Lean on Me

Issue #5 – May 25, 2022

With traditional and Crypto markets continuing their declines last week, investor queries have focused squarely on when global markets will find a bottom.

Since our indicators all point to not soon given a likely recession, we suggest investors consider the emerging differences in behavior of both the Bitcoin and Ethereum protocols relative to fiat-bound assets like equities, for reasons laid out in our May 9th and 16th Digital Asset Bulletins.

Today’s market tumult is an own goal by monetary and fiscal policy makers, hiking rates, as growth slows in the wake of record currency debasement and Debt/GDP ratios: a tumult that now appears to be gaining steam, as outlier down moves in fiat assets continue. The below graph of the Euro’s top 50 down days relative to the Swiss Franc (CHF) providing the most recent data point, a -1.3% loss on May 18th ranking in the 99.6th%ile since 2000. It is the third such move in 2022, the largest cluster since the Euro crisis.



We highlight the instance of these recent EURCHF moves, on top of the already historic equity and rate moves, to differentiate the declines in risk assets relative to BTC and ETH volatility, which are both below historic averages.

Second, we note the fallout from last week’s Luna/USDT de-peg was limited when compared the fallout from the -18% one day loss from the EURCHF de-peg on January 15th, 2015.

Specifically, the closure of several funds in the wake of the EURCHF de-peg, has yet to manifest in the wake of the Luna/UST collapse. Regarding trade volumes, we see that markets absorbed the elevated, but not historic volumes for BTC. Turning to the largest stable coin, Tether’s USDT, the volumes experienced during its dip below $1.00 weren’t historic but were noteworthy for reasons discussed below.


We view the recent redemptions in fiat-dollar collateralized stablecoins as indicative of the overall negative sentiment across global markets, and not an indictment of stablecoins themselves.

Generally, stablecoin subscriptions are a cost-effective way to fund future investment in the digital asset economy.  In this manner, stablecoins are the reliable on-and-off ramp for this new economy. Think Dry Powder, ready for future investment.

Conversely, redemptions of collateralized stablecoins normally result in fiat dollars (USD) exiting from the digital economy, moving back into the Fiat economy, settling in the redeemer’s bank account.

Of the five stablecoins mentioned in the above graph, below is their dominance as a percentage of their combined market capitalization.




Source: 3iQ Research. Data sourced from Messari as of May 19, 2022.

Since the start of 2022, the total supply of these stablecoins has increased by 5.65% or $8.7 billion USD; however, since the unwind of UST started to begin on May 7th, the total supply declined by 7.39% or roughly $13.3 billion USD.



Digital Asset Universe

Dominance has again crept in favor of BTC since our last bulletin, with BTC at 45% and ETH at 20%.



Source: 3iQ Research. Data sourced from Coin.Dance, Etherscan.io as of May 19, 2022.


USDT Demonstrates Resilience


USDT’s May 12th 3:00am ET dip to $0.941 occurred on light volume coincidentally BTC’s drop to a recent low point of $25,400. While breaking the buck is never desirable, this instance was not only on light volume, but brief, lasting less than an hour. 

Some may view this as a catalyst for Tether’s nearly $7.5 billion USD in outflows since our last bulletin and therefore a negative for the coin. We do not. Instead, we view this as a constructive development, given the market’s ability to absorb this record volume at/near the expected $1.00 price and AFTER the wobble to $0.9411. As noted above, we see the redemptions more a function of a general risk reduction in the system, than aversion to the USDT coin. 

1Coinbase USDT/USD. Data sourced from Coinbase as of April 12, 2022.

The alternative digital assets below posted greater losses than most other global assets, including BTC and ETH over the past week, building on YTD underperformance in part due to their size, usability, and lower relative participation than those of their peers: BTC and ETH.



Source: 3iQ Research. Data sourced from Messari as of May 19, 2022. Figures expressed in USD unless otherwise stated. Past performance is not indicative of future results.

BTC is down relative to the fiat-based assets over the past year, besting only fellow digital asset native, ETH. However, BTC maintains its 3Y and 5Y positive performance.  

This performance divide leads us straight to a single question. Will BTC and ETH follow their 3Y positive performance profile or maintain their more recent pattern of underperformance compared to other digital assets?   

In determining the above, we suggest investors review the metrics and analysis highlighting the inherent integrity of BTC and improved performance profile of both BTC and ETH outlined in our previous reports. The diminished volatility profile for both BTC’s and ETH’s is constructive, but both assets still exhibit higher beta and volatility than all assets listed below, which should be a consideration for all investors, including those with short time horizons.

