Crypto Report from Kraken

2. Introduction
After several months of headwinds for the crypto space, the historical collapse of crypto
exchange FTX in early November added fuel to the bear market’s fire.
FTX’s crisis began on November 2 when news broke that the firm’s trading subsidiary heavily
invested in FTX’s illiquid, native token FTT.1
Binance CEO Changpeng "CZ" Zhao announced
several days later that he would offload Binance’s FTT holdings to avoid falling victim to
another Terra-Luna death spiral type of situation, which spurred mayhem across the crypto
space. Binance announced a non-binding letter of intent to buy FTX a couple of days later,
which eased the industry’s panic. However, the deal fell through the next day after Binance
conducted due diligence on FTX’s financials. FTX ultimately filed for Chapter 11 bankruptcy in
the US on November 11. Though FTX's collapse has negatively impacted many actors in the
industry, the true extent of the collateral damage from this debacle is only beginning to
surface.
Bitcoin (BTC) was uptrending through November 5 but flipped to the downside amid the FTX
chaos. Between November 5 and November 13, as the FTX story unfolded, BTC fell -23.4%
from $21,300 to $16,310. With this drop, BTC broke through its $19,000 support level with
conviction. Ethereum, which transitioned from proof-of-work (PoW) to proof-of-stake (PoS)
two months prior via The Merge, saw the price of its native coin ether (ETH) drop by a greater
-25% from $1,627 to $1,220 during the same period.
The downtrending crypto market coincided with a bleak macroeconomic environment, which
continued to weigh on stocks, crypto, and more.
Box 1. Macro Snapshot
➤ In year-over-year (YoY) terms, U.S. CPI rose 7.7% in October (down from 8.2% YoY in September),
U.K. CPI increased 11.1% in October (up from 10.1% YoY in September), and eurozone CPI jumped
10.7% in October (up from 9.9% YoY in September).2,3,4,5,6
➤ The U.S. Federal Reserve (Fed) approved a 75 basis-point interest rate hike for the fourth straight
month in October, taking the benchmark overnight borrowing rate up to a range of 3.75% - 4.00%.7
➤ The rate hikes in July, August, September, and October represented the most severe consecutive
action since the Fed began using the overnight funds rate as the principal tool of monetary policy in
the early 1990s.
➤ The U.S. Dollar Index, which measures the greenback against a basket of other currencies, is up
nearly +11.2% so far this year. The U.S. dollar’s strength is due to the Fed’s hawkish monetary
policy stance in response to rising U.S. inflation and its potential as a safe haven, given the
economic troubles looming in Europe and Asia.
➤ The Russia-Ukraine war adds to global uncertainty, given its impact on commodity markets,
particularly food and energy costs.
Between the nebulous crypto market and the hectic macroeconomic environment, it is
difficult to anticipate what lies ahead. However, on-chain data can help filter out the signal
Oct 15-Nov 13 2022 Crypto On-Chain Digest | kraken.com/suscribe/intelligence 2

