Welcome to the institutional Crypto Long & Short newsletter. This week:
- He Main headlines that institutions should read by Francisco Memoria
- Perspectives and analysis on global exchanges by Joshua de Vos
- The ‘hopeful signs’ of cryptocurrencies as we end the year by Andy Baehr
- Bitcoin Weekly Returns 2025 Chart of the Week
Thanks for joining us!
-Alexandra Levis
Headlines of the week
– By Francisco Memoria
Cryptocurrency prices fell more than 13% over the past week, as measured by the performance of the CoinDesk 20 (CD20) index, with bitcoin losing 12.6% of its value in the period. However, the headlines tell us that institutions are not backing down.
Expert Perspectives
Licenses, liquidity and the changing geography of exchange quality
– By Joshua de Vosresearch leader, CoinDesk
For years, Europe seemed the natural center of gravity for cryptocurrency regulation. Clearer frameworks, early VASP regimes and a mature supervisory environment made the EU feel like the region ready to dominate licensing and registration. But as MiCA moves into its implementation phase, we are seeing a new trend in the underlying logs.
The center of gravity is shifting and it is shifting towards the US.
The latest edition of CoinDesk’s Exchange Benchmark makes this clear. For the first time in several cycles, courtesy of VASPnet data, North America has overtaken Europe as the top licensed region for digital asset exchanges (based on the number of benchmark exchanges duly licensed/registered in these jurisdictions). The US regulatory model is often described as fragmented or slow, but it is proving to be more stable and functional than many expected. Exchanges are now treating FinCEN registration and a network of money transmitter licenses as a viable route to legitimacy.
Europe is moving in a different direction. Increasingly strict rules are creating difficulties for some of its own VASPs. VASPnet data suggests that the end of MiCA protection periods is putting pressure on mid-sized companies that felt comfortable under previous national regimes. The result is a consolidation and, in some cases, a shift of business operations towards more permissive jurisdictions.
The data reinforces the trend:
- Registrations in the EU fell by 33 percent since April.
- The Netherlands experienced an 83 percent drop after its transition period ended.
- Currently, only 16 exchanges are MiCA authorized.
- Meanwhile, 59 percent of global exchanges are now regulated under a broader virtual asset or market regime, compared to the last cycle.
The direction of travel is becoming clearer. Exchanges are concentrating on regions where licensing is still practical and commercially viable for them.
Liquidity: why execution has become the true signal
The Benchmark also introduced the largest market quality update since its launch. Historically, liquidity assessments have been largely based on static order book depth. While easy to measure, the displayed depth is often divorced from actual running conditions. Stale liquidity, spoofing, and inconsistent refresh rates limit its usefulness as an indicator of market quality. This year’s framework shifts the analysis toward executed trades rather than displayed orders.
The new Composite Liquidity Score is based on:
- performed slide
- a run-based depth proxy
- commercial density
- sustained business activity
- activity in the top 25 pairs
The principle is simple. Liquidity should reflect actual execution conditions, not what appears in the order book.
This change comes at a time when the very structure of the market is changing. Top-tier exchanges no longer dominate global spot volumes as they did in recent years. In the first quarter of this year, the top tier captured almost 60 percent of the market share in volumes. In the third quarter, that figure is 41 percent. Liquidity is increasingly distributed and quality of execution is now a clearer differentiator than raw size.
Exchanges that rise to the top thanks to this more rigorous, execution-driven approach are also strengthening their regulatory footprint. Binance, Bitstamp, Coinbase, Kraken, and Crypto.com all get high scores here. Regulation and true quality of execution are increasingly aligned.
Where exchanges are still lagging
Despite clear progress, the Benchmark highlights several areas where the industry continues to fail:
- 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 $62 million during the evaluation period, although more exchanges now operate formal bug bounty programs.
Overall, the FX landscape is becoming more mature and more execution-focused, while also becoming more uneven. Regional licensing standards are divergent. Liquidity is fragmenting. Transparency is advancing in some areas and stagnating in others.
The benchmark shows what high quality looks like now:
- Licenses that allow access to markets.
- Liquidity that reflects genuine execution conditions.
- Transparency that supports institutional level expectations.
The exchanges that do them well are driving the continued divergence between our reference universe.
Environment control
What did we expect?
– By Andy Baehr, CFA, head of product and research, CoinDesk Indices
With just a few precious weeks left, what will the digital asset class offer in 2025?
Over the weekend, bitcoin plummeted below its opening price of the year of around $93,400. Of course, we’re still far from the 2025 lows (below $75,000 in early April), but with less than seven weeks left, we’re wondering what message 2025 will end up conveying. This was meant to be (and in many ways has been) the year cryptocurrencies got the green light. We think it’s fair to say that the US administration has done its part, both in terms of driving regulatory progress and (some) legislative outcomes. Wells Notice futures plummeted. Most observers agree that it is “the markets” that have erased cryptocurrencies’ impressive gains in the second and third quarters. Lack of certainty, lack of liquidity and lack of catalysts. Even lack of data.
It’s ironic that the US government has done more to depress cryptocurrency prices by being closed than open.
And make no mistake: cryptocurrencies have more to prove. If a sour market takes the shine off growth stocks in 2025, well, that’s the game. There’s always next year. For the young digital asset class, which is striving for allocations from global investors, a bad year is more discouraging.
Cryptocurrencies risk poor results in 2025
Some hopeful signs
There is no shortage of good news about the adoption of blockchain technology and its integration into the global financial system. (We have referred to this as “slow money”: mergers and acquisitions, new launches, initial public offerings, etc.) However, we do not see a consistent conversion of that progress into digital asset market returns. where we do seeing encouraging signs is in the quality of those commercial markets.
Breadth, as always, is key. When we look at our two flagship market indices (CoinDesk 5 and CoinDesk 20), we see that they have held up. relatively good in bitcoin terms.
- CoinDesk 5 is virtually stable in bitcoin terms, down <2% year to date.
- CoinDesk 20 is only down 8.4% year to date in bitcoin terms (and is dead even year over year).
We observe a removal of “distracting” assets. Smaller names and frenzy-era memecoins declined steadily in 2025, allowing the market to take a more reasonable approach. beta.
- The CoinDesk 80 (80 names outside the CoinDesk 20) lost half its value in CD20 terms.
- The CoinDesk Memecoin Index (CDMEME), which tracks 50 equally weighted memecoins, lost more than 60% of its value in CD20 terms.
Chart of the week
Bitcoin closed last week down 10.0% at $94,244. This marked the largest weekly drop in the price of BTC since the week ending March 9. This also recorded a third consecutive week of negative bitcoin price action. Bitcoin has since traded below its yearly 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.
Hear. Read. Look. Engage.
