This report is for professional investors and information purposes only. Persons without professional investment experience should not rely on it. Not investment advice or a personal recommendation. Cryptoassets are high risk and volatile and you may lose all capital invested. See full risk information at the end of this document.
- Performance: Digital assets remained largely stagnant over the week, with Bitcoin continuing to consolidate despite volatile macro and cross-asset conditions. Beneath the surface, US spot Bitcoin ETF flows improved meaningfully, marking a break from the weaker demand observed in recent weeks. At the same time, realised and implied volatility remain exceptionally compressed, while trading volumes are historically subdued, suggesting the probability of a larger volatility expansion is building.
- Sentiment: Our in-house Cryptoasset Sentiment Index has increased significantly, consistent with the surge of positive inflows into ETF instruments and now signals a substantial level of positive sentiment. Readings now sit at historically elevated levels, albeit with some further headroom, which may in turn weigh on prices over the short term in the event of a reversal.
- Chart of the Week: Bitcoin implied volatility remains exceptionally compressed across the maturity curve. At-the-money IV for one-week, one-month, three-month and six-month options currently ranks in only the 1.6th, 1.0th, 1.7th and 0.6th historical percentiles, respectively. This broad-based compression suggests options markets are pricing remarkably subdued expectations for future price movement. Historically, such extreme volatility suppression has often preceded periods of expansion, although the eventual direction of that move remains uncertain.
Chart of the Week
Performance
Bitcoin and other major cryptoassets continued to consolidate over the past week despite a significant improvement in underlying investment demand. Despite the languishing price action, net flows into cryptoasset ETPs accelerated substantially, marking a clear reversal from the rather sluggish flow environment highlighted in last week's report. In the US alone, spot Bitcoin ETFs recorded approximately $865mn of net inflows over the past week, while spot Ethereum ETFs attracted another approximately $244mn.
At the same time, the build-up in potential volatility that we highlighted last week has continued rather than resolved. Bitcoin's trading range remains exceptionally compressed across multiple time horizons, while implied volatility, representing options markets' expectations for future volatility, has also declined to unusually subdued levels.
As highlighted previously, periods of extreme volatility compression have historically tended to precede increases in realised volatility.
Apart from that, another important development over the weekend was the decisive failure of BIP-110 to gain meaningful consensus on the dominant Bitcoin chain. BIP-110 proposed a temporary consensus-level soft fork aimed at restricting the use of Bitcoin for arbitrary data storage, including tighter limits on the amount of non-financial data that could be embedded in Bitcoin transactions. A blockchain fork occurs when participants enforce incompatible consensus rules and therefore begin recognising different versions of the ledger as valid.
Once BIP-110-enforcing nodes entered the mandatory-signalling phase, they began rejecting blocks that did not signal support for the proposal and consequently forked themselves away from the dominant Bitcoin network. Miner signalling stood at approximately 2.5%, meaning that the overwhelming majority of hashpower continued extending the established chain. The resulting minority chain produced only two blocks before effectively stalling.
We think this episode provides another important real-world demonstration of Bitcoin's decentralised governance model. A proposed consensus change does not automatically become part of Bitcoin simply because a subset of participants begins enforcing it. In the absence of sufficiently broad miner and broader economic node support, the established chain remains the natural coordination point for the network.
In other words, continuity is Bitcoin's default position. The burden is on proponents of a consensus change to coordinate sufficiently broad adoption; otherwise, participants enforcing the minority ruleset simply fork themselves away from the economically dominant chain rather than forcing Bitcoin to adopt their preferred rules. The BIP-110 episode therefore highlights the very high threshold required to alter Bitcoin's consensus rules without broad agreement.
There have also been important developments on the macro side. The latest US employment report was considerably weaker than expected. Nonfarm payrolls declined by 23k in July compared with consensus expectations for an increase of around 80k, while May and June payroll growth was revised lower by a combined 103k. Moreover, the decline in the unemployment rate from 4.2% to 4.1% was accompanied by a further fall in labour-force participation from 61.5% to 61.4%.
