Stablecoin Flows Reveal Layer-One Performance Predictors

A new factor model developed by Artemis has been shown to effectively predict layer-one performance using stablecoin flows. The study found that tracking liquidity across chains offers a measurable edge in the market, often driven by sentiment and momentum.

The research used a long-short strategy to analyze stablecoin inflows and outflows across blockchain networks, rebalancing weekly to take advantage of incoming and outgoing capital. Over a five-year backtest, the approach delivered an annualized return of 83.6% with limited correlation to broader crypto movements.

Notably, the model showed near-zero market exposure, generating an average monthly gain of 6.8% during bearish periods when Bitcoin declined by -10.9%. The strategy was found to be largely driven by the long side, which accounts for 84% of total returns, with mid-cap ecosystems dominating.