GLXY CN)
Iris Energy (IREN)
Northern Data AG (NB2 GR)
DBS Group (DBS SP)
CME Group Inc (CME)
Signature Bank (SBNY)
Advanced Micro Devices (AMD)

 

Bitwise Crypto Index Constituents

As of September 30, 2022
Bitwise Blue-Chip NFT Collections Index
The Bitwise Blue-Chip NFT Collections Index is designed to broadly capture the investable market
opportunity for the most valuable arts and collectibles NFT collections.

Ball Multicoin Bitwise Metaverse Index
The Ball Multicoin Bitwise Metaverse Index is designed to capture the investable market opportunity for
crypto assets exposed to the emerging Metaverse.

33.43% Bored Ape Yacht Club
13.13% Mutant Ape Yacht Club
4.44% Moonbirds
4.09% Azuki
2.62% VeeFriends

9.13%
8.30%
8.07%
5.70%
4.93%
3.88%
3.54%
2.92%
2.00%
1.93%
1.27%
0.80%
0.59%
0.09%

26.98% CryptoPunks
5.19% CloneX
4.37% Chromie Squiggle
3.21% Doodles
2.53% Meebits

Chainlink (LINK)
Solana (SOL)
Filecoin (FIL)
Uniswap (UNI)
The Graph (GRT)
FTX Token (FTT)
Avalanche (AVAX)
Sandbox (SAND)
Render (RNDR)
Flow (FLOW)
Audius (AUDIO)
Maker (MKR)
Curve (CRV)
Yield Guild Games (YGG)

8.71%
8.07%
6.05%
4.94%
4.13%
3.75%
2.93%
2.31%
1.95%
1.71%
1.25%
0.78%
0.27%

Ethereum (ETH)
Polygon (MATIC)
Binance Coin (BNB)
Arweave (AR)
Ethereum Name Service (ENS)
ApeCoin (APE)
Decentraland (MANA)
Serum (SRM)
Near Protocol (NEAR)
Livepeer (LPT)
Aave (AAVE)
PancakeSwap (CAKE)
0x (ZRX)

The S&P 500 Index, or Standard & Poor’s 500 Index, is a market-capitalization-weighted index of 500
leading publicly traded companies in the U.S.

GLOSSARY & NOTES

61

 

Notes

Section 1: Market Overview
Slide 5
(1) KPI figures are calculated for the entire crypto market unless otherwise noted.
(2) Total Crypto Market Cap includes the market capitalization of all crypto assets. By contrast,
Bitwise indexes—including the Bitwise 10 Large Cap Crypto Index—hold only select assets.
(3) Calculated using the 90-day correlations for June 30 and September 30, 2022. SPY refers to
the SPDR S&P 500 ETF Trust. Bitwise 10 refers to the Bitwise 10 Crypto Index.

Section 2: Bitcoin
Slide 12
Tickers refer to the following assets (in alphabetical order): Australian Dollar (AUD), Bitcoin (BTC),
Canadian Dollar (CAD), Swiss Franc (CHF), Chinese Yuan (CNY), U.S. Dollar (DXY), Euro
(EUR), British Pound (GBP), Japanese Yen (JPY), New Zealand Dollar (NZD), Philadelphia
Gold and Silver Index (XAU), and South African Rand (ZAR).
Slide 14
(1) The price of bitcoin spot is calculated by Bitwise Asset Management from select exchanges.
“SPY ETF” refers to the SPDR S&P 500 ETF Trust. “IMW ETF” refers to the iShares Russell
2000 ETF. “EEM ETF” refers to the iShares MSCI Emerging Markets ETF. “GLD ETF” refers
to the SPDR Gold Trust ETF.

Slide 15
(1) Market Cap reflects the aggregate market capitalization of the Asset denoted, not of the fund
represented by the Ticker. Market Cap for 10-Year Treasury aggregates U.S. treasury notes
with maturities between 2 and 10 years. Market Cap for Corporate Bonds – Investment
Grade and Corporate Bonds – High Yield sourced from SIFMA as of June 30, 2022. Total
value of USD in circulation based on Federal Reserve data as of August 31, 2022, available
at https://www.federalreserve.gov/releases/h6/current/default.htm.

Section 3: Ethereum & Emerging L1s
Slide 17
Tickers refer to the following crypto assets (in alphabetical order): Cardano (ADA), Algorand
(ALGO), Cosmos (ATOM), Avalanche (AVAX), BNB Chain (BNB), Polkadot (DOT), Ethereum (ETH),
Flow (FLOW), Near Protocol (NEAR), and Solana (SOL).
(1) “Select Layer 1 Blockchains” refers to a select set of crypto asset that the Bitwise Asset
Management Research Team believes represents the emerging Layer 1 space. (See list
above.)
(2) “Median daily transaction count” is calculated using a seven-day moving average of “Select
Layer 1 Blockchains.” The figure given excludes Cosmos due to missing data. Additionally,
data for Avalanche is limited to its C-Chain and data for Polkadot is limited to its Relay
Chain due to data limitations.
(3) “Fees generated” is calculated using seven-day averages as of 6/30/2022 and 9/30/2022. The
figure given does not include Cosmos, Flow, or Algorand due to missing data.
(4) “L2 % of Fees on Ethereum” refers to the percent of all Ethereum fees paid by Polygon,
Optimism, and Arbitrum. The figure is calculated using daily fees generated on 6/30/2022
and 9/30/2022.
(5) “L2 TVL as a % of Ethereum TVL” is calculated using daily TVL figures as of 6/30/2022 and
9/30/2022.