The immediate market reaction was a reduction in expectations for further Fed tightening. The probability of a September rate hike declined to approximately 44%, while shorter-dated Treasury yields and the US dollar also moved lower. The 10-year Treasury yield nevertheless ended Friday around 4.65%, meaning that longer-term Treasury yields remain elevated despite the weaker labour-market data.
This distinction is important. While markets have reduced expectations for further tightening, the Fed itself has shown little indication of a shift towards a more accommodative stance as of yet. At its latest meeting, three FOMC members dissented in favour of an immediate 25-bp rate increase, while inflation remains above the Fed's 2% objective. Initial signs of labour-market weakness alone may therefore not yet be sufficient to materially alter the monetary-policy outlook, a more sustained deterioration would provide a stronger basis for such a shift.
Instead, the macro environment is increasingly characterised by a tension between weakening labour-market momentum and persistent inflationary pressures. This makes developments in oil prices and long-term Treasury yields particularly important. Despite falling sharply earlier in the week, Brent ultimately finished around $83.55 per barrel as uncertainty surrounding the Strait of Hormuz persisted, highlighting that the inflationary impulse from energy markets has not disappeared and that geopolitical risks remain elevated.
Keeping oil prices contained is therefore an extremely important policy priority for the US administration. A renewed increase in oil prices would add to inflationary pressures, reinforce expectations for higher interest rates and risk pushing Treasury yields higher, potentially placing additional strain on the US Treasury market.
In general, among the top 10 crypto assets Zcash, Solana, Hyperliquid were the relative outperformers. Ethereum underperformed bitcoin last week.
Sentiment
Our in-house “Cryptoasset Sentiment Index”[1] has increased significantly and now signals a substantial level of positive sentiment. Readings now sit at historically elevated levels, albeit with some further headroom, which may in turn weigh on prices over the short term in the event of a reversal.
At the moment, 13 out of 15 indicators remain above their short-term trend.
For instance, cross asset risk appetite reversed last weeks negative reading, which likely provided a boon to risk appetite and demand for crypto assets.
The Crypto Fear & Greed Index has continued to remain in the ‘fear' territory.
Performance dispersion increased slightly as longer tail altcoins outperformed. The Gaming sector, led by Axie Infinity and Ronin, and the Layer-1 sector, led by BTC, ETH, Zcash, BNB, HYPE and SOL, led the advance.
When dispersion increases, it may indicate that the market appears to be driven by a more diverse set of narratives which, in our analysis, has historically been associated with periods of increasing risk appetite in prior market cycles.
Altcoin outperformance vis-à-vis Bitcoin declined somewhat to 20% of our tracked altcoins in the index. Ethereum modestly underperformed Bitcoin over the week. This points to a softening in sentiment alongside greater dispersion, consistent with a weaker footing and something of a relief rally, as corroborated by the concentration of spot fund flows into the majors.
Sentiment in traditional financial markets as measured by our in-house measure of Cross Asset Risk Appetite (CARA) has increased slightly from 0.66 to 0.68 over the past week, signalling an improvement in risk appetite. This has likely fed through to broader crypto risk appetite.
The CME Bitcoin Commercials Net Positioning metric shows the difference between long and short CME Bitcoin futures contracts. The reading has declined further to -16.43% of open interest, from -17.5%, suggesting that investors have taken off some short leverage amidst which likely helped the recent rebound higher. Although downside positioning—outright or hedged—remains the dominant view.
All in all, a pick-up in risk appetite, led by an improvement in cross-asset risk appetite, fed through to altcoins. That said, the combination of wider performance dispersion yet reduced altcoin outperformance, bar a handful of Layer-1s, suggests the move is more consistent with a relief rally than anything else. Caution is warranted, given our in-house Sentiment Index sits at historically high levels indicating the short-term forward outlook is potentially stretched.
Fund Flows
Global crypto ETPs experienced around +1146.5 mn USD in net inflows last week, across all types of cryptoassets, after -83.5 mn USD in net outflows the previous week.
Global Bitcoin ETPs experienced net inflows of +923 mn USD last week, of which +832.1 mn USD in net inflows were related to US spot Bitcoin ETFs.
The Bitwise Bitcoin ETF (BITB) in the US experienced net inflows of +25.9 mn USD last week.
