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Crypto for Advisors: The Hidden Mechanics Behind This Crypto Rally
In today’s Crypto for Advisors newsletter, Alex Tapscott, explains the flywheel effect, and it’s impact on the crypto markets.
Then, Natalie Hirsch from Polymath answers questions about questions about investing in public crypto companies in Ask an Expert.
Thank you to our sponsor of this week’s newsletter, Grayscale. For financial advisors: register for the upcoming Minneapolis event on September 18th.
The Crypto Flywheel Keeps Spinning!
These days it’s become fashionable to describe how crypto is driving a «flywheel effect» in the market, and that is a reason to be bullish. But what is the flywheel effect, exactly?
The term was popularized by Jim Collins in his 2001 book «From Good to Great.» Collins asked us to imagine someone pushing a giant wheel. With the first push, the wheel budges only slightly, but after hundreds of pushes, it begins to gain momentum — every new push becomes easier and accelerates the wheel further.
Nobody can say for sure which push helped it to achieve that momentum, because it is the product of all the small pushes together. The lesson for business leaders is this: Do the small stuff right consistently and you’ll be rewarded in the long run.
Today, the term has evolved into something else. Rather than describing only the impact of sound operational decision-making, flywheel effects now describe how positive feedback loops impact systems, like marketplaces and whole industries.
Here are some of the ways that dynamic is at play in crypto and public markets:
Because of the demand from investors for access to crypto assets, digital asset treasury companies (aka DATs) like MicroStrategy can issue shares at a premium to their underlying net asset value, buy bitcoin and other assets, and grow NAV per share. This can drive the underlying asset higher and induce more people to buy shares of their company.
Flywheel effects are also seen in ETF markets. The launch of ether-focused digital asset treasury companies helped accelerate flows into ETFs too. Ether ETFs have seen inflows of more than $6 billion since launching. ETH gained as much as 50 percent in July and closed the month at around $3,800, and the Ether-to-bitcoin price ratio broke above its 200-day moving average.
Stablecoin issuers produce flywheel effects too. For example, Tether, issuer of the USDT coin, reinvests its enormous profits ($4.9 billion last quarter) in bitcoin, pushing the price higher, increasing aggregate interest in bitcoin and creating demand for stablecoins like USDT to buy them.
Another flywheel effect can be seen in the IPO market. Circle’s (CRCL) successful IPO was followed with several companies filing to go public, such as Grayscale, BitGo, Bullish and Gemini. A wave of successful IPOs grows the total investable universe of companies, broadening its appeal and accelerating its inclusion in traditional portfolios and indexes.
A flywheel is, by its nature, something that creates a positive feedback loop. What happens when things reverse?
Let’s start with those digital asset treasury companies. Some have taken on leverage. If their shares fall or the underlying asset declines, they will need to sell assets to meet these liabilities. That will put downward pressure on their stock and the underlying asset, like bitcoin.
Right now, IPOs are acting as a tailwind, but if the cycle lasts long enough, all sorts of businesses will try to tap the markets. If they fail to meet expectations, investors may write off the whole sector for a time, as they did during the dot-com crash. That will have a chilling effect on everything.
Currently, ETH treasury companies are buying ETH, driving the price higher. However, as the price rises, ETH holders are queuing up to sell their staked ETH. The higher the price goes, the more that may come free-trading. That’s putting the brake on the flywheel.
In the end, the good times can’t last forever. Markets are cyclical, and this one will come to an end. But right now, the (fly)wheels are in motion, and everyone from regulators to public companies to crypto founders and institutional investors are nudging that wheel. It will take a lot to stop their momentum.
— Alex Tapscott, managing director, Ninepoint Capital Digital Asset Group
Ask an Expert
Q. Is it a good time to invest in crypto IPOs?
A. The short answer is yes. While the success of Circle, which exceeded expectations with precedent-setting gains, stood out, overall market sentiment remains highly favourable.
The launch of spot BTC and ETH ETFs in the US has brought a significant capital influx. Regulatory clarity in major markets like the U.S. and Europe has boosted investor confidence in asset issuers who now follow established listing procedures and operate with legitimised governance frameworks.
Add to this the ongoing bull run, and investors are seeing a robust opportunity for long-term value creation.
Q. What type of crypto IPOs should investors focus on?
A. More than token prices, investors should focus on the project’s fundamentals and core propositions. Projects with robust, foolproof, clearly drafted business models, realistic plans, and defined revenue streams will perform better. These may include stablecoins, custody services, and staking platforms at the primary level.
