The correct “Coinbase Premium” metric tells a different story — capital flight.
The structurally possible use cases for crypto are narrowing, as bitcoin gained dominance through this cycle for the first time.
DATs are diversifying their investment strategies, with some undergoing a more active route.
Correcting the Flawed “Coinbase Premium” Tells a Different Story
Remarkably, this needs to be written again, but an already-debunked analysis has resurfaced, this time in a recent Bloomberg article, a research report by a crypto institution, and in recent conversations. The industry’s insistence on the use of this flawed metric risks drawing systematically incorrect conclusions about market structure and capital flows.
The issue centers on the so-called “Coinbase Premium,” typically defined as the price difference between BTC-USD on Coinbase and BTC-USDT on Binance, typically cited from data provider CryptoQuant (link). In its most common form, this measure is analytically unsound. Because the quote currencies differ, USD versus USDT, the spread largely captures fluctuations in the price of Tether (USDT) rather than a clean signal of relative bitcoin demand between U.S. and offshore venues. The unadjusted premium becomes a proxy for the USDT-USD exchange rate.
A proper construction of the Coinbase Premium requires adjusting BTC-USDT prices into USD terms using the market price of USDT-USD. USDT is freely traded and does not maintain a hard peg, a common misconception. Once BTC-USDT is converted into true USD terms, the residual spread more accurately reflects relative buying and selling pressure between U.S. and offshore participants.
Corrected Coinbase Premium Tells a Different Story
Importantly, the corrected measure still contains useful information, but its recent readings convey something different from what is commonly assumed. The industry frequently interprets a negative Coinbase Premium as evidence that U.S. investors are selling relative to offshore investors. Conceptually, that’s correct, but only when the spread is adjusted for the price of USDT. Without that correction, conclusions about geographic differences are invalid.
Using the unadjusted metric, one might conclude that U.S. investors have been overwhelmingly selling in recent months. While U.S. trading-hour return patterns do suggest net selling pressure, the corrected Coinbase Premium tells a more nuanced story. The selloff appears orderly, rather than disorderly and there is little evidence of the kind of acute cross-venue dislocation that would signal stress.
Moreover, the fact that USDT-USD itself has traded at a discount to $1.00 provides a much more important takeaway. Rather than simply selling BTC (and simultaneously buying USDT), offshore investors have also been selling USDT, effectively exiting the crypto ecosystem altogether. This dynamic is consistent with the observed contraction in USDT supply, which is down 1.8% year-to-date, but has flattened out over the past few days. In other words, capital had not been merely rotating within crypto, it was leaving the system. That is a fundamentally different signal from the one implied by the conventional Coinbase Premium narrative.
The industry should retire the unadjusted Coinbase Premium as a primary indicator. Continuing to rely on it is misleading, leads to incorrect inferences about investor behavior, and undermines analytical credibility. A corrected framework, one that separates bitcoin price from stablecoin price, is straightforward to implement and materially improves conclusions. At a minimum, institutional-grade analysis should demand that level of rigor.
Crypto’s Structural Narrowing of Use Cases
Recent commentary from leading crypto venture investors underscores an important shift in thinking that is increasingly being echoed across the industry — blockchains are best suited for financial applications. a16z Crypto’s Chris Dixon acknowledged that, while still early, the majority of meaningful blockchain applications to date are financial in nature (link). Kyle Samani, formerly of Multicoin, characterized blockchains as primarily “asset ledgers.” These are not casual observations. They are among the most prominent venture investors in the sector, with front-row exposure to early-stage experimentation and technical development.
These views reinforce a conclusion we have held for some time: the core attributes of open blockchains, trustlessness, permissionlessness, and censorship resistance, are uniquely suited to money and money-like (financial) applications. Most real-world applications do not require global, permissionless state machines with immutable ledgers. Centralized systems will always be faster, cheaper, and operationally more efficient for the vast majority of enterprise and consumer applications. Only use cases where the benefits of operating on a blockchain clearly outweigh its costs will survive. As a result, the design space for economically viable blockchain applications is narrower than early narratives hoped.
Bitcoin’s Dominance is the Signal
Market structure increasingly reflects this narrowing thesis. It shows up in bitcoin’s sustained and, in this cycle, growing dominance, even near the cycle peak when we would typically see capital rotate indiscriminately into altcoins, regardless of their utility. The absence of a broad-based altcoin season, limited emergence of durable new narratives, and the failure of many non-financial verticals to gain traction suggest a consolidation of capital toward a smaller set of use cases. Rather than an explosion of applications, we are observing capital concentrate in a few core categories.
Some investors argue this is a healthy development, evidence that crypto capital is becoming more disciplined and selective. To a degree, that’s true. The problem is that even the tokens of objectively successful projects, those that have scaled TVL and fees dramatically, have struggled to keep pace with bitcoin’s price performance. Blame flawed token design or weak value accrual if you like, but the pattern is too persistent to dismiss. The more uncomfortable possibility is that the underperformance may be structural, not accidental. Fact: this was the first time that bitcoin grew its dominance through the peak of the cycle (no metrics exist for the 2011 or 2013 peaks). Historically, it has shed dominance at the peak, the most speculative phase of the cycle.