In Europe, the Bitwise Physical Bitcoin ETP (BTCE) experienced net outflows equivalent to -1.2 mn USD, as the Bitwise Core Bitcoin ETP (BTC1) experienced net inflows of around +1 mn USD.
The Grayscale Bitcoin Trust (GBTC) posted net inflows of +7.5 mn USD whereas, the iShares Bitcoin Trust (IBIT) experienced net inflows of around +693.6 mn USD last week.
Meanwhile, global Ethereum ETPs experienced +227.5 mn USD in net inflows last week, of which US spot Ethereum ETFs recorded net inflows of around +231 mn USD on aggregate.
The Grayscale Ethereum Trust (ETHE) posted net outflows of -4.8 mn USD, whilst the iShares Ethereum Trust (ETHA) saw net inflows of +203.1 mn USD.
The Bitwise Ethereum ETF (ETHW) in the US experienced net inflows of +2.7 mn USD last week.
In Europe, the Bitwise Physical Ethereum ETP (ZETH) recorded net outflows of -0.4 mn USD, whilst the Bitwise Ethereum Staking ETP (ET32) saw net inflows of +1.3 mn USD.
Altcoin ETPs ex Ethereum also saw net outflows of -0.7 mn USD last week.
Thematic & basket crypto ETPs posted net outflows of -3.2 mn USD on aggregate last week. The Bitwise MSCI Digital Assets Select 20 ETP (DA20) recorded no net inflows or outflows last week.
All in all, flows staged a decisive reversal last week, swinging from modest net outflows to over 1.1 bn USD of net inflows as risk appetite returned across the digital-asset complex. Bitcoin did the heavy lifting, with US spot ETFs accounting for most of the move. Ethereum flows were similarly constructive, led by ETHA at +203.1 mn USD, whilst Grayscale's legacy trusts remained a modest drag on both assets. Altcoin and thematic products were broadly flat to marginally negative, suggesting allocators concentrated conviction in the two majors rather than spreading exposure across the wider complex. The tone marks a clear improvement on the prior week and points to renewed institutional demand at the index level.
On-Chain Data
Bitcoin’s consolidation continues, with price remaining remarkably tight despite the recent Coldcard exploit, the resolution of the BIP-110 dispute, volatility across the AI trade and a complex macroeconomic backdrop. Bitcoin’s relative calm amid these external shocks highlights a growing degree of inertia around the asset, with price appearing increasingly less reactive to outside forces. However, beneath the surface, this lack of movement is becoming increasingly atypical. This week, we continue to highlight that volatility risk is building as potential energy accumulates.
To quantify the degree of price compression, we assess the dollar range in which Bitcoin has traded over the past 30, 60 and 90 days, before ranking each observation on a historical percentile basis. Periods of tightly coiled price action have often preceded increases in realised volatility. Consolidation can encourage investor apathy and seller exhaustion, eventually giving way to a period of expansion. Importantly, however, the direction of any volatility expansion remains uncertain.
| Window | Historical Percentile |
|---|---|
| 30-Day | 1.88% |
| 60-Day | 1.72% |
| 90-Day | 23.7% |
The 30-day and 60-day windows are exceptionally compressed, while the 90-day window remains moderately compressed. Through the lens of this framework, the probability of an increase in realised volatility appears elevated.
This compression is also visible across the options market, where implied volatility remains extremely low across the maturity curve. From one-week contracts through one-month, three-month and six-month tenors, market participants are pricing unusually subdued expectations for future Bitcoin volatility, with each measure sitting near the extreme lower end of its historical range.
| Tenor | Historical Percentile |
|---|---|
| 1-Week | 1.56% |
| 1-Month | 1.04% |
| 3-Month | 1.67% |
| 6-Month | 0.56% |
This is important because implied volatility reflects the market’s collective pricing of future movement. When volatility expectations become this depressed across multiple tenors simultaneously, the market can become increasingly crowded around the assumption that very little will happen. From a contrarian perspective, such conditions can leave the market more vulnerable to an eventual volatility expansion.
The investor apathy implied by this compression is also visible across major market sectors, where volumes remain heavily subdued. Spot, futures and options volumes all rank in the 0.3rd percentile over the past year, highlighting the acute lack of investor attention across these instruments at present.
