Last week, major cryptoassets outperformed alongside gold but traded with higher volatility overall due to new impulses from the latest FOMC meeting.
As was widely anticipated, the Fed cut its Fed Funds Target by another 25 basis points to 3.625% (mid rate) on Wednesday last week – its 3rd interest rate reduction this year.
Cryptoassets sold off initially following the FOMC announcement in a “sell-the-news” fashion.
Historically speaking, bitcoin has exhibited below-average returns in the short-term following FOMC meetings (Chart-of-the-Week). So, a short-term underperformance was to be expected.
However, it is worth pointing out that FOMC events generally don’t show any significant performance effect on bitcoin compared to non-FOMC days. That being said, the median excess performance became significantly positive after around 40 days following previous FOMC events (see Chart-of-the-Week).
What was more important than the interest rate decision itself was the announcement by the Fed to restart buying of short-term Treasury bills in order to provide ample reserves to the banking system. More specifically, the Fed announced it will buy around $40 bn per month of short-dated Treasury securities, starting around December 12, 2025, to maintain sufficient reserves and support smooth functioning of short-term funding markets.
However, in this context it is worth pointing out that the Fed has buying longer term Treasury bonds continuously since Covid (2020) as shown here. This implies that the Fed will be buying Treasury bonds across the whole yield curve (short and long duration).
Although these monthly purchases are described by the Fed as technical reserve management operations rather than traditional quantitative easing (QE) it is worth noting that the scale and regularity resemble a modest balance sheet expansion which tends to be a tailwind for bitcoin and cryptoassets.
At the time of writing, Fed Funds Futures price in additional 2 rate cuts for 2026 which is probably rather conservative considering a new nomination of a Fed chair in May 2026. Based on the latest Polymarket data, both Kevin Hassett and Kevin Warsh appear to be the most likely candidate for the Fed chair – both candidates have made positive comments on bitcoin and cryptoassets in the past. Note that Kevin Warsh’s odds have recently increased significantly.
The general narrative in the market remains that the Trump administration will try to administer a very dovish Fed board to deliver more rate cuts than expected and a weaker Dollar ahead of the mid-term elections in November 2026.
Irrespective of these developments, our general macro view suggests that the US and global economy are expected to remain resilient in 2026 with a potential for a continued as outlined in detail in our latest Bitcoin Macro Investor report.
In fact, the latest Fed rate cut decision has led to a further re-steepening of the 10-year minus Fed Funds Target rate yield spread which implies further acceleration in US money supply growth over the coming month – this should also be a positive tailwind for bitcoin and cryptoassets.
At the same time, the latest sell-off in bitcoin has created a significant under-pricing of BTC relative to the expected growth outlook described above which is why we think that there is potentially an asymmetric opportunity to the upside at these prices, especially in light of depressed sentiment.
That being said, bitcoin could continue to consolidate further in the short term due to ongoing profit-taking by long-term holders and loss-taking by short-term holders, and until a clear positive catalyst emerges. Admittedly, outsized BTC purchases by Michael Saylor’s Strategy (MSTR) have so far failed to reignite a clear bull trend.
However, price action tends to create its own narratives, and we think that major flows into US spot bitcoin ETFs are still to be expected on account of the greenlighting of crypto ETFs at major wirehouses, Vanguard and 401ks. It is quite likely that these flows will pick up significantly early next year.
In general, among the top 10 crypto assets Ethereum, Bitcoin, and BNB were the relative outperformers.
Overall, altcoin outperformance vis-à-vis bitcoin remained low last week, with only 20% of our tracked altcoins managing to outperform bitcoin on a weekly basis. Ethereum continued to outperform bitcoin last week.
Our in-house “Cryptoasset Sentiment Index” has increased slightly compared to last week and is now signalling a neutral level of sentiment.
At the moment, 6 out of 15 indicators are above their short-term trend.
Last week, the Hedge Fund Beta, BTC Exchange Inflows, BTC perpetual funding rates, Crypto Dispersion, Cross Asset Risk Appetite, and the Bitcoin STH-SOPR metrics showed positive momentum.
The Crypto Fear & Greed Index continues to signal an “extreme fear” level of sentiment as of this morning. The index has spent the whole month of November and December, so far, in either “fear” or “extreme fear” territory.
Performance dispersion among cryptoassets declined slightly last week from 0.37 to 0.35. When dispersion is high, it means that the market appears to be driven by a more diverse set of narratives which tends to be a sign of increasing risk appetite.
Altcoin outperformance vis-à-vis Bitcoin decreased last week, with around 20% of our tracked altcoins managing to outperform Bitcoin on a weekly basis. Meanwhile, Ethereum continued to outperform Bitcoin last week.
In general, increasing (decreasing) altcoin outperformance tends to be a sign of increasing (decreasing) risk appetite within cryptoasset markets and the latest altcoin underperformance still signals decreasing risk appetite at the moment.
Sentiment in traditional financial markets as measured by our in-house measure of Cross Asset Risk Appetite (CARA) remained unchanged at 0.74. This is a notable divergence between TradFi and crypto asset sentiment that should be continued to watch closely.
Global crypto ETPs saw slightly accelerating net inflows last week, mainly in Bitcoin and Ethereum products.
Global crypto ETPs saw around +733 mn USD in weekly net inflows across all types of cryptoassets, after +465.2 mn USD in net inflows the previous week.
Global Bitcoin ETPs have continued to experience net inflows totalling +516.7 mn USD last week, of which +286.6 mn USD in net inflows were related to US spot Bitcoin ETFs.
