May 2022 Takeaways

May 2022 led another correction in crypto assets overall. BTC fell -16% over the course of May, to a 10-month low. May 2022
volatility (79%) was on the higher end of historical observations, and turned out to be a more volatile month than April 2022
(49%) for BTC. Historically speaking, May is generally a positive month for BTC performance with a historical median return
of +10%.

Ethereum posted a loss of -29% in May 2022. Annualized volatility for ETH (100%) was higher than that of BTC (79%), and
ETH’s volatility during May peaked to a 7-month high.

All sectors saw negative returns over the month with losses all exceeding -17%. Layer-1, Metaverse, and Meme Coin sectors
led the month with the biggest losses with -43%, -42%, and -39% returns, respectively. Bitcoin and Privacy coins performed
the best on a relative basis, with -17% and -19% returns, respectively.

DeFi as a whole saw major losses, ranging from -3% to -53% across the sector’s top assets. YFI took the biggest hit with a
-53% drop in value.

NFT markets on OpenSea slowed down in May as daily users and daily transactions were relatively flat with -7% and +1.1%
changes, respectively. NFT volume saw a large decrease with daily volume dropping over -87%.

BTC remained positively correlated with both the Nasdaq (0.95) and the S&P500 (0.94) equity indices during the month of
May. Similarly, BTC’s correlation with U.S. Treasuries (0.50) and gold (0.72) grew month-over-month. This observation signals
a broader trend of correlations between all asset classes rising amidst significant macroeconomic uncertainty.

Whale activity for both BTC and ETH was relatively quiet over the month. Overall, Bitcoin saw a slight decrease in the
number of whales and BTC held by whales while Ethereum saw a slight increase in the number of whales and ETH held by
whales.

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 Bitcoin (BTC) May 2022 Recap

• Following April’s lackluster month, BTC dropped even further in May to a 10-month low. Over the course of the month, BTC dropped
-16%, hitting a low of $28,646 on May 27th before rebounding and closing the month at $31,866.

• BTC’s annualized volatility spiked throughout the month, starting o at 49% and closing the month at 79% with a momentary dip on
May 27th to 74%.

• Bitcoin’s hash rate reached an all-time-high of 254 EH/s mid-month, but corrected to a low of 186 EH/s on May 24th. Bitcoin mining
di iculty dropped over -4.3% on May 26th, the largest drop since July 17, 2021 when di iculty dropped by -4.8%. Falling hash rate and
mining di iculty levels indicate a lower level of competition among crypto miners working to introduce new blocks.

sources: Kraken Intelligence, CoinGecko, blockchain.com

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Ethereum (ETH) May 2022 Recap

• ETH’s market activity during May 2022 closely mirrored that of BTC. ETH hit a 10-month low of $1,724 on May 27th, before rebounding and
ending the month at $1,944. ETH recorded a loss of -29%, larger than BTC’s -16% loss for the month.

• ETH’s annualized volatility started o the month at 59% and closed the month at 100%, a 7-month high.

• The long-awaited Ethereum 2.0 update, the “Merge,” is on track to go live in August 2022. The Merge is the next major step in Ethereum’s
migration to Ethereum 2.0 that will transition the network from proof-of-work to proof-of-stake. On May 30th, Ethereum Foundation
developer Tim Beiko announced that the Ethereum Foundation launched a new Beacon Chain for the Ropsten testnet. The launch is part of
a test run slated for June 8, 2022 that will serve as a beta environment for the Merge. Ropsten testnet simulates the environment of the
Ethereum mainnet but will not impact it. OpenEthereum, one of the most popular Ethereum clients, ended support for its software this
month in anticipation of the Merge.

sources: Kraken Intelligence, CoinGecko, Coindesk, Cointelegraph

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What Happened In Crypto?

Sector Breakdown
• All sectors posted negative performance in the month of May.

note: sector breakdown re ects changes in market capitalization, not necessarily asset prices; the metaverse sector only includes fungible assets and excludes NFTs.
Layer-1, Metaverse, and Meme Coin sectors led the month with
the biggest losses at -43%, -42%, and -39% returns, respectively.
Meanwhile, Bitcoin and Privacy coins performed the best on a
relative basis, returning -17% and -19%, respectively.

• When looking at 1Y performance, the Metaverse sector has

significantly outperformed the market YoY with a return of
+395%. This includes assets such as Decentraland (MANA),
Sandbox (SAND), Axie Infinity (AXS), Apecoin (APE), and STEPN
(GMT).