The below table illustrates this month’s impact on full year returns, which are losses for everything but oil.



Source: 3iQ Research. Data sourced from Bloomberg as of May 19, 2022.

Less apparent is the sequence of losses that rolled from rates to equities and Digital assets, finally to currencies as noted above and seen in the British Pound Sterling and Gold below.

In our opinion, it suggests that markets are still assessing the implications of the serial reversal of a decade plus of Global Zero Rate Policy by G-10 policy makers.

Pulling the lens a bit closer in, we see that Bitcoin has bested all other assets over the past 5 days, +6%, with all other assets flat to up 4% in a choppy week (5D data through May 19th, 2022).

  • BTC’s 5-day shift in performance halted the sharp increase in correlation to equities, as noted in last week’s publication. BTC 63-day correlation to the S&P 500 peaked last week at 68%, dropping to 66% on May 18th, 2022, on BTC’s 6% gain vs. S&P 500’s flat performance over 5 days ending May 19th, 2022.

We will be monitoring the correlation to see if it follows previous patterns of high, but short-lived correlation.

Research Team

Mark Connors

Mark Connors

Head of Research

Herbert Zhang, CFA

Herbert Zhang, CFA

Director and Portfolio Manager

Connor Loewen

Connor Loewen

Cryptocurrency Analyst

Contact us: research@3iq.ca

Important Disclosures:


These materials do not constitute an offer to sell or issue or the solicitation of an offer to buy or subscribe for securities in the United States or any other jurisdiction. Neither the 3iQ Corp.’s (the “Manager”) nor the Fund’s securities have been nor will be registered under the United States Securities Act of 1933, as amended (the “Securities Act”), nor under the applicable securities laws of any state or other jurisdiction of the United States, and may not be offered, sold, resold, transferred or delivered, directly or indirectly within, into or in the United States, absent registration or an applicable exemption from, or except in a transaction not subject to, the registration requirements of the Securities Act and in compliance with the securities laws of any relevant state or other jurisdiction of the United States. No securities regulatory authority has expressed an opinion about these securities and it is an offence to claim otherwise.

The commentaries contained herein are provided as a general source of information based on information available as of May 19, 2022. Every effort has been made to ensure accuracy in these commentaries at the time of publication; however, accuracy cannot be guaranteed. Market conditions may change investment decisions arising from the use or relevance on the information contained here. Investors are expected to obtain professional investment advice to determine suitability of their investment objectives and portfolio. 3iQ Corp. makes no representation or warranty to any investor regarding the legality of any investment, the income or tax consequences, or the suitability of an investment for such investor. Prospective investors must not rely on this document as part of any assessment of any potential investment and should not treat the contents of this document as advice relating to legal, taxation, financial or investment matters. Prospective investors are strongly advised to make their own inquiries and consult their own professional advisers as to the legal, tax, accounting and related matters concerning the acquisition, holding or disposal of an investment. All content is original and has been researched and produced by 3iQ Corp. unless otherwise sourced or stated therein.

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About 3iQ Corp.

Founded in 2012, 3iQ is Canada’s largest digital asset investment fund manager with more than C$2.5 billion in assets under management. 3iQ offers investors convenient and familiar investment products to gain exposure to digital assets. For more information about 3iQ and its digital asset investment funds, visit www.3iQ.ca or follow us on Twitter @3iQ_corp.

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Fred Pye

Frederick T. Pye


Frederick T. Pye is the Chairman, Chief Executive Officer and Director of 3iQ Corp. He is also the Chairman and Director of 3iQ Digital Holdings Inc. Mr. Pye is recognized for creating and promoting creative and unique investment products for the investment industry.

Mr. Pye has managed private client portfolios with Landry Investment Management and various other investment dealers. Prior to this Mr. Pye was Founder, President & Chief Executive Officer of Argentum Management and Research Corporation, a company dedicated to managing and distributing quantitative investment portfolios including the first long-short mutual fund in Canada.

He was also Senior Vice-President and National Sales Manager of Fidelity Investments Canada and an integral part of the team that saw assets rise from $80 million to over $7.5 billion in assets under management during his tenure. He also held various positions with Guardian Trust Company, which listed the first Gold, Silver and Platinum Certificates on the Montreal Exchange.

Mr. Pye obtained a Masters in Business Administration from Concordia University.