3. from the noise by providing evidence of trends in network usage and demand. To surface
recent network performance, the Kraken Intelligence team analyzed several core on-chain
metrics across select cryptoassets.
On-chain fundamentals
Core on-chain metrics for measuring adoption and broader network supply and demand
dynamics include crypto market share, transaction fees, daily settlement value, active
addresses, transaction count, and circulating supply growth. These measures allow market
participants to analyze any blockchain network’s supply and demand dynamics.
Note that the on-chain data coverage in this report spans October 15, 2022, and November
13, 2022. Moreover, SOL and AVAX data is missing in some sections due to the lack of
available data.
Crypto Market Share
Looking at the share of
total crypto market
capitalization (market
share) of selected
cryptoassets helps
describe which assets are
experiencing rising or
falling demand and, more
generally, whether
demand is rotating
between BTC and
altcoins.
The total crypto market
cap has taken a rough hit
this year, dropping by more than $1.5 trillion year-to-date (YTD) (-63%). The last 30 days was
no exception as the crypto
market dropped by $82 billion
(-9%).
While BTC demand
outperformed altcoins during the
bear cycles through July, this
trend shifted in August as BTC’s
market share started its
downtrend. Not only has the
market continued to bleed out
over the last 30 days, but BTC’s
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4. downtrend has accelerated. Specifically, BTC market share ticked down by -2.4 percentage
points (pp) in the last 30 days and flipped ETH as the worst-performing cryptoasset YTD at
-2.3 pp. Prior to this sharp drop, following the FTX debacle, BTC saw a YTD increase in market
share. DOGE, this year’s best-performer (+0.4 pp), saw its share surpass ADA this month.
Total Daily Transaction Fees
Transaction fees represent the cost crypto users are willing to pay to include a transaction on
a protocol’s ledger. Note that Figure 2 does not include SOL, ALGO, and ADA because of their
static fee rate, which does not respond to varying levels of network congestion.
Because transaction fees
are a proxy for network
demand, we can infer that
on-chain demand trended
upward in the last 30 days,
especially in the case of
BTC and DOGE. Unlike
market share, DOGE
underperformed relative
to BTC and ETH on a YTD
basis (-59%), but rose the
most in the last 30 days
(+131%). DOGE’s monthly
increase in both market
share and daily transaction
fees is likely due to Tesla
Cofounder Elon Musk’s acquisition of Twitter and endorsements of DOGE.8,9
DOGE rallied on
rumors prior to the acquisition and on the
confirmation of the news. Though ETH was the
best-performing cryptoasset of the cohort
YTD, it was the worst-performer over the last
30 days with a minor +0.03% rise. Even BTC,
the market’s worst performer, outpaced ETH
fees with a +21% uptick.
Total Daily On-Chain Volume
Daily network transaction volume, also known as on-chain volume, is another strong
reference for network demand as it measures the aggregated value of funds market
participants are transferring. Precisely, the metric captures the USD equivalent value of a
cryptoasset’s on-chain transfer activity during that day.
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5. ADA on-chain volume
remains the best YTD
performer of the cohort with
a +107% increase. Though
ADA also saw +41% rise in the
last 30 days, this figure pales
in comparison to the +285%
and +107% monthly increases
in DOGE and ETH,
respectively. On-chain volume
is yet another metric
suggesting that network
demand for ETH and DOGE
increased. ETH’s rise in
volume following the
cryptoasset’s rebound after
the sell-off after The Merge.
Considering that ALGO has seen falling demand throughout the year, it’s perhaps unsurprising
that ALGO remained the worst
performer both YTD (-76%) and in
the last 30 days (-30%). BTC’s falling
network demand also showed in
on-chain volume as the cryptoasset
saw a -1% monthly decline and
followed behind ALGO as the
second-worst performer YTD (-65%).
Network Activity
Total Daily Active Addresses
Analyzing the number of
active addresses per day can
help identify network demand
from existing and new market
participants. This report
defines daily active addresses
as the total unique addresses
active in a network, either as a
sender or receiver, that day.
Individual addresses are not
double-counted if previously
Oct 15-Nov 13 2022 Crypto On-Chain Digest | kraken.com/suscribe/intelligence 5

6. active. A rising number of active addresses may indicate increasing demand among market
participants and vice-versa.
Based on our analysis, most of the
cryptoassets in the group in Table 4 saw
daily active addresses fall YTD except for
BTC, which flipped into positive territory
after seeing a YTD decrease as of last
month. Furthermore, BTC, DOGE and
ADA saw increases between +11% and
+29% in the last 30 days. ALGO saw the largest drop in active addresses YTD and in the last
30 days, ticking down -65% in 2022 and -24% in the last month.
Total Daily Transactions
A blockchain’s daily transaction count is another indicator of on-chain demand as it highlights
which protocols are experiencing higher levels of relative activity.
DOGE transactions led the
charge YTD (+23%) despite
seeing the biggest decrease in
the cohort over the last 30
days (-9%). Notably, the rest
of the cryptoassets in the
group saw monthly upticks
between +4% and +19%.
While BTC has struggled
across several metrics, it saw
the second-largest 30D
increase in the group at
+21%. Unlike the rest of the
on-chain metrics covered in
this report, ALGO saw the biggest jump over the last month (+19%). Still, ALGO remained this
year’s worst performer in terms of
total daily transactions, followed by
ADA (-18%) and ETH (-5%).
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7. Stablecoin Supply
Stablecoins are cryptoassets programmed for price stability, typically through pegging the
stablecoin to a commodity or currency or regulating its supply through an algorithm. A
stablecoin’s supply growth provides a look at on-chain liquidity. The metric tracks the sum of
all issued stablecoins at the end of that day.
USDT has seen the
most redemptions out
of all centralized
issuers in 2022, with a
decrease of ~10.3B in
total supply (on ETH,
OMNI and TRX). On
the other hand, GUSD
saw the largest
percentage increase,
followed by BUSD and
USDC, while the rest of
the stablecoins have
seen YTD declines.
GUSD's supply flew
past its recent all-time
high of roughly $403 million in late October when it signed an agreement with MakerDAO to
offer the protocol 1.25% rewards on staked GUSD. As of Nov. 13, MakerDAO had roughly
$440 million worth of GUSD on its platform, a more than 10x increase from October.
MakerDAO's GUSD supply accounts for roughly 56% of the stablecoin's supply.10
Following news that Binance consolidated holdings of USDC, USDP, and TUSD on its
platforms into its native stablecoin, Binance’s BUSD rose the most in nominal terms,
increasing by roughly $9 billion in 2022 and $2.1 billion in the last 30 days.11
Circle’s USDC
followed with a $2.1 billion YTD
rise and a roughly $30,000
monthly loss. Furthermore,
USDT continues to give up
market share to competing
stablecoins.
Oct 15-Nov 13 2022 Crypto On-Chain Digest | kraken.com/suscribe/intelligence 7