The Bitwise Bitcoin ETF (BITB) in the US experienced net inflows, totalling +24.7 mn USD last week.
In Europe, the Bitwise Physical Bitcoin ETP (BTCE) experienced net inflows equivalent to +1.5 mn USD, as the Bitwise Core Bitcoin ETP (BTC1) also experienced net inflows of +1.4 mn USD.
The Grayscale Bitcoin Trust (GBTC) has posted net outflows of -38.8 mn USD and the iShares Bitcoin Trust (IBIT) experienced net inflows of around +214.1 mn USD last week.
Meanwhile, global Ethereum ETPs also experienced +339.2 mn USD in net inflows last week – a significant acceleration compared to last week.
US spot Ethereum ETFs, also recorded net inflows of around +208.9 mn USD on aggregate. The Grayscale Ethereum Trust (ETHE), has posted net outflows of -34.2 mn USD.
The Bitwise Ethereum ETF (ETHW) in the US has posted net inflows of +17.9 mn USD.
In Europe, the Bitwise Physical Ethereum ETP (ZETH) saw minor net outflows of -0.4 mn USD while the Bitwise Ethereum Staking ETP (ET32) saw +0.2 mn of net inflows.
Altcoin ETPs ex Ethereum experienced net outflows of -16.1 mn USD last week.
Thematic & basket crypto ETPs also posted net outflows of -106.8 mn USD on aggregate last week. The Bitwise MSCI Digital Assets Select 20 ETP (DA20) has experienced no net flows last week (+/- 0 mn USD) on aggregate.
Global crypto hedge funds exposure to Bitcoin remained unchanged last week. The 20-days rolling beta of global crypto hedge funds’ performance to Bitcoin remained at around 0.98 per yesterday’s close.
Sell-side pressure across exchanges continues to deepen, with intraday spot buying minus selling closing the week at approximately at -$1.47bn, up from -$370mn.
At the same time, on-chain profit taking has also experienced a slight uptick from $340mn to $488mn per day. Despite the increase, overall profit taking remains subdued, indicating that de-risking among profitable investors is continuing to exhaust within this price range.
Market sentiment remains fragile with 33.5% of the supply in loss. This corresponds to $706bn of invested value that is an underwater position. In total, the losses held across these coins amount to -$103bn, or -$15.4k per coin, which remains historically elevated, but is showing signs of easing.
Additionally, pressure on underwater investors continues to surface on-chain, with realised losses remaining elevated at around -$459mn per day, down modestly from -$492mn previously. This marks the largest loss-taking period since the FTX collapse, and while it presents short-term headwinds, such capitulation has historically been a necessary step in forming durable market floors as supply migrates from weaker to more resilient holders.
Further confirmation of this sentiment deterioration can be found in the Fear and Greed Index, which has retreated into Extreme Fear territory, suggesting that on-chain conditions and sentiment indicators are in alignment.
Mature investor distribution remains elevated, with the Long-Term Holder to Short-Term Holder supply ratio recording a sharp 30-day percentage decline of -14.3%, ranking among the most extreme readings on record (only 210 / 5628 trading days have recorded lower). This confirms that coins continue to rotate from long-term holders toward newer market participants. However, unlike prior distribution waves seen near the March and November 2024 all-time highs, the current transfer is occurring into depressed price conditions. Although prior examples remain sparse, these conditions have usually occurred across market bottoming processes.
Price continues to attempt to break through the $93.5k threshold, which we have highlighted as a critical region to claim for market momentum. Notably, any breakthroughs above this region have been short lived and met with rejection. Furthermore, the drawdowns across the rejections are getting increasingly shallower. This coiling of price suggests that volatility is brewing within our local price range.
As of current, the bottom of the local price range is the is $82k-$75k region, where the average investor purchasing price, the MSTR cost basis and the US spot Bitcoin ETF cost basis reside. The top of the range is the Short-Term Holder Cost-Basis at $102k, which closely aligns with the $100k psychological level. The $93.5k level remains the point of control for the range, and shares confluence with the yearly open.
Over the past week, BTC perpetual futures open interest declined by -4.8k BTC across all exchanges, while CME futures open interest increased by a +2k BTC, indicating a slight uptick in institutional positioning. In aggregate, total open interest remains relatively subdued compared to recent months, suggesting that the futures market is not the primary driver of current price action.
BTC perpetual funding rates continue to grow but remain close to neutral, suggesting that a long-bias is still present, yet investor risk appetite remains low. This is a constructive development, as funding rates resetting toward equilibrium suggests that derivatives positioning is no longer driving market behaviour, supporting the observation that spot flows are exerting greater influence over price direction.
In general, when the funding rate is positive (negative), long (short) positions periodically pay short (long) positions, which is indicative of bullish (bearish) sentiment.
The BTC 3-month annualised basis remained steady this week, falling slightly from 5.2% to 4.6% this week. The lack of significant movement here reinforces the notion that derivatives positioning is relatively muted.
Across multiple weeks, open interest continues to build at the $94k level, adding confluence to the observation that $93.5k remains a critical threshold for further constructive price action. This area is likely to be highly sensitive, with short traders defending their positions.
BTC options open interest has increased by approximately +26.6k BTC. In addition, the put to call open interest ratio remains broadly stable at 0.53 suggesting that demand for downside protection remains balanced.
However, the 25-delta skew remained broadly unchanged across all tenors this week and continues to sit at elevated levels, indicating that the cost of downside protection remains high. Notably, the gradual rise in skew over recent months has been the most structurally contained increase of the cycle, suggesting that market uncertainty has been steadily building into year-end rather than spiking abruptly.
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