Market Reboot

Issue #2 – May 2, 2022

Something appears to be afoot in traditional financial markets.

Elon is taking Twitter private, Amazon reported its worst EPS since 2000, and a contraction in U.S. GDP to -1.4% just as the Fed reverses its rate policy. No wonder interest rate and equity volatility rank in the 99th and 90th percentiles respectively since 2016.

See the full report below for details. 


Bitcoin Dominance, AKA market share, has ebbed and flowed over time, currently sitting at 42% and below its 59% average in February 2016, owes to an uptick in functionality of protocols that have been met with increasing adoption.

Source: 3iQ Research. Data sourced from Coin.Dance, as at April 28, 2022.


Source: 3iQ Research. Data sourced from Coin.Dance, as at April 28, 2022.


Source: 3iQ Research. Data sourced from Coin.Dance, as at April 28, 2022.

Set against the near peak volatility noted below, is a more stable price action in digital assets, where Bitcoin and Ethereum post below average volatility.

Building on last week’s bulletin, today’s publication provides more detail on the volatility divide and growing utility of crypto.  The graph above supports this notion of expanding adoption of the Crypto universe, as investors potentially fold in the growing functionality of smart contract protocols such as Ethereum, Solana, Polkadot and Algorand.

As part of 3iQ’s commitment to client education, those interested in commentary or with questions beyond the scope of this report can reach out to our Research Team here.


Bitcoin and Convexity

A proxy for the convexity enjoyed by long duration fixed securities, Bitcoin has loosely followed the expected performance profile, by outperforming in down markets, underperforming in up crypto markets. Bitcoin’s integrity, performing over time regardless of circumstance, owes in part to its increasing adoption as the collateral layer for crypto. Not too similar to the role treasuries play in the global fiat funding markets.

However, Bitcoin’s growth profile could periodically disrupt the type of persistent convexity exhibited by the more mature US fixed income market. A price to pay for growth.

The divergent volatility relationship between the $38 trillion dollar S&P 500 and the $750 billion dollar Bitcoin is exhibited in the below chart, where it has only grown since first sharing in last week’s publication.

Source: 3iQ Research. Data sourced from Bloomberg as at April 28, 2022. You cannot invest directly into an index.


Extending the volatility discussion to interest rates and Bitcoin, we see that the current disruption in traditional assets may have been attended by a historic spike in interest rate volatility as measured by the MOVE index.

Today’s level measures in the 99th percentile as rate hikes and growth uncertainty could cause economists and investors to question the utility of existing models and strategies as such data suggests regime change.

The graph below demonstrates the relatively steady price performance of Bitcoin in the face of elevated rate volatility. Note that Bitcoin’s breakout from $5k to $60k USD occurred in the year following the outbreak of COVID-19. In the early innings of a growing interest rate disruption, we suggest investors could monitor some of the coin and market metrics provided below.

Source: 3iQ Research. Data sourced from Bloomberg as at April 28, 2022. MOVE index is a representation of implied volatilities of interest rate options across the US yield curve. You cannot invest directly into an index.


Despite a lower volatility profile, the correlation between Bitcoin and the S&P 500 is at the 94th percentile based on a 5-year lookback. The takeaway being that although crypto adoption may increase after turbulence in broader markets, the path to that outperformance could be choppy.

Source: 3iQ Research. Data sourced from Bloomberg as at April 28, 2022. You cannot invest directly into an index.


Source: 3iQ Research. Data sourced from Bloomberg as at April 28, 2022.

The elevated correlation of 52% (94th percentile, based on a 5y lookback) is exceeded only by notable periods of volatility such as:

– Q4 2018, when equity markets embarked on a 25% decline after Powell hinted at rates hikes

– April 2020 on the reality of COVID-19 setting in

– More recently how inflation & Fed policy reversal impacts growth and risk appetite



Taking a Closer Look at Alternatives

The decline in Bitcoin dominance is a feature, not a bug in crypto ecosystem code. With Bitcoin as a store of value against the inflationary impact of expanding global fiat systems, it has moved to be the collateral layer for a growing number of protocols and coins.

The below table is a sampling of coins and metrics from dozens that are recognized across the industry to shift the focus from recognized problems in fiat to the actionable opportunities in digital assets.

Source: 3iQ Research. Data sourced from Messari as of April 28, 2022. Figures expressed in USD unless otherwise stated. Past performance is not indicative of future results. 


Source: 3iQ Research. Data sourced from Messari as of April 28, 2022. Figures expressed in USD unless otherwise stated. Past performance is not indicative of future results. 


The below table denominates Bitcoin in terms of currencies, assets (Gold, Oil) and the smart contract protocol, Ethereum:

Source: 3iQ Research. Data sourced from Bloomberg as of April 28, 2022. Past performance is not indicative of future results. 


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:

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 April 28, 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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Certain statements in this document are forward-looking statements, including those identified by the expressions “anticipate”, “believe”, “plan”, “estimate”, “expect”, “intend”, “target”, “seek”, “will” and similar expressions to the extent they relate to the Fund and the Manager. Forward-looking statements are not historical facts but reflect the current expectations of the Fund and the Manager regarding future results or events. Such forward-looking statements reflect the Fund’s and the Manager’s current beliefs and are based on information currently available to them. Forward-looking statements are made with assumptions and involve significant risks and uncertainties. Although the forward-looking statements contained in this document are based upon assumptions that the Fund and the Manager believe to be reasonable, none of the Fund or the Manager can assure investors that actual results will be consistent with these forward-looking statements. As a result, readers are cautioned not to place undue reliance on these statements as a number of factors could cause actual results or events to differ materially from current expectation.  Some of these risks, uncertainties and other factors are described in the offering documents for the relevant Funds under the heading “Risk Factors”. These factors – many of which are beyond the Manager’s control and the effects of which can be difficult to predict – include: no assurance in achieving investment objectives, loss of investment, volatility and fluctuation in value of cryptoassets, concentration risk, reliance on the Manager, no ownership interest in the cryptoasset portfolio, changes in legislation, conflicts of interest, valuation, significant redemptions, limited liquidity in the units, limited operating history, exchange rate risk, liquidity constraints on cryptoasset markets, tax risk, risks associated with blockchain networks and forks, risks associated with digital asset platforms and cybersecurity. The forward-looking statements contained herein were prepared for the purpose of providing prospective investors with general educational background information about cryptoassets and the Funds and may not be appropriate for other purposes. None of the Fund or the Manager assumes any obligation to update or revise them to reflect new events or circumstances, except as required by law.

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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 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.