Welcome to our institutional newsletter, Crypto Long & Short. This week:
- Insights from Psy Protocol’s Carter Feldman on Where Investors Look for Value During Bear Markets
- A mood review of ETH’s whirlwind year by Andy Baehr
- Main headlines that institutions should read by Francisco Memoria
- “ETH DAT flows vs. ETH price” on the week chart
-Alexandra Levis
Expert Perspectives
Investors seek countercyclical value in privacy coins
– By carter feldman, CEO and founder of Psy Protocol
The sustained pressure of a falling bitcoin price acts not only as a system-wide depressant, but also as a catalyst for efficiency, forcing both miners and investors to seek value in specialized operations. The bear market makes this a prime time for ZK proof-of-work privacy coins, whose security and logarithmic scalability are now more important than ever for miners and private internet transactions.
When the price of bitcoin stagnates, miners’ margins compress. This economic reality forces miners to be more astute as capital allocators, shifting hash power toward more profitable specialized chains. This is a calculated step towards protocols that reward not only raw energy expenditure, but also provide the utility that the market desires.
This is where privacy coins come into the conversation. As the overall market consolidated, there was a surge in privacy coins led by Zcash. Encrypted electronic cash used for private everyday payments. With price increases of up to 950% from September lows, it far outperformed the overall market performance. This resurgence is a sign that both retail and institutional players recognize that privacy is a missing piece in the maturing crypto ecosystem.
Adoption metrics confirm this. Zcash’s protected pool (i.e. tokens held in private addresses) recently reached its highest level of over 4.5 million tokens, indicating growing user demand for true financial autonomy. The market is not just speculating; Functionally it requires a system that offers accountability without sacrificing confidentiality.
The technology underpinning this privacy, known as zero-knowledge (ZK) proofs, is the real long-term institutional appeal and reaches far beyond the crypto world. ZK is fundamentally a computational tool that allows a party to prove that a claim is true without revealing the underlying data.
This capability is rapidly moving into real-world applications where data protection is paramount:
- Decentralized identity: Prove that you are over 18 years of age without revealing your date of birth or your name, crucial for regulatory compliance (GDPR, etc.).
- Supply chain: Verify the ethical sourcing or origin of a product without revealing sensitive supplier contracts or business relationships.
- Safe vote: Allow participants to demonstrate their eligibility to vote without revealing their identity or ballot choice.
In this context, ZK’s native protocols are simply adapting this universal technology to the most difficult and riskiest computational problem: Internet-scale financial transactions. By performing transaction verification on the client side, ZK can scale while maintaining the privacy that is becoming the global standard for data security across industries. This dual utility is why ZK native assets are a smart long-term investment; They are based on technology that is quickly becoming mandatory, not just optional, for the global digital infrastructure.
While the market worried about bitcoin price fluctuations, savvy investors recognized that privacy coins met a real market demand.
Headlines of the week
– By Francisco Rodríguez
This week we are seeing huge risk exposure for the world’s largest corporate bitcoin holder, Strategy, and for the decentralized finance ecosystem if regulatory hurdles increase.
Environment control
Smooth the Ride, Part II: ETH’s whirlwind year has not been for the faint of heart.
– By Andy Baehr, CFA, head of product and research, CoinDesk Indices
A few weeks ago, we showed how a trend overlay in bitcoin helped save 2025 returns. Our Bitcoin Trend Indicator (BTI) signaled the next “significant downtrend” in mid-October, allowing strategies to step aside and preserve capital. For advisors and institutions creating long-term crypto allocations, we see that trend-based strategies can help “ease the journey” and keep people in the game.
In last week’s Crypto Long & Short, we reiterated the view that there cannot be a broad rally in digital asset classes without ETH’s participation, if not leadership. Like it or not, Ethereum is the standard bearer for blockchain adoption narratives. In the eyes of many, it is not an “altcoin.” When ETH recovers, it indicates that something bigger is afoot: that stablecoins, DeFi, and tokenization are gaining share in the global consciousness. We note that Fusaka’s update is an embodiment of the kind of progress, focus, and, yes, messaging that will encourage even greater mental engagement.
Still, ETH has been pretty tough in 2025, making conviction (and sizing) a challenge.
The case of the ether trend
This leads us to a natural question: how does our ETH trending strategy work? We launched the Ether Trend Indicator (ETI) alongside BTI in March 2023, using the same quartet of moving average crossover signals. We tested those signals on both assets, liked what we saw, and haven’t needed to change them since.
Color-coded ETH price based on Ether trend indicator (green ones are bullish trend, yellow neutral, red ones are bearish trend)
Source: CoinDesk Indices
If you think about why time series momentum should work (new information drives different market segments over time), then ETH seems like a good candidate. Hedge funds and crypto-native derivatives traders are more likely to start a trend. ETF flows are more likely to follow.
ETH has had three notable phases in 2025: a crash in the first quarter, a powerful rally in the second and third quarters, and the heartbreaking drop in the fourth quarter. We applied a systematic trend strategy (active since October 2023) following ETI to ETH and the results are surprising.
ETH trend strategy (active since October 2023) helped smooth the way
Source: CoinDesk Indices. “ETIS1” strategy. Methodology here. Hypothetical results ignoring transaction costs. Past performance is no guarantee of future results.
ETI has shown that ETH is in downtrend for 5 days and in significant downtrend for the previous 29. For a market that is insensitive to lows, it may be better to follow the signals and wait for the trend to reverse.
Chart of the week
ETH DAT flows vs. ETH price
In this week’s COTW we analyze Ethereum Digital Asset Treasury (DAT) flows and the price of ETH, revealing a clear correlation: the trend in DAT flows appears to be a central driver of the price. Before October 2025, the increase in DAT flows corresponded strongly with the ETH price rally. Since ETH price peaked around October 2025, both flows and price have been trending downward. Given that these DATs contain approximately 3.5% of the circulating supply of ETH, the current lack of upward momentum in these flows suggests that a renewed and clear bullish trend in DAT accumulation is likely a prerequisite for the next major bullish price move.
Hear. Read. Look. Engage.