Looking Ahead: More Narrowing Likely
Looking forward, the next cycle may be even more focused. The investable universe appears to be coalescing around 1) bitcoin as digital gold, 2) a limited number of general-purpose smart contract platforms, primarily Ethereum and Solana, 3) DeFi primitives and base-layer financial infrastructure, and 4) tokenized real-world assets (RWAs), including stablecoins, that extend traditional finance products onto blockchain infrastructure. Beyond these categories, the probability of large-scale blockchain applications appears lower than previously assumed.
For investors, this has important implications. On one hand, a narrower opportunity set may improve durability and clarity around long-term winners, particularly for bitcoin and select infrastructure assets. On the other hand, the erosion of expansive, technology-driven narratives reduces speculative breadth and compresses the optionality premium that previously fueled capital inflows across the asset class. A more sober market, anchored in monetary and financial utility rather than broad “web3” ambition, may ultimately strengthen core assets, but it also implies that crypto’s total addressable scope could be materially smaller than once projected.
Digital Asset Treasuries Evolve
Digital Asset Treasury companies (DATs) are entering a new phase, one that appears to increasingly differ from their original vision. These vehicles were initially pitched as transparent, single-asset exposure platforms: public market vehicles for disciplined, balance-sheet accumulation of a specific digital asset coupled with crypto-native innovations. Today, that vision is changing for some.
Instead of staying aligned with their stated digital asset, many DATs are now branching out into alternative investments and strategies: private and public equities, technical analysis and market timing, distributing token airdrops to shareholders, and launching (unconventional) financial products like tokenized aircraft engine leases. However, complicating this shift is that some firms continue to withhold basic accounting disclosures, such as current shares outstanding, undermining transparency at a time when scrutiny is increasing, not decreasing.
In effect, many DATs are beginning to resemble actively managed investment funds, rather than passive, but levered, ETFs. Missing from many still, however, are key ingredients, like an articulated strategy or seasoned investment management team.
The sector now stands at an inflection point. Some DATs are recommitting to their original vision, disciplined, transparent digital asset exposure. This response from Metaplanet’s CEO stands out as one of the more substantive and well-articulated rebuttals to concerns: Read (needs translating). Still other DATs should formalize their transition into professionally managed, diversified investment platforms. The middle ground is becoming increasingly complicated, especially without the clarity that most investors seek.
Market Update
Bitcoin (BTC) is up 2.7% on the week, trading near $67K and finding stability after the recent drawdown. While dip-buying has emerged, absent a clear catalyst, price action is likely to remain rangebound in the near term as the market consolidates and digests prior losses. Volatility is beginning to compress, with both realized and implied measures trending lower, but remaining at elevated levels.
Positioning remains subdued. Offshore perpetual swaps funding rates are near neutral (2.6% annualized), and CME futures basis continues to hover in the mid-single digit percent, signaling tempered demand for directional exposure from both retail and institutional participants.
The spot ETF complex continues to show outflows, though at a slower pace. With an estimated average cost basis of around $84K, ETF investors remain meaningfully underwater, which may create overhead supply on rallies. Meanwhile, crypto-native flows are stabilizing. Total stablecoin balances have flattened after a period of contraction, with USDT supply notably leveling off after declining since the start of the year.
You are receiving this email because you signed up to receive our weekly research at www.nydig.com
This communication has been prepared solely for informational purposes and does not represent investment advice or provide an opinion regarding the fairness of any transaction to any and all parties nor does it constitute an offer, solicitation or a recommendation to buy or sell any particular security or instrument or to adopt any investment strategy. Charts and graphs provided herein are for illustrative purposes only. This communication does not represent valuation judgments with respect to any financial instrument, issuer, security or sector that may be described or referenced herein and does not represent a formal or official view of New York Digital Investment Group or its affiliates (collectively NYDIG).
It should not be assumed that NYDIG will make investment recommendations in the future that are consistent with the views expressed herein, or use any or all of the techniques or methods of analysis described herein. NYDIG may have positions (long or short) or engage in securities transactions that are not consistent with the information and views expressed in this communication.
The information provided herein is valid only for the purpose stated herein and as of the date hereof (or such other date as may be indicated herein) and no undertaking has been made to update the information, which may be superseded by subsequent market events or for other reasons. The information in this communication may contain forward-looking statements regarding future events, targets or expectations. NYDIG neither assumes any duty to nor undertakes to update any forward-looking statements. There is no assurance that any forward-looking events or targets will be achieved, and actual outcomes may be significantly different from those shown herein. The information in this communication, including statements concerning financial market trends, is based on current market conditions, which will fluctuate and may be superseded by subsequent market events or for other reasons.
Information furnished by others, upon which all or portions of this communication are based, are from sources believed to be reliable. However, NYDIG makes no representation as to the accuracy, adequacy or completeness of such information and has accepted the information without further verification. No warranty is given as to the accuracy, adequacy or completeness of such information. No responsibility is taken for changes in market conditions or laws or regulations and no obligation is assumed to revise this communication to reflect changes, events or conditions that occur subsequent to the date hereof.
Nothing contained herein constitutes investment, legal, tax or other advice nor is it to be relied on in making an investment or other decision. Legal advice can only be provided by legal counsel. NYDIG shall have no liability to any third party in respect of this communication or any actions taken or decisions made as a consequence of the information set forth herein. By accepting this communication, the recipient acknowledges its understanding and acceptance of the foregoing terms.
