Hi all, happy Wednesday. Big pullback across crypto over the past week, with no notable names performing particularly well. At the Blockworks Research team, we have disparate views, with some bulls (Boccaccio and Ryan) and some bears (Westie Capital). 

On the DeFi side, we saw a major loss of users' funds this week, with Stream DeFi losing funds due to an external team member leveraging user funds to make back personal losses.

Markets turned sharply risk-off as crypto sectors sold off across the board, while traditional assets held relatively firm. BTC (-4.5%) led the broader pullback, with the Nasdaq 100 (-2.1%) and S&P 500 (-1.1%) also slipping modestly. Gold (-1.5%) also retraced, losing the bid from a mild safe-haven bid amid rising Treasury yields and a stronger dollar.

Crypto sector performance was deeply bifurcated. Miners (+2.5%) and L2s (+2.0%) were the only bright spots, supported by renewed optimism around scaling and upcoming fee structure upgrades. In stark contrast, AI (-13.4%) and DePIN (-13.6%) were the biggest laggards, unwinding recent speculative gains. Ethereum (-5.3%) and Solana (-8.2%) ecosystems also underperformed as liquidity rotated out of higher-beta names. Launchpads (-4.4%) and DeFi (-3.9%) continued their grind lower, reflecting weakening onchain activity and profit-taking from the prior week’s rally.

The selloff came as traders reassessed risk exposure ahead of key macro catalysts, notably Friday’s US payrolls report and ongoing Fed commentary hinting at “higher-for-longer” rates. As seen below, the probability of a 25bps cut has dropped from over 80% to 70%. A sharp drop in small-cap crypto names suggested thinning liquidity and tighter positioning across majors.

Volatility ticked higher as market breadth narrowed, with BTC dominance inching up while alt sectors bled. Attention now turns to whether this is a short-term flush or the start of a broader de-risking phase heading into year-end. All eyes now turn to upcoming ISM Services PMI, US unemployment and payrolls and CPI over the coming days and weeks, with these releases likely to set crypto’s next leg — whether it’s a deeper pullback or a push higher.

— Marc

A rapid retracement in BTC and sliding ETF flows this week signals a shift from accumulation to caution among institutional crypto players. Over Nov. 4-5, BTC tumbled back toward the $100,000 area after topping  $126,000 in early October, a drop of more than 15-20%.

Furthermore, October’s rotation from inflows to redemptions across major BTC ETFs signals waning institutional appetite as macro headwinds bite. After mid-October inflows topping $400 million, late-month sessions saw outflows exceeding $500 million, primarily from IBIT and FBTC, the same vehicles that had driven early Q4 liquidity. Smaller issuers like ARKB and BTCO briefly offset redemptions, but aggregate ETF flows have now been negative for multiple sessions in a row.

ETF flow data is a sentiment index, and right now, it’s blinking yellow. Monitor aggregate ETF flows (especially IBIT and FBTC) as a real-time risk gauge. If redemptions persist another week, the market could transition from “buy the dip” to “protect capital” mode, pressuring altcoins and BTC volatility sellers alike.

— Marc

Top of Mind

We had a particularly eventful week. Market downturns typically coincide with several predictable patterns: hacks emerge, funds are lost and curators make leveraged bets to recover personal losses. This past week followed the same script. Morpho faced significant criticism after a vault curator's losses resulted in user fund depletion. 

Morpho's defense centers on its permissionless architecture: Anyone can create a vault using its smart contracts. This argument has merit; Morpho genuinely cannot control who deploys on its platform, a design choice that likely reduces both liability and operational burden for the core team by eliminating the need for active curation and risk management. 

However, this explanation is incomplete. While anyone can permissionlessly launch markets on Morpho, the platform retains discretion over which projects to amplify and promote. Stream was a protocol that Morpho publicly announced as a partner and hosted on its frontend. 

You can be a permissionless product, but you need to be careful who you promote. From a brand perspective, this is a problem for Morpho, and something it needs to address. Morpho needs to have further separation between curators and itself. 

To be clear, Morpho is not responsible for all vaults given its permissionless nature. However, in our opinion, the protocol should only promote certain curators, and only host certain curators on its frontend. The rest should use an SDK to integrate on their own frontend. We believe that this would be better for Morpho (as well as all modular lending platforms) as it could easily say: “Our contracts are permissionless, vaults are hosted on their own frontends.”

— Boccacio

1. DeFi Dad Pod: Is This The Next Best BTC Yield In DeFi?

Curve founder Michael Egorov has launched Yield Basis, a new DeFi protocol offering “yield-bearing Bitcoin” by eliminating impermanent loss in BTC-USD liquidity pools. Early results show around 20% BTC-denominated yields, with over $150 million TVL already across three BTC vaults. Egorov sees potential expansion to ETH and tokenized gold, noting risks mainly stem from extreme volatility or low liquidity, but calls the system “a step toward sustainable, real yield on Bitcoin.”

2. NeoBanks: Bit Ecosystem Review

An in-depth guide mapping the fast-growing world of crypto neobank. It reviews leading players like Plasma One, Ether.fi Cash, Mantle UR, Gnosis Pay, KAST, Payy Wallet, and others, highlighting their yields, custody models, card networks and regional availability. The report concludes that crypto neobanks are rapidly evolving into the operational layer of the digital economy, with the most successful ones balancing regulation, security, user control and real-world utility.

3. Why Has Zcash Suddenly Soared?

Galaxy published a research report analyzing Zcash's recent 700% price surge since September 2025. The report examines the resurgence of privacy-focused cryptocurrencies, highlighting how Zcash has overtaken Monero in market capitalization. Key factors driving adoption include improved user experience through the Zashi wallet, integration with NEAR Intents for cross-chain functionality, and a significant increase in shielded transactions (over 30% of ZEC supply now in shielded pools). The analysis explores Zcash's zero-knowledge proof technology, its advantages over Bitcoin's transparency limitations, and growing cultural interest in financial privacy amid increasing blockchain surveillance. The report suggests this rally reflects broader shifts toward privacy as a valuable feature in cryptocurrency.