  Weekly insights, news and analysis for the professional investor By Noelle Acheson, Managing Director of Research April 25, 2021 Sponsored by  Prices as of 04/25/21 @ 11 a.m. UTC If you were forwarded this newsletter and would like to receive it, sign up here.
Hi everyone!
On Earth Day this week, we published a new report that looks at bitcoin's relationship with energy.
The higher the bitcoin price goes, and the more institutional and retail interest in cryptocurrencies, the louder the criticism of bitcoin's energy footprint. This is not a bad thing – these are conversations that we need to have, and bitcoin mining has issues to address. But most of the criticism is based on incorrect information and a lack of understanding of industry incentives.
In this report, my colleague George Kaloudis unpacked some of the myths and acknowledged some of the realities. He also looked ahead to bitcoin's evolving energy mix, how it improves renewables distribution, as well as the role policy can play in furthering bitcoin's relationship with the energy industry going forward.
It's an important topic that anyone truly interested in bitcoin should embrace, especially given the intensifying global dialogue around climate legislation and energy source development. We're excited to be part of the discussion.
On Monday, Christine Kim and I host the third in our series of webinars based on topics featured in our Quarterly Review. This time, we'll be focusing on the development so far this year in decentralized finance (DeFi) and NFTs: the strong growth, industry leaders and evolving metrics that highlight the fascinating innovation that seems to be just getting started. Join us on Monday, April 26 at 11:30 a.m. ET.
THE BRIEFING this week is brought to you by my colleague Galen Moore, who looks at bitcoin's volatility trend.
With that, read on …
– Noelle
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THE BRIEFING Bitcoin Volatility Cycles Bitcoin's volatility has been moving in a downward direction, and the price of the currency seems fixed in a band between $50,000 and $60,000. Is the current market for bitcoin a temporary lull between lurches? Or is it a long-term trend toward lower volatility that could change the way bitcoin is perceived?  The answer is, it's too early to tell. The chart above shows bitcoin's volatility has been on a steady decline. (Ether and the S&P 500 are included as references.) However, it's still in an approximate mid-range historically.
As of Sunday morning, this past week's correction hadn't changed that. Bitcoin's price remains roughly in a band between $50,000 and $60,000, and with this week's dip marking the second time it's rocked between the minimum and maximum of that range, its volatility is still roughly in the middle.
Using the table below as a guide, bitcoin's stretch of middling volatility is likely to continue. At 43 days, it is still rather young, as these things go.  The data in the table is based on dividing bitcoin volatility into three ranges: high, mid and low. High is volatility at or above 100%. Mid is volatility at or above 50%, and below 100%. Low is volatility below 50%. Volatility is the 30-day standard deviation of daily log returns, annualized at 365 days of trading.
These ranges aren't entirely arbitrary. Since October 2014, bitcoin volatility's top tercile has been above 79% and its middle third has started at 51%.
Looking at bitcoin volatility in this way shows a pattern in the duration of volatility cycles. In the first two years on the table, bitcoin volatility cycles tended to be shorter, less than 50 days in duration. They lengthened in 2016 to 2018, then returned to shorter cycles in 2019.
As of Saturday, bitcoin's volatility was just over 50%, putting it at the low end of our mid-range for volatility. It's been in the mid-range for 43 days, following a period (32 days) of high volatility that ended March 13. In the current environment, it hasn't yet reached the average duration of a volatility cycle – at least not as we're defining them here.
If recent norms persist, bitcoin's volatility may be disappointing both to traders antsy for a break and technologists hoping for long-term lower volatility that could make bitcoin more "useful" as a currency. It may feel like bitcoin has been in stasis for a long time, but historically speaking this could be a long haul.
– Galen Moore
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CHAIN LINKS This week saw two notable appointments that underline the "institutionalization" of crypto markets:
We continue to see investment pour into crypto market infrastructure from traditional investment firms. This past week:
Coinbase will list the stablecoin tether (USDT) on its professional trading platform, allowing investors to deposit immediately and to begin trading next week. TAKEAWAY: This move is a big deal, as it effectively legitimizes tether, which had been struggling with reputation issues related to the stablecoin's backing and the internal handling of funds. Earlier this year, the NYAG settled its enquiry into the stablecoin's issuing company and sister exchange, mandating periodic attestations starting in May 2021. Tether acts as a significant support to market liquidity, and concerns that regulatory or confidence problems could deal a blow to overall market sentiment have been weighing on the market for some time. That Coinbase's first new token listing after going public should be a stablecoin previously mired in controversy sends a strong signal of support to the market's preference for a competitor to the USDC stablecoin, which is managed by a Circle-Coinbase partnership.