• BTC and ETH posted -17% and -31% returns in the past 30 days, BTC Dominance vs. BTCUSD
respectively. In terms of risk-adjusted returns (Sharpe ratio), BTC
outperformed ETH with a ratio of -4.2 versus -6.1.

• BTC dominance rose in May from 39% to 43%, which is in line

with historical BTC dominance during downtrends in the crypto
market.

sources: Kraken Intelligence, CoinGecko

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What Happened? - DeFi

DeFi Metrics - May 2022
• MakerDAO, Aave, and Curve ranked in the top 3 DeFi protocols by total
value locked (TVL) during May. Looking at the Market Cap-to-TVL ratio,
Curve, Lido Finance, and Balancer continued to remain the lowest
ranked. All of the protocols saw a fall in 30D revenue. Aave, Curve, and
MakerDAO had the greatest 30D revenue loss of -98%, -78%, and -50%,
respectively.

• May performance for the DeFi sector was broadly negative with all of
the top assets posting losses between -3% to -53%. YFI took the
biggest hit with a -53% drop in value.

Headwinds

• TerraUSD (UST) and its collateral asset LUNA collapsed during May.
On May 11th, the peg destabilized and the circulating supply of LUNA
DeFi Performance - May 2022

sources: Kraken Intelligence, CoinGecko, Token Terminal, CoinDesk, Cryptoslate

grew by over 22,000% while its total value declined by 99%. By May
12th, the value of LUNA fell to less than $0.10. Following the collapse,
the platform submitted a proposal to fork the network that will not
include UST. The proposal passed with 65.5% votes in support. The fork
went live on May 28.

Innovation & Developments

• Uniswap announced it processed $1T in lifetime trading volume to date.

S&P Global ratings division created a DeFi strategy group to build out a
decentralized market framework for investors. ErgoDex DeFi protocol is
preparing for a launch on Cardano.

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 What Happened? - NFTs & GameFi

OpenSea Statistics (7D Moving Avg.)
• In line with overall crypto market performance, activity in NFT markets
slowed down in May. Daily users and daily transactions were relatively
flat at -7% and +1.1% MoM, respectively. However, NFT volume, saw a
large decrease with daily volume dropping -87.1%.

Innovation & Developments

• Kraken announced a waitlist for its upcoming Kraken NFT

marketplace. Kraken NFT features zero gas fees for trading activity,
built-in tools to track rarity scores for NFTs, the ability to buy and list
NFTs for cash or crypto, access to NFTs across multiple blockchains,
industry-leading security, and Creator Earnings to reward artists and
innovators.

• The National Football League (NFL) partnered with Mythical Games to

launch its own play-to-earn game that will run on the Mythical Chain

sources: Kraken Intelligence, DappRadar, OpenSea, Coindesk, Decrypt

protocol. The launch will kick o with the sale of 32 franchise themed
May 2022 Top NFT Collections (ETH)
NFTs.

Capital Raises

• Dapper Labs launched a $725M fund that will back projects native to
the Flow ecosystem. Andreessen Horowitz launched a $600M fund
that will back metaverse gaming projects. Other capital raises this
month include BAYC ($285M), NCG Ventures ($100M), Zora ($50M),
N3TWORK Studios ($46M), Irreverent Labs ($40M), Co:Create ($25M),
Arianee ($21M), Branch ($12.5M), Highlight ($11M), Cometh ($10M),
Nyan Heroes ($7.5M), UnicornDAO ($4.5M), and Ready Games ($3M).

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Industry Highlights & News

• May 2: BAYC Team raises $285M with the debut of Otherside NFTs, the largest NFT mint in history on the Ethereum network.

• May 4: MicroStrategy reports a $140M impairment charge on its digital asset holdings in Q1 2022, reflecting the decline in value of its
bitcoin holdings.

• May 5: The US Federal Reserve raises the Federal Funds Rate by 0.5% and announces it will begin “quantitative tightening,” or reducing its
balance sheet by $47.5B per month for the next three months.

• May 10: Dapper Labs launches $725M fund to back projects in the Flow ecosystem.

• May 11: The US Labor Department announces that US inflation (CPI) slowed to 8.3% in April. However, core inflation, which excludes food
and energy categories, rose 0.6% month-over-month.

• May 11: Celsius pulls close to $500M out of Anchor Protocol, a lending and borrowing protocol on the Terra blockchain.