On a secondary level, fintech, infrastructure, and analytics-related projects are also expected to yield well. The founder and leadership team play a crucial role, which implies better fund management and ongoing innovation.
With adoption surging, advisory services can help investors identify the best-positioned projects in a growing field.
Q. What are the prospects of crypto IPOs?
A. The crypto market has matured, and institutional adoption is rising. In the near future, crypto-asset issuers are expected to become more structured and efficient in accessing traditional capital markets. If the positive trend continues, investor confidence in high-risk-high-return opportunities will also grow.
Issuers are now more confident in going public. However, investors should approach with prudence. Crypto IPOs are best treated as high-risk components within a well-diversified portfolio.
Retail investors must stay alert to macro events that may affect market sentiment. Asset and fund managers should compare the performance of crypto stocks with traditional tech stocks while monitoring liquidity and volatility.
— Natalie Hirsch, CFO, Polymath
Keep Reading
- A July recap of the crypto markets by CoinDesk, in partnership with NYSE and TrackInsight.
- CoinDesk breaks down July crypto ETF and ETP flows.
- The SEC permits in-kind creation and redemptions for crypto ETFs.
- President Trump prepares to sign an order that blocks banks from denying banking services to companies involved in bitcoin and crypto.
- JP Morgan has partnered with Coinbase to let users fund wallets and purchase crypto directly this fall.
Bitcoin traded in the red having failed to establish a foothold above $116,000 as whales rotated more funds into ether.
By Omkar Godbole (All times ET unless indicated otherwise)
The crypto market has stalled since Saturday, with bitcoin (BTC) once again failing to keep gains above $116,000 alongside continued selling by wallets of early adopters, or OGs.
According to blockchain analyst Lookonchain, on Sunday an eight-year BTC holder moved 1,176 BTC worth over $136 million to Hyperliquid and started dumping. This holder is known to have exchanged 35,991 BTC for 886,731 ETH in recent months.
Other long-term holders have also been liquidating coins in recent months as the market continues to adjust to a six-figure price as the new normal for BTC.
But the latest selling is not just limited to long-term holders. On-chain data tracked by Glassnode showed that wallets of all sizes are back to distributing coins.
In ether’s case, whale wallets continue to scale exposure, suggesting ether outperformance relative to bitcoin. The ether-bitcoin ratio on Binance, however, fell for a third consecutive day, unable to capitalize on the descending trendline breakout confirmed on Friday.
Memecoins, the recent outperformers, have also come under pressure, with top tokens, DOGE and SHIB, losing 10% and 6%, respectively, over the past 24 hours.
Solana’s native token SOL traded over 2% lower at $234 despite key industry participants taking steps to accelerate the adoption of Solana-native decentralized finance (DeFi).
Kyle Samani, chairman of Nasdaq-listed Solana treasury company Forward Industries, said on X that the company plans to deploy funds into the Solana-based DeFi protocols. Last week, Forward raised $1.65 billion in a private placement led by Multicoin Capital, Galaxy Digital and Jump Crypto.
Samani was responding to an idea raised by a crypto trader, Ansem, who called for corporate treasury funds to invest in Solana-based DeFi to boost the network’s DeFi appeal relative to industry giant Ethereum.
In traditional markets, investor positioning in the S&P 500 looked totally biased bullish. «Sentiment is at extremes. Careful out there,» pseudonymous observer The Short Bear said on X. Stay alert!
What to Watch
- Crypto
- None scheduled.
- Macro
- None scheduled.
- Earnings (Estimates based on FactSet data)
- None scheduled.
Token Events
- Governance votes & calls
- Curve DAO is voting to update donation-enabled Twocrypto contracts, refining donation vesting so unlocked portions persist after burns. Voting ends Sept. 16.
- Unlocks
- Sept. 15: Starknet (STRK) to unlock 5.98% of its circulating supply worth $17.09 million.
- Sept. 15: Sei (SEI) to unlock 1.18% of its circulating supply worth $18.06 million.
- Token Launches
- Sept. 15: OpenLedger (OPENLEDGER) to be listed on Crypto.com.
Conferences
- Day 4 of 4: ETHTokyo 2025
- Day 1 of 7: Budapest Blockchain Week 2025
- Sept. 15: TGE Summit 2025 (New York)
Token Talk
By Oliver Knight
- Monero’s blockchain suffered its deepest-ever reorg on Monday, rolling back 18 blocks.
