Welcome to the institutional newsletter, crypto long and short. This week:
- The The top headlines institutions must read Francisco Memoria
- Insights and analysis on global exchange by Joshua de Vos
- “Crypto Hopes are “Signals” as we end the year by Andy Baehr
- Bitcoin’s 2025 weekly return on the Chart of the Week
Thanks for joining us!
Headlines of the week
– Neither Memory of Francisco
Cryptocurrency prices have fallen by more than 13% in the past week, as measured by the performance of Coindesk 20 (CD20) Index, including Bitcoin lost 12.6% of its value during the period. However, the headlines tell us institutions are not backing down.
Expert views
Licenses, liquidity and the shifting geography of exchange quality
– Neither Joshua de VosResearch Insights, Coindesk
For years, Europe has looked like the natural center of gravity for crypto regulation. Clearer frameworks, early VASP regimes and a lethal regulatory environment made the EU feel like the region poised to dominate licensing and registration. But as MICA moves deeper into its implementation phase, we are seeing a new trend in underlying registrations.
The center of gravity is shifting, and it’s shifting toward the US
The latest edition of Coindesk’s Exchange Benchmark makes it clear. For the first time in many cycles, courtesy of data from VASPNET, North America has overtaken Europe as the leading licensing region for digital asset exchanges (based on the number of benchmarked exchanges duly licensed/registered under these jurisdictions). The US regulatory model is often described as fragmented or slow, but it is proving to be more robust and functional than expected. Exchanges are now treating Fincen registration and a network of money transfer licenses as a route that can work towards legitimacy.
Europe is moving in a different direction. Increasingly stringent rules are creating difficulties for some of its own VASPs. VASPNET data suggests that the end of mica’s grandfather era is putting pressure on mid-sized companies that were comfortable under previous national regimes. The result is consolidation, and in some cases, a transfer of business operations to more permissive jurisdictions.
The data reinforces the trend:
- EU registrations have fallen 33 percent since April.
- The Netherlands saw an 83 percent drop after its transition period.
- 16 to simply replace the existing mica permit holder.
- Meanwhile, 59 percent of global exchanges are now regulated under a broader virtual asset or market regime, as of the last cycle.
The direction of travel becomes clearer. Exchanges focus on regions where licensing is still practical and commercially viable for them.
Liquidity: Why execution has become a real signal
The benchmark also introduced the most significant market quality update since its launch. Historically, liquidity assessments have relied heavily on the depth of the static order book. While simple to measure, the displayed depth is often divorced from real implementation conditions. Stale liquidity, spoofing and inconsistent refresh rates limit its usefulness as an indicator of market quality. This year’s framework shifts analysis towards executed trades rather than displayed orders.
The new Composite Liquidity Score captures:
- realized the slippage
- a depth based implementation
- trade density
- prolonged trading activity
- activity across the top 25 pairs
The principle is straightforward. Liquidity should reflect actual execution conditions, not what appears in the order book.
This change occurs at a moment when the structure of the market itself is changing. Top-tier exchanges no longer dominate the global arena as much as they did in the past few years. In Q1 of this year, the top-tier captured nearly 60 percent of the market share of volumes. In Q3, that figure was 41 percent. Liquidity is becoming more distributed, and the quality of execution is now a more pronounced difference than raw size.
Exchanges rising to the top under a stricter, enforcement-driven approach are also strengthening their regulatory footprints. Binance, Bitstamp, Coinbase, Kraken and Crypto.com all score highly here. Regulation and real quality enforcement are becoming more aligned.
Where exchanges are still lagging
Despite clear progress, the benchmark highlights several areas where the industry continues to fall behind:
- Only 34 percent of exchanges publish audited financial statements.
- Only 49 percent provide proof of reserves and 35 percent provide proof of liabilities.
- Security losses reached $62m during the assessment period, although more exchanges now operate formal Bug Bounty programs.
In general, the exchange landscape is becoming older and more enforcement-oriented, while also becoming more uneven. Regional licensing standards are shifting. Liquidity is dispersed. Transparency is progressive in some areas and surprising in others.
The benchmark shows what high quality looks like today:
- Licensing that allows access to markets
- Liquidity that reflects the real conditions of execution
- transparency that supports institutional-grade expectations
Exchanges gaining rights drive continued diversification among our benchmark universe.
Check out the vibe
What do we expect?
– Neither Andy Baehr, Cfa, Head of product and research, Coindesk indexes
With only a few weeks left, what will the digital asset class deliver in 2025?
Over the weekend, Bitcoin fell below the price of the year around $93,400. Of course, we remain far from the lows of 2025 (below $75k in early April), but with less than seven weeks left, we wonder what message 2025 will end up delivering. It was meant to be (and in many ways, is) the year that crypto gets permission. We think it is fair to say that the US administration has done its part, both in terms of stimulating regulatory development and (some) legislative outcomes. Wells noticed futures tanked. Most observers agree that it was “the markets” that erased the impressive gains of Crypto in Q2 and Q3. Lack of certainty, lack of liquidity and lack of catalysts. Even lack of data.
There is some irony that the US government has done more for crypto prices by being shut down than being open.
And make no mistake – Crypto has more to prove. If a sour market takes the shine off growth equities in 2025, well, that’s the game. There’s always next year. For the young digital asset class, which is struggling to earn the allocations of global investors, a bad year is more off-putting.
Crypto risks deliver poor 2025 results
Some hopeful signals
There is no shortage of good news about the adoption of blockchain technology and its integration into the global financial system. (We refer to this as “slow money” – M&A, new launches, IPOs, etc.) However, we don’t see that growth consistently converting into digital asset market returns. Where are we? do See the encouraging signs are on quality of trading markets.
Width, as always, is key. When we look at our two flagship market indices (Coindesk 5 and Coindesk 20) We see that they hold quite a bit Well in bitcoin terms.
- Coindesk 5 is mostly flat in bitcoin terms, down <2% YTD.
- Coindesk 20 is down just 8.4% YTD in Bitcoin terms (and dead even year-over-year).
We observe a cull of “disruptive” assets. The smaller names and frenzy era of memecoins beta.
- The Coindesk 80 (80 names outside Coindesk 20) has lost half of its value in CD20 terms.
- The COINDESK MEMECOIN INDEX .
Chart of the week
Bitcoin closed last week down 10.0% at $94,244. This marked the biggest weekly drop in BTC price since the week ending March 9. It also recorded a third consecutive week of negative bitcoin price action. Bitcoin has since traded below its annual open and is on track to record four consecutive weeks of negative price action, which would be the first time since the first week of July 2024.
