Originally Published April 10, 2020 [GDR Archive]

Summary. We review the macroeconomic backdrop as the COVID-19 crash unfolded through the lens of Bitcoin, dive into the events of Black Thursday 2020, contextualize the decline in asset prices, peer into Galaxy’s proprietary OTC trading data, and discuss the macro implications of trillions of dollars of global stimulus on risky assets. We find that:

  • Widespread risk-off behavior began in mid-February across traditional assets, and digital assets were not immune from the broad selling. …

Originally Published April 6, 2020 [GDR Archive]


  • We believe that all elements of the Bitcoin halving that the market is able to reason about must be priced-in but conclude there are elements of the Bitcoin network that are uniquely opaque, and which can be sources of considerable uncertainty in making future predictions about the network. Mining is chief among those sources of uncertainty because little is publicly known about the global distribution of cost bases among miners (what it costs each to produce one BTC).
  • The Nash equilibrium for miners is to add hashpower in price-neutral or bullish environments…

Summary. In this research insight, we deconstruct bitcoin’s performance during periods of macroeconomic uncertainty over the past decade, providing an analysis of historical correlations, market conditions, return clustering, and macro events.We find that:

  • Historically bitcoin’s correlation among established macro assets typically hovers within ±0.25 around a 0 correlation; however, we see that bitcoin’s correlations reach their global maxima and minima, that is their most correlated, in Q3 2019, potentially suggesting that bitcoin is becoming part of investors’ reaction functions. …

Summary. In this research insight, we contextualize bitcoin’s drawdowns, provide an analysis of bitcoin’s historical drawdowns with forward returns, and discuss implications for timing market cycles. We find that:

  • 68% of all days are spent in global maxima drawdowns ranging between -40% and -85%
  • Bitcoin makes new highs on 5.5% of days; drawdowns <5% tend to revert and make new all-time highs, suggesting persistence of market trend after a new peak is reached
  • Drawdowns spend 40–50% of their time increasing (falling from its previous peak) and 50–60% of their time declining (rising toward next peak after bottoming out)
  • A scatterplot…

Summary. Bitcoin’s unspent transaction outputs (UTXO) accounting system and public timestamping of transactions offers data researchers numerous opportunities to analyze the economic dynamics, linkages, and market implications of on-chain movements. UTXO age data has significance for stored value measures, economic velocity, and ownership behavior, and has already been a component of many macro and micro analyses, including realized capitalization measures and qualitative judgments regarding their impact on price. Our motivation for this research is to take a quantitative approach to understand how changes in UTXO age distributions may affect bitcoin’s price. …

Abstract. Current monetary standards have been relatively monopolistic and have caused significant wealth erosion of its holders through inflationary policies. However, the crypto asset innovations of the past decade have enabled a free market determination of the best forms of money for its users. A competitive market for money would lead to a free market determination of monetary standards and place natural disciplines on issuers to maintain the soundness of their money.

The Market for Monetary Standards

Similar to any good, service, or form of labor, monetary standards exist in a market, a process by which the price of money for goods and services is…

Summary. Understanding bit setting, clearing, and pointer arithmetic comes in handy when examining p2p protocols and the low-level code involved in consensus protocols. What’s also important is knowing why certain algorithms are chosen over others, especially when examining the motivation behind every piece of code that exists in a protocol. Systems that have thousands of participants in lock-step consensus should be constructed in a manner that encourages consistency and efficiency, but also, should be readable to the engineers working on the code. …

Abstract. While the usage of Modern Portfolio Theory (MPT) for portfolio return and volatility optimization in traditional assets has been well studied, the extension of MPT to crypto assets has not been well examined. In On Sound Money, we discussed a macro case for Bitcoin, citing the diversification it can provide to some of the systemic risk present in modern portfolios. We extend the discussion and lay out a portfolio optimization case for adding an allocation to Bitcoin, highlighting its uncorrelated nature and ability to improve a portfolio’s risk-adjusted returns despite its relatively high volatility.

Brief introduction to modern portfolio theory

MPT is a theory on…

Summary. The objective of this paper is to describe the purpose and necessity for native crypto assets to enable decentralization. We highlight key problems solved by non-centralized networks and crypto assets, including information sharing, data protection, developer alignment, and incentive structures in distributed systems.


Historical innovations in how humans have created, recorded, and shared information have led to the most profound step-function changes in civilizations and societies. Information encoding evolved from cave art to symbols, the written and spoken word, and alphabets. This information encoding and transfer evolved from stories told over generations to writing, printing presses, telegraphs, and telephones…

Summary: On May 6th, 2019, prominent Bitcoin Core developer Pieter Wiulle sent an email to the bitcoin-dev mailing list titled “Taproot proposal”. The email outlines the goal of three new BIPs (Bitcoin Improvement Proposals) that are vying for addition to the Bitcoin Core code. Two of the proposed BIPs are related to Taproot, a privacy-enhancing and feature-rich upgrade for the Bitcoin scripting language; the last BIP describes the Schnorr signature scheme. Together, Taproot and Schnorr signatures improve both scalability and privacy, and these changes can be implemented in a soft-fork update without forcing broad coordination to upgrade.


Soft-forks vs Hard-forks

It’s important to…

Galaxy Digital Research

A best-in-class investment research engine, designed to provide investment insights and thematic views across Galaxy Digital and its partners.

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store