- A blockchain reorganization, or reorg, happens when nodes abandon part of the existing chain to follow a longer one with more proof-of-work. The shift occurs during a temporary fork, when two versions of the chain compete.
- Monero’s XMR token remained unperturbed during the porcess; rallying by 5% despite the attack by Qubic, a layer-1 AI-focused blockchain and mining pool that attempted to take over the Monero blockchain by amassing 51% of the mining power last month.
- The event rewrote roughly 36 minutes of transaction history and invalidated about 118 confirmed transactions, prompting concerns about the security of the network.
- Crypto podcaster xenu claimed that Qubic’s reorg was an attempt to «stop the bleeding» of XMR’s price after it tumbled from $344 to $235 during the initial 51% attack in August.
- XMR currently trades at $304 having brushed aside negative sentiment with daily trading volume rising by 78% to $136 million.
Derivatives Positioning
by Omkar Godbole
- The top 25 coins have experienced a decline in futures open interest (OI) over the past 24 hours, with memecoins, such as DOGE, PEPE and FARTCOIN, registering double-digit capital outflows. This contrasts with the pre-Fed bounce being seen in most tokens.
- BTC’s global futures OI tally has pulled back to 720K BTC from the near-record high of 744K BTC last week. Total market-wide OI has pulled back to $90 billion from $95 billion over the weekend.
- ETH’s tally grew to over 14 million ether from roughly 13.2 million ether early this month, indicating renewed capital inflows. However, this does not necessarily indicate bullish positioning, as the OI-normalized cumulative volume delta (CVD) for ETH has been negative for the past 24 hours. That’s a sign of net selling pressure.
- Most major tokens have seen a negative CVD for the past 24 hours.
- Activity in the CME-listed futures looks to be picking up the pace, with OI bouncing to 141.69K BTC from the multimonth low of 133.25K BTC early this week. The annualized rate on a three-month basis remains below 10%, extending the consolidation. ETH’s CME OI remains below 2 million ether.
- On Deribit, put bias in BTC and ETH has eased significantly across all tenors as markets anticipate Fed rate cuts in the coming months. The implied volatility term structure remains in contango, with December expiry expected to be more volatile.
Market Movements
- BTC is down 1.1% from 4 p.m. ET Friday at $114,933.52 (24hrs: -1%)
- ETH is down 3.1% at $4,528.04 (24hrs: -3.22%)
- CoinDesk 20 is down 2.73% at 4,245.39 (24hrs: -3.35%)
- Ether CESR Composite Staking Rate is down 2 bps at 2.82%
- BTC funding rate is at 0.0081% (8.829% annualized) on Binance
- DXY is unchanged at 97.48
- Gold futures are down 0.29% at $3,675.80
- Silver futures are down 0.56% at $42.59
- Nikkei 225 closed up 0.89% at 44,768.12
- Hang Seng closed up 0.22% at 26,446.56
- FTSE is down 0.1% at 9,273.57
- Euro Stoxx 50 is up 0.6% at 5,423.13
- DJIA closed on Friday down 0.59% at 45,834.22
- S&P 500 closed unchanged at 6,584.29
- Nasdaq Composite closed up 0.44% at 22,141.10
- S&P/TSX Composite closed down 0.42% at 29,283.82
- S&P 40 Latin America closed unchanged at 2,857.80
- U.S. 10-Year Treasury rate is unchanged at 4.059%
- E-mini S&P 500 futures are unchanged at 6,594.50
- E-mini Nasdaq-100 futures are unchanged at 24,098.00
- E-mini Dow Jones Industrial Average Index are up 0.22% at 45,957.00
Bitcoin Stats
- BTC Dominance: 58.11% (0.57%)
- Ether to bitcoin ratio: 0.03938 (-1.38%)
- Hashrate (seven-day moving average): 1,025 EH/s
- Hashprice (spot): $53.81
- Total Fees: 3.13 BTC / $362,347
- CME Futures Open Interest: 141,690 BTC
- BTC priced in gold: 31.5 oz
- BTC vs gold market cap: 8.90%
Technical Analysis
- DOGE has dropped from 30.7 cents to 26 cents, penetrating the bullish trendline from Sept. 6 lows.
- The breakdown suggests renewed seller momentum.
- Prices have also found acceptance below the Ichimoku cloud. Crossovers below the cloud are said to represent a bearish shift in trend.