The broader malaise in market activity points to a substantial lack of liquidity. Low volumes create a thinner market surface, increasing the potential for relatively modest flows or external shocks to have an outsized impact on price action.
On balance, activity continues to reflect a severe lack of investor engagement across digital asset markets. Historically, when liquidity becomes this constrained, price often needs to move materially to unlock latent supply and encourage renewed capital movement.
| Market | 7-Day Volume | 1-Year Percentile |
|---|---|---|
| Spot | $23.7bn | 0.3% |
| Futures | $175.4bn | 0.3% |
| Options | $15.8bn | 0.3% |
| On-chain | $38.0bn | 45.6% |
| ETF | $8.1bn | 4.4% |
| DAT | $8.0bn | 9.3% |
As mentioned in the performance section above, a meaningful inflow into the etf complex has arrived, despite the intert price action. This is a material break from the behaviour of these investors we have observed over recent weeks, which has been characterised by strong outflows, or weak inflows during periods of short market relief. Whilst this remains just one weeks reading, a continuiantion of this trend would be considered a constructive market development.
Additionally, a positive divergence continues to form between declining price action and diminishing investor losses across the macro timeframe. While this may appear counterintuitive, the mechanics are straightforward: as sellers progressively exhaust the supply available to distribute, each successive leg lower can carry less sell-side pressure even as price continues to contract. This suggests that a degree of seller exhaustion may be emerging.
Historically, this has been a constructive divergence, although such patterns can still fail, particularly across noisier local timeframes. A further positive observation would be for the divergence to persist even in the event of another leg lower.
Whilst there are positive observations such as mentioned throughout the text, volatility remains coiled and directionally agnostic, therefore, it is prudent to assess to key pricing levels to both the upside and downside.
On the downside, the Realised Price at $52.8k, representing the market’s average cost basis, and the 200-week moving average at $63.7k have historically bracketed the regions where terminal cycle lows form during deep bear markets. Our base case remains that terminal valuation forms within this range.
At present, price appears to be finding a degree of support around the 200-week moving average, which would represent a constructive development if sustained. However, a decisive loss of this level would bring the Realised Price back into focus as the next major downside reference.
To the upside, the Short-Term Holder cost basis at $68.7k, representing the average acquisition price of newer investors, and the True Market Mean at $75.9k, representing the average acquisition price of active investors, mark important local and macro equilibrium levels. A decisive reclaim of these thresholds has historically been associated with renewed momentum and a return to risk-on conditions.
Futures, Options & Perpetuals
Over the past week, BTC perpetual futures open interest decreased by approximately 6.77k BTC, while CME futures open interest increased by around 9.6k BTC. That combination suggests some deleveraging across offshore perpetual markets while positioning continued to build in the more institutionally oriented CME market. Aggregate futures liquidations declined from the prior week. In total, liquidations reached roughly $1.26bn over the week, with long liquidations of $0.50bn and short liquidations of $0.75bn. The higher share of short liquidations is consistent with Bitcoin’s modest recovery over the period.
The week’s positioning reflected a market that remained resilient despite a mixed macro backdrop. US labour data softened, while services activity remained in expansion and price pressures stayed elevated, leaving the Fed balancing weaker employment against persistent inflation risks. Bitcoin remained above its 200-week moving average and is currently hovering around $65k. Liquidity is now forming around $62k on the downside and $66k on the upside.
Perpetual funding rates, measured on a 7-day moving average, ended the week at around +5.83% annualised, down from +6.63% last week. Combined with the decline in perpetual open interest, this suggests leveraged positioning became somewhat less aggressive over the week. In other words, the market moved higher without a corresponding build-up in offshore leverage, which points to a relatively cautious recovery rather than traders aggressively adding leveraged long exposure.
At the same time, the BTC 3-month annualised basis ticked higher to around 4.3% from 4.0% last week. This leaves the futures curve modestly positive and suggests demand for term futures increased slightly. Taken together with the 9.6k BTC increase in CME open interest, the higher basis points to some increase in institutionally oriented futures exposure, even as perpetual markets saw open interest decline. The divergence suggests positioning shifted somewhat away from shorter-term offshore leverage and towards longer-dated futures exposure.
