Artemis analysis exhibits stablecoin capital flows predict L1 crypto returns, delivering a 1.67 Sharpe and income even in bear markets.
Crypto analytics agency Artemis has printed new analysis linking stablecoin capital flows to layer-one blockchain returns.
The findings reveal a weekly-rebalanced long-short issue with a 1.67 Sharpe ratio over 5 years. The technique generated an annualized return of 83.6% with near-zero correlation to broader market actions.
Notably, it posted beneficial properties even in periods when Bitcoin was deep within the pink.
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Stablecoin Capital Flows as a Cross-Sectional Return Predictor
Artemis constructed the issue, referred to as Stablecoins 1, by monitoring stablecoin flows between chains.
The technique rebalances weekly and goes lengthy chains receiving sturdy inflows whereas shorting these shedding capital. Over the five-year backtest interval, the uncooked issue produced a most drawdown of -43.9%.
Artemis utilized a volatility-targeting overlay to the uncooked issue. That model introduced the Sharpe right down to 1.17 however trimmed the utmost drawdown to -31.9%.
The agency estimates a conservative out-of-sample Sharpe of 0.96 after making use of a degrees-of-freedom haircut to account for overfitting threat.
The annualized alpha stood at 73.8%, with a t-statistic of three.31 and a p-value of 0.001. That makes it statistically vital on the 1% stage after controlling for market publicity.
🚨New analysis: stablecoin flows are a transparent main indicator for L1 efficiency.
Our newest issue:
– 1.67 Sharpe over 5 years
– Close to-zero market beta
– Earnings in down markets (+6.8%/mo when BTC averages -10.9%).Launching Stablecoin 1
Full breakdown:… pic.twitter.com/1GzXgdHaQn
— Artemis (@artemis) April 10, 2026
Market-Impartial Efficiency Throughout Crypto Bear Markets
One element Artemis highlighted was the issue’s conduct throughout downturns.
Throughout 30 months the place Bitcoin posted destructive returns, the uncooked Stablecoins 1 issue averaged a achieve of 6.8% month-to-month. Bitcoin averaged -10.9% over those self same months.
The market beta for the issue sits at -0.03, and the R-squared is simply 0.1%. Which means broad crypto market strikes defined nearly not one of the technique’s returns.
Artemis described it as essentially the most market-independent alpha supply in its present issue stack.
The issue additionally confirmed the bottom pairwise correlation with each different issue Artemis has constructed, with a most correlation of 0.16.
Even in a spanning regression controlling for all different elements concurrently, it retained a t-statistic of two.54 and an R-squared of simply 6.1%.
Mid-Cap L1s and L2s Drive the Bulk of Returns
Artemis famous that the lengthy leg of the technique generated 84% of whole returns.
The issue primarily rewards mid-cap layer-one and layer-two networks receiving sturdy stablecoin inflows. It doesn’t depend on structural shorts in opposition to large-cap chains.
5 networks led the efficiency: Polygon, Mantle, Optimism, BNB Sensible Chain, and Sei. Collectively, they accounted for 84% of whole returns over the backtest interval.
Yearly efficiency confirmed resilience throughout completely different market cycles. The technique returned 262% in 2021, 47% in 2022, and 315% in early 2025.
Its solely shedding yr was 2024, returning -13%, which Artemis linked to stagnant combination stablecoin provide development throughout that interval. Efficiency recovered as soon as ecosystem enlargement resumed.