Crypto Equities
- Coinbase Global (COIN): closed on Friday at $323.04 (-0.28%), -0.34% at $321.95 in pre-market
- Circle (CRCL): closed at $125.32 (-6.27%), +1.81% at $127.59
- Galaxy Digital (GLXY): closed at $29.70 (+2.88%), -0.47% at $29.56
- Bullish (BLSH): closed at $51.84 (-3.98%), +1.72% at $52.73
- MARA Holdings (MARA): closed at $16.31 (+3.82%), -0.67% at $16.20
- Riot Platforms (RIOT): closed at $15.89 (+1.53%), -0.44% at $15.82
- Core Scientific (CORZ): closed at $15.86 (+1.99%), -0.38% at $15.80
- CleanSpark (CLSK): closed at $10.35 (+1.47%), unchanged in pre-market
- CoinShares Valkyrie Bitcoin Miners ETF (WGMI): closed at $37.32 (+4.63%)
- Exodus Movement (EXOD): closed at $28.36 (-1.73%), unchanged in pre-market
Crypto Treasury Companies
- Strategy (MSTR): closed at $331.44 (+1.66%), -0.53% at $329.68
- Semler Scientific (SMLR): closed at $29.19 (+2.28%)
- SharpLink Gaming (SBET): closed at $17.7 (+8.19%), -2.26% at $17.30
- Upexi (UPXI): closed at $6.76 (+18.93%), +1.55% at $6.86
- Lite Strategy (LITS): closed at $3.07 (+10.43%)
ETF Flows
Spot BTC ETFs
- Daily net flow: $642.4 million
- Cumulative net flows: $56.79 billion
- Total BTC holdings ~ 1.31 million
Spot ETH ETFs
- Daily net flow: $405.5 million
- Cumulative net flows: $13.38 billion
- Total ETH holdings ~ 6.48 million
Source: Farside Investors
While You Were Sleeping
- What’s Next for Bitcoin and Ether as Downside Fears Ease Ahead of Fed Rate Cut? (CoinDesk): Amberdata’s Greg Magadini says a routine quarter-point cut could mean gradual gains, while a half-point move might trigger an explosive rally in BTC, ETH, SOL and gold.
- Bank of England’s Proposed Stablecoin Ownership Limits Are Unworkable, Say Crypto Groups (CoinDesk): Executives say the U.K.’s proposed caps could be impossible to enforce and risk pushing innovation abroad, while U.S. and EU rules set standards without limiting holdings.
- LSE Group Starts Blockchain Platform for Access by Private Funds (Bloomberg): LSEG’s Digital Markets Infrastructure, built to boost efficiency, was used in a MembersCap fundraising for MCM Fund 1 with crypto exchange Archax serving the role of nominee.
- Trump Administration Claims Vast Powers as It Races to Fire Fed Governor Before Meeting (The New York Times): In Sunday’s filing to a federal appeals court, Justice Department lawyers argued Trump’s authority to oust Fed governor Lisa Cook was both “unreviewable” and “reasonable.”
- BOE Expected to Leave Key Rate on Hold, but Slow Quantitative Tightening (The Wall Street Journal): Signs of internal resistance have cast doubt on near-term rate cuts, with four MPC members opposing the last move and BoE Governor Andrew Bailey warning inflation pressures complicate policy choices.
Markets are seeing sharp moves this morning with crypto mining stocks continuing their rally and Tesla jumping on Elon Musk’s latest share purchase.
Bitfarms (BITF) is up 15% pre-market to $2.55, extending its weekly rally of 75%. AI-focused mining stocks continue their strong performance as well, with IREN (IREN) rising 3% pre-market and up over 230% year-to-date. Hive Blockchain (HIVE) gained 5% pre-market, adding to its 40% rise over the past month.
KindlyMD (NAKA), a bitcoin treasury company holding 5,765 BTC, is down 50% pre-market and off 96% from its all-time high.
Tesla (TSLA) is trading at $420 pre-market, up 6% from Friday’s close after a 7% surge last week. An SEC filing revealed Elon Musk purchased nearly 2.6 million shares.
While, CapitalB (ALCPB) acquired 48 BTC, bringing its total holdings to 2,249 BTC, up 15% in European markets.
Crypto Markets Today: XMR Rallies Despite 18-Block Reorg
Bitcoin Fails to Hold $116K as OGs Rotate Into Ether: Crypto Daybook Americas
Crypto Miners Rally in Pre-Market Trading Amid Tesla’s Surge
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