Stablecoin Flows Reveal Likely L1 Winners, Artemis Reports

TL;DR

• Stablecoin flows are emerging as a strong predictor of layer-one performance, according to Artemis, with a long-short strategy delivering a 1.67 Sharpe ratio over five years.
• The model shows resilience during downturns, posting gains even when Bitcoin declines.
• Mid-cap networks such as Polygon and Optimism capture most of the upside, suggesting capital rotation within crypto ecosystems drives returns more than broad market trends.
  

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Stablecoin flows are becoming a central signal for identifying outperforming blockchains, as new research from Artemis links capital movement to layer-one returns. The report highlights how tracking liquidity across chains offers a measurable edge in a market often driven by sentiment and momentum.

New research: stablecoin flows are a clear leading indicator for L1 performance.

Our latest factor:
– 1.67 Sharpe over 5 years
– Near-zero market beta
– Profits 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

Stablecoin Flows As A Return Signal

Artemis developed a factor model that tracks stablecoin inflows and outflows across blockchain networks. The approach rebalances weekly, taking long positions in chains attracting liquidity while shorting those losing it. Over a five-year backtest, the strategy delivered an annualized return of 83.6% with limited correlation to broader crypto movements.

The firm reports a Sharpe ratio of 1.67 for the raw model, with a maximum drawdown of -43.9%. After adjusting for volatility, the Sharpe moderates to 1.17 while reducing drawdown risk. Even under conservative assumptions, the factor maintains statistical significance, with an estimated out-of-sample Sharpe near 0.96.

This reinforces the idea that stablecoins act as a proxy for deployable capital. When liquidity flows into a chain, it often precedes increased activity in trading, lending, and decentralized applications.

Market Neutral Performance During Downturns

One of the most notable findings is the factor’s behavior during bearish periods. Across 30 months when Bitcoin posted negative returns, the strategy generated an average monthly gain of 6.8%, while Bitcoin declined by an average of -10.9%.

The model shows near-zero market exposure, with a beta of -0.03 and minimal explanatory power from overall market movements. Artemis identifies it as one of the most independent alpha sources in its dataset, with low correlation to other systematic strategies.

Performance is largely driven by the long side, which accounts for 84% of total returns. Mid-cap ecosystems dominate, including networks such as Polygon, Optimism, Mantle, BNB Smart Chain, and Sei. These chains benefit most from incoming liquidity, suggesting that growth phases in crypto often concentrate outside the largest assets.

Annual returns highlight strong adaptability. The strategy gained 262% in 2021, 47% in 2022, and 315% in 2025, with 2024 as the only negative year at -13%, linked to slower stablecoin supply growth.