• May 12: TerraUSD (UST) collapses as LUNA falls under $0.10, falling -96% in price within a day.

• May 16: Terraform Labs founder Do Kwon proposes to fork the Terra blockchain without UST.

• May 18: Andreessen Horowitz (a16z) launches $600M inaugural fund, named GAMES FUND ONE, to invest in the metaverse gaming
industry.

sources: Kraken Intelligence, Coindesk, The Block, Decrypt, Cointelegraph

• May 25: Terra validators approve a fork to “Terra 2.0,” with the previous chain now termed “Terra Classic.” Andreessen Horowitz launches a
$4.5B fund that invests in crypto and Web 3 companies.

• May 26: ARK Investment Management will refile an application to launch a spot Bitcoin ETF after the rejection by the SEC of their ARK
21Shares Bitcoin ETF application in early April.

• May 27: JP Morgan successfully trialled the use of its own private blockchain for collateral settlements.

• May 28: Terra 2.0 launches, with LUNA airdrop to follow.

• May 30: The Ethereum Foundation announces the launch of a new Beacon Chain for the Ropsten testnet slated for June 8th. The Ropsten
testnet will serve as a “first dress rehersal” for the Merge.

• May 31: One River Asset Management’s application for a bitcoin spot ETF, One River Carbon Neutral Bitcoin Trust, was rejected by the US
Securities and Exchange Commission (SEC).

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BTC Correlations
• BTC remained positively correlated with both the Nasdaq (0.95) and the S&P500 (0.94) equity indices during the month of May. The
strength of this correlation reflects the tight relationship between BTC’s return profile with that of traditional tech equities.

• Correlations against these major equity markets increased from prior levels of 0.73 and 0.71 with the Nasdaq and the S&P500,
respectively, from the beginning of May.

• Turning to risk-o assets, BTC’s 90-day correlation with both U.S. Treasuries (0.50) and gold (0.72), which grew month-over-month. This
observation signals a broader trend of correlations between all asset classes rising amidst significant macroeconomic uncertainty.

BTC 90D Rolling Correlation - Risk-On Assets BTC 90D Rolling Correlation - Risk-O Assets

sources: Kraken Intelligence, CoinGecko, Yahoo Finance

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 History Says…
BTCUSD Monthly Returns
• Looking at monthly performance, BTC performed below historical
averages for the month of May with a -16% return. Historically, May is
generally a positive month for BTC performance with a historical
median return of +10%.

• During 2022, BTC has underperformed historical monthly returns

now for every month except for March.

• Historically, May typically underperforms April as measured by the

monthly median return. However, noting that May has the highest
variance of all the months of the year, it’s not completely unexpected
that May 2022 (-16%) slightly outperformed April 2022 (-17%).

• Turning to annualized volatility, May 2022 volatility (79%) was on the

higher end of historical observations. May 2022 volatility came in
above the month’s historical median volatility (68%) and just below BTCUSD Monthly Volatility
the upper quartile (91%).

• May 2022 (79%) proved to be much more volatile than April 2022
(48%). May volatility historically tends to be lower in variance
compared to other months.

sources: Kraken Intelligence, CoinGecko

Reading Box Plots:
Lower bound of box — lower quartile (25th percentile)
Center line of box — median (50th percentile)
Upper bound of box — upper quartile (75th percentile)
Inner Quartile Range (IQR) — di erence between the upper and lower quartiles
Whiskers — extend out beyond the box to last point within 1.5 times the IQR. Points
beyond whiskers are generally considered outliers.

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What The Whales Are Doing

• To gauge sentiment among whales over the course of May, we look to the amount of BTC and ETH held in whale wallets. Note that we
define a “whale” as a wallet with more than ₿1,000 or Ξ10,000. 

• It was a relatively quiet month for BTC whale activity. The amount of BTC held by whales decreased slightly from ₿8.07M to ₿8.04M MoM,
and the number of BTC whales decreased from 2,280 to 2,212.

• On Ethereum, changes in whale activity notably spiked on May 10th, when the amount of ETH held by whales hit a high of Ξ81.8M before
falling sharply to end the month at Ξ81.6M. Similarly, the number of ETH whales started o at 1,302 and spiked mid-month, but closed at
1,308, remaining largely unchanged from the beginning of the month.

BTC & ETH in Whale Addresses Number of BTC & ETH Whales

sources: Kraken Intelligence,, CoinGecko

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