In options markets, BTC Deribit options open interest increased modestly by roughly 710 BTC, bringing total open interest to around 331.2k BTC. The Deribit put-to-call open interest ratio increased to 0.66, while the equivalent metric across IBIT options moved slightly higher to 0.67 by week’s end.
Taken together, these moves suggest options positioning became somewhat more defensive despite the improvement in spot prices. The increase in the Deribit put-to-call ratio points to greater relative demand for downside protection among crypto-native participants, while the slightly higher IBIT ratio suggests ETF-linked options investors also remained cautious. This is consistent with a market where Bitcoin has recovered but investors remain mindful of the mixed macro backdrop.
The 25-delta skew moved lower across all tenors. This suggests downside protection became cheaper relative to upside exposure, potentially reflecting stronger demand for calls as Bitcoin recovered and remained above its 200-week moving average. It may also indicate that investors were less willing to pay a premium for downside hedges despite the increase in put-to-call open interest. The move therefore points to a somewhat more balanced options market, with investors maintaining protection while also positioning for further upside.
Total GEX, on a 7-day moving average basis, increased from around -$1.50bn to -$0.42bn. This suggests dealer positioning became considerably less negative over the week, reducing the extent to which dealer hedging flows could amplify large price moves. Gamma exposure nevertheless remains slightly negative, meaning dealers may still need to sell into declines or buy into rallies, but the magnitude of those flows should be lower than last week.
Dealer gamma exposure is now concentrated close to the current spot price. The bulk of negative gamma is clustered around the $65k strike, while positive gamma is concentrated around the $70k range. With Bitcoin currently trading around $65k, negative gamma at this level could contribute to more volatile price action if spot begins to move sharply away from the strike. If Bitcoin moves towards $70k, the positive gamma concentration may increasingly dampen volatility as dealer hedging flows begin to work against larger price moves.
In short, Bitcoin remained resilient despite a mixed macro backdrop, while futures positioning became less aggressive in offshore markets and more concentrated in CME. Perpetual open interest declined by 6.77k BTC, while CME open interest increased by 9.6k BTC. Liquidations declined to $1.26bn and were weighted towards shorts, while funding moved lower and the 3-month basis increased modestly. Options open interest increased by 710 BTC, while both Deribit and IBIT put-to-call ratios moved higher, suggesting somewhat more defensive positioning. With dealer GEX becoming significantly less negative and liquidity concentrated between $62k and $66k, the market appears less vulnerable to dealer-driven amplification than last week, although negative gamma around the current $65k level could still increase volatility if Bitcoin breaks out of its current range.
Bottom Line
- Performance: Digital assets remained largely stagnant over the week, with Bitcoin continuing to consolidate despite volatile macro and cross-asset conditions. Beneath the surface, US spot Bitcoin ETF flows improved meaningfully, marking a break from the weaker demand observed in recent weeks. At the same time, realised and implied volatility remain exceptionally compressed, while trading volumes are historically subdued, suggesting the probability of a larger volatility expansion is building.
- Sentiment: Our in-house Cryptoasset Sentiment Index has increased significantly, consistent with the surge of positive inflows into ETF instruments and now signals a substantial level of positive sentiment. Readings now sit at historically elevated levels, albeit with some further headroom, which may in turn weigh on prices over the short term in the event of a reversal.
- Chart of the Week: Bitcoin implied volatility remains exceptionally compressed across the maturity curve. At-the-money IV for one-week, one-month, three-month and six-month options currently ranks in only the 1.6th, 1.0th, 1.7th and 0.6th historical percentiles, respectively. This broad-based compression suggests options markets are pricing remarkably subdued expectations for future price movement. Historically, such extreme volatility suppression has often preceded periods of expansion, although the eventual direction of that move remains uncertain.
Appendix
Data subject to change
Combined positioning = futures and options in % of Ol
[1] The Cryptoasset Sentiment Index is a composite indicator consisting of 15 different sub-indicators covering sentiment, on-chain, derivatives, flows developments as well as sentiment in traditional financial markets. A 90-day rolling z-score is used to standardise and aggregate these sub-indicators.
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