8. Conclusion & Outlook
The multi-month bear market picked up the pace with the collapse of FTX in early November.
Though the FTX crisis has already negatively affected many areas of the crypto economy, the
collateral aftereffects continue to surface.
While BTC’s market share fell the most among the group analyzed, the leading cryptoasset
saw network demand increase over the last month. Namely, BTC saw rising transaction fees,
active addresses, and transaction count. ETH and DOGE took the spotlight over the last 30
days, recording the largest monthly increases in market share and witnessing rising network
demand across several on-chain metrics. Thanks to Elon Musk’s latest DOGE endorsements
and acquisition of Twitter, the meme coin saw notable increases in transaction fees, volume,
market share, transaction count, and active addresses. ETH made a comeback after seeing a
downtrend following The Merge on September 15. Specifically, ETH market share
outperformed the cohort in the last month, but the cryptoasset also saw positive growth
across volume, fees, and transaction count. Still, ETH’s YTD growth remained unimpressive
across the board.
In the stablecoin world, USDT continued to give up market share to competing stablecoins.
GUSD supply surpassed recent all-time highs of roughly $403 million in late October when it
signed an agreement to boost GUSD volume on MakerDAO. However, in nominal terms,
GUSD’s growth paled in comparison to BUSD’s $2.1 billion rise between October 15 and
November 13. BUSD’s supply increase followed news that Binance consolidated holdings of
USDC, USDP, and TUSD on its platforms into BUSD.
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9. Endnotes
1. https://www.coindesk.com/markets/2022/11/12/the-epic-collapse-of-sam-bankman-fried
s-ftx-exchange-a-crypto-markets-timeline/
2. https://www.bls.gov/news.release/pdf/cpi.pdf
3. https://www.bls.gov/news.release/archives/cpi_10132022.htm
4. https://www.ons.gov.uk/economy/inflationandpriceindices/bulletins/consumerpriceinflati
on/october2022
5. https://www.ons.gov.uk/economy/inflationandpriceindices/bulletins/consumerpriceinflati
on/september2022
6. https://www.marketwatch.com/story/eurozone-inflation-hit-double-digits-in-october-271
667210511#:~:text=The%20consumer%20price%20index%E2%80%93a,statistics%20ag
ency%20Eurostat%20showed%20Monday.
7. https://www.cnbc.com/2022/11/02/fed-hikes-by-another-three-quarters-of-a-point-taki
ng-rates-to-the-highest-level-since-january-2008.html
8. https://www.nytimes.com/2022/10/27/technology/elon-musk-twitter-deal-complete.html
9. https://www.coindesk.com/tech/2022/11/01/elon-musk-tweet-sparks-flurry-of-twitter-t
hemed-dogecoin-tokens/
10. https://www.theblock.co/post/173757/gemini-wants-to-boost-gusd-stablecoin-volume-in
-makerdao
11. https://news.bitcoin.com/usdcs-market-cap-sheds-close-to-4-billion-in-less-than-20-days-
binances-busd-climbs-3/
Oct 15-Nov 13 2022 Crypto On-Chain Digest | kraken.com/suscribe/intelligence 9

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Oct 15-Nov 13 2022 Crypto On-Chain Digest | kraken.com/suscribe/intelligence 10