GLOSSARY & NOTES

62

 

Notes

Slide 18
(1) “Impact” is a measure of the reduction of ETH issuance, and hence of the reduction in
inflationary pressure on ETH, converted to USD. Impact is calculated by taking the closing
price of ETH as of 9/30/2022 and multiplying it by the amount of ETH not issued due to The
Merge.

(3) “TVL” refers to total DeFi sector value locked.
(4) “Revenue” is calculated based on 20 of the leading DeFi protocols tracked by The Block.
(5) “DEX Trading Volume” refers to the major decentralized exchanges tracked by The Block and
CoinGecko.
(6) “Stablecoin supply” refers to all major stablecoins tracked by The Block.

Slide 19
(1) Chainlink is not a Layer 1 blockchain. It is an oracle network that provides real-world data to
the applications that live on Layer 1s. As a result, upgrades made to Chainlink can
significantly impact Layer 1s, which is why we discuss it in this section.

Slide 25
(1) “Stablecoin Activity” refers to Adjusted Transfer Value of Stablecoins (USD), or the USD value
of the sum of the stablecoin’s native units transferred, removing noise and certain artifacts.
Only non-zero-value, successful transfers with distinct sender and recipient are considered.

Slide 20
(1) In Q3 2022, Cosmos released its updated roadmap, which includes “Inter-chain Security,”
which allows Cosmos-based blockchains to rely on the Cosmos Hub’s robust validator set
for security.

Section 5: NFTs

Section 4: DeFi
Slide 23
Tickers refer to the following crypto assets, in alphabetical order: Aave (AAVE), Compound
(COMP), Convex (CVX), Curve (CRV), Lido DAO (LDO) Loopring (LRC), Maker DAO Token
(MKR), Uniswap (UNI), Yearn Finance (YFI), and 0x (ZRX).

Slide 29
(1) “Top 10 collections” refers to the constituents of the Bitwise Blue-Chip NFT Collections
Index. For more information please refer to the Index’s methodology document, available at
https://app.bitwiseinvestments.com/indexes/nft-methodology.
(2) Data for “Trading Volume,” “Median Daily Transactions,” and “Median Daily Traders”
encompasses Ethereum-based NFTs only.

(1) “DeFi blue chips” refers to constituents of the Bitwise Decentralized Finance Crypto Index as
of September 30, 2022. (See list above.)
(2) “Total DeFi Market Cap” refers to total DeFi sector market capitalization, and includes the
market capitalization of all DeFi crypto assets. By contrast, Bitwise indexes—including the
Bitwise Decentralized Finance Crypto Index—hold only select assets.

GLOSSARY & NOTES

63

 

Notes

Section 6: Crypto Equities

Section 7: Crypto Fundamentals Guide

Slide 35
Tickers refer to the following crypto equities, in alphabetical order: Bakkt Holdings (BKKT),
Canaan (CAN), Coinbase (COIN), Galaxy Digital Holdings (GLXY-CT), Hive Blockchain Tech
(HIVE), Hut 8 Mining (HUT), Marathon Digital Holdings (MARA), MicroStrategy (MSTR), Riot
Blockchain (RIOT), Silvergate Capital (SI).

Slide 50
(1) “Staking services” includes liquid staking, centralized exchanges, and staking pools, and
excludes other categories of stakers.

(1) KPIs are calculated based on the Tier 1 constituents of the Bitwise Crypto Innovators 30
Index. For more information please refer to the Index’s methodology document, available at
https://s3.amazonaws.com/static.bitwiseinvestments.com/BITQ/Bitwise-Crypto-Innovators30-Index-Methodology.pdf

Slide 55
(1) The Cambridge Centre for Alternative Finance provided the following footnote: “To our
knowledge, there is little evidence of large mining operations in Germany or Ireland that
would justify these figures. Their share is likely significantly inflated due to redirected IP
addresses via the use of VPN or proxy services.”
(2) MARA guidance is projected to be achieved in mid-2023; GREE, HIVE and RIOT in Q1 2023;
and remaining miner guidance by end of 2022.

Slide 38
(1) Circle’s annual revenue calculation estimate: Circle has $43.5 billion in USDC reserves
allocated to U.S. Treasuries Securities as of its September 23, 2022 update, available at
https://www.centre.io/hubfs/USDC%202022_Circle%20Examination%20Report%20August
%202022.pdf?hsLang=en. Three-month T-bill rates are currently at 3.32%, generating $1.4
billion in annual revenue. We’ve assumed a 50/50 revenue split with Coinbase, given their
CENTRE Consortium joint venture, which included a revenue share on interest income from
USDC reserves. Circle would therefore earn an estimated $722 million in annual revenue.
This calculation doesn’t take into account rates increasing more in the future.