New York-based Signature Bank added $3.77 billion in non-interest bearing deposits in Q1, which shows an acceleration of deposit growth – in Q4 the growth was $2.5 billion. TAKEAWAY: Figures like these will signal to other banks that the crypto industry is currently a source of strong balance sheet growth and could encourage more of them to offer service to crypto companies. Over the years, crypto companies have struggled to get basic banking services – a more robust banking service offering for crypto companies, perhaps even competition for their business, will bring new operating efficiencies. That in turn will make these companies even more attractive to investors, which will further support innovation.
Cryptocurrency-focused financial services firm Galaxy Digital is in advanced discussions to buy crypto custodian BitGo, according to sources. TAKEAWAY: Yet another gripping scoop from my colleague Ian Allison. Whether it goes ahead or not, this represents powerful positioning in the crypto prime broker race.
San Francisco-based trading tech firm X-Margin and cryptocurrency custody provider Fireblocks are developing a credit management system that gives lenders insight into borrower positions across platforms while preserving privacy. TAKEAWAY: This is intriguing in that it brings a technology angle to the prime brokerage business, with the potential effect of reducing lending risk and collateral requirements, which in turn should free up liquidity.
A bitcoin ETF managed by 3iQ and CoinShares is now trading on the Toronto Stock Exchange under the symbols BTCQ (CAD) and BTCQ.U (USD). TAKEAWAY: For those keeping score, Canada now has four bitcoin ETFs and four ether ETFs. The U.S. still has none.
Speaking of 3iQ, the company's CEO told Bloomberg that it is aiming to raise over $200 million from the dual listing of its 3iQ Coinshares bitcoin exchange-traded fund in Dubai. TAKEAWAY: The potential is indeed high, since it will be the first cryptocurrency fund to go public in the Middle East. But for context, $200 million is almost 20% of bitcoin's total market cap, so that's … quite a lot.
Switzerland-based investment product provider 21Shares is launching ETPs for the native cryptocurrencies of Stellar (ticker: AXLM) and Cardano (ticker: AADA) on the Swiss SIX Exchange. TAKEAWAY: It's curious that Europe has such a wide range of crypto-based assets listed on exchanges that investors of all types can access through their brokers, while the U.S. has none. (Unless you count MicroStrategy, but that's a different story.)
Bitcoin services firm NYDIG has bought commercial lender Arctos Capital, which provides financing solutions to bitcoin miners and other crypto firms. TAKEAWAY: It is fascinating to see the growing institutional interest in the bitcoin mining industry, which points not only to greater sophistication in mining financing and operations, but also to considerable growth ahead in North American mining operations.
A message from CoinDesk  CoinDesk's Quarterly Review Webinar Series
The suits are here to stay, but retail isn't going away. While Q1 saw the emergence of retail investors as a market driver, crypto caught explosive interest through NFTs from investors, celebrities and the general public.
Every Monday at 11:30 a.m. ET, crypto analysts Noelle Acheson and Christine Kim will discuss the performance and milestones of bitcoin and ether compared to macro and other crypto assets, along with important developments in the emerging DeFi and NFT sectors. Each episode in this four-part series will reference key findings from the latest CoinDesk Quarterly Review report and a live Q&A.
Sign up for CoinDesk's Quarterly Review Webinar Series, every Monday from April 12 - May 3.
Podcast episodes worth listening to: 
A message from Coindesk  CoinDesk Research: Does Bitcoin Have an Energy Problem?
Is Bitcoin bad for the environment? This CoinDesk Research report looks at the data behind the most common critiques and shows that, while Bitcoin uses a lot of energy, the mix is evolving toward renewables. Bitcoin also incentivizes investment in clean energy sources, can convert pollution into value, and redistributes wasted power production. Download the free report.
Research Hub: New + Noteworthy 
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