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: Bitcoin, Ethereum and the top 20 digital assets outperformed this week as equities, commodities and bonds fell. Global bond yields rose, with the US 10-year at 5.2% and France's spread over Germany at 141bps, the widest since 2012. Two-year yields remain above policy rates, and the RBA hiked to 4.60%, its fourth rise this year. US labour and inflation data mostly missed, though GDP growth beat expectations at 2.2%, driving a twist steepener in the yield curve. Decoupling from equities, a softer AI trade and a weaker dollar could support Bitcoin further, although euro, gilt, Iran or Fed shocks could strengthen the dollar in the short term.
- Cryptoasset Sentiment Index:[1] Our in-house Cryptoasset Sentiment Index increased into positive territory although sits subdued relative to the past several weeks. It has now regained significant headroom having softened substantially already, pointing to a potential reversal of risk appetite.
- Chart-of-the-Week: A slowdown in the AI trade, alongside global bond yields increasing could further weaken the US dollar from capital outflows which may provide a tailwind for Bitcoin given its negative 30-day and 90-day correlation at -0.29 and -0.4, respectively. Risks such as a Eurodollar flare up and continued geopolitical tensions may provide a short tailwind for a safe haven bid. However, also note that correlations with equity markets are starting to increase again, with the 30-day at 0.69 suggesting any AI spill over could be a temporary net detractor to performance.
Chart of the Week
Performance
Global bond yields continue their rise higher. The US 10-year Treasury yield ended the week at 5.2%, while the 30-year reached ~5.6%. Europe continues to suffer. France has suffered the most as their 10-year spread relative to Germany has increased the most since the beginning of the year: 141 basis points (bps), the widest since the Eurozone debt crisis of 2012. Italy, Greece and Spain all pay a premium between 117 and 67 basis points.
Broadly speaking, monetary policy is still restrictive. Two-year government note yields are above central banks' official policy rates. The UK, for example, has a spread of 107bps. The gap is smallest in Australia, at 34bps. Continued hikes are still evident, as the Reserve Bank of Australia raised its cash rate by 25bps to 4.60% on September 29, its fourth hike this year.
US employment (JOLTs Job Openings, Unemployment Rate), inflation (Core PCE, Non-Farm Payrolls) and growth (ISM Manufacturing, although still above 50 at 54.5) data came all came in below expectations. Quarter over quarter GDP growth rate did beat expectations at 2.2% compared to 1.5%, however. Although overall, this led to twist steepner of the curve: front end rates falling as long-end rates rose. Investors are now managing the balance of risks with possible continued tightening to achieve credibility with the bond market before potentially easing aggressively later.
Despite this, crypto was still bid. Bitcoin, Ethereum and a basket of the top 20 Digital Assets outperformed the broader market as global equities, commodities and bond indexes all declined. This is indicative of how the crypto market is positioned relative to other asset classes. The asset class appears well-primed for continued fiscal deficits, weakening government finances and bond volatility, as a scarce hedge against debasement.
But there’s more. Markets are already pricing a slowdown in global growth, which is currently the dominant driver behind US equities, with expectations already rolling over. This has likely dampened the equity risk bid recently. A slowdown in the AI trade and rising sovereign yields, could then weaken the US Dollar, of which could drive Bitcoin higher with the negative 30d and 90d correlation at -0.29 and -0.4, respectively. Pair this with stretched momentum indicators for broader asset classes (Mayer Multiple; price / 200-day moving average) relative to Bitcoin, suggests Bitcoin could be undervalued in this scenario.
Risks such as a renewed Euro crisis flare-up (French German 10Y spreads continue to blow out) and pre-Budget pressure on gilts may weigh on the euro and sterling, which together make up around 70% of the DXY index. Escalation in Iran could lead to a safe-haven bid temporarily, and a hawkish tone in this week's FOMC minutes could revive October rate-hike odds. Together, these could drive short-term Dollar strength, which is worth monitoring. It is also worth monitoring the increasing correlations between Bitcoin and the S&P 500 with any AI spill over potentially temporarily negatively affecting Bitcoin.
Bottom Line: Digital assets outperformed this week amidst continued increases in global bond yields that weighed on traditional risk assets. Investors are pricing in demand for an asset that is a hedge against monetary debasement and fiscal dominance. Although a straight path higher is not clear. Temporary dollar strength could stem risk appetite.
Sentiment
Our in-house “Cryptoasset Sentiment Index”[2] increased into positive territory although sits subdued relative to the past several weeks.
At the moment, 10 out of 15 indicators remain above their short-term trend.
The most notable changes were in BTC exchange inflows and BTC Long Futures Liquidation Dominance, which both flipped from negative to positive. This suggests investors are more inclined to sell amidst a futures market that is struggling suggesting last week’s move was mostly spot driven.
The Crypto Fear & Greed Index declined slightly over the past week but still remains within the “Greed” Zone.
Performance dispersion increased slightly despite large net outflows of spot Ethereum and Altcoin ETPs. This was mostly driven by the gaming sector which is up +30% week over week.
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 substantially to 15% from 80% of the altcoins tracked in our index. This is more synonymous with the large spot outflows of the major blue-chip coins yet slight performance dispersion driven by gaming tokens.
Sentiment in traditional financial markets as measured by our in-house measure of Cross Asset Risk Appetite (CARA) has decreased from 0.38 to -0.01 over the past week, signalling risk appetite has declined from less favourable macro conditions.
The CME Bitcoin Commercials Net Positioning metric captures the difference between long and short CME Bitcoin futures contracts. The reading has declined to –13.96% of open interest, suggesting traders have increased their short leverage alongside the reversal in flows.
Bottom Line: Crypto and TradFi sentiment diverged. Altcoins took the brunt as outperformance declined apart from a small subsector, in that of Gaming, causing dispersion to increase slightly. Crypto sentiment has regained significant headroom having softened in the past several weeks pointing to a potential reversal of risk appetite.
Fund Flows
Global crypto ETPs experienced around –69.6 mn USD in net outflows last week, across all types of cryptoassets, after +3,330.1 mn USD in net inflows the previous week.
Global Bitcoin ETPs experienced net inflows of +290.9 mn USD last week, of which +231.6 mn USD in net inflows were related to US spot Bitcoin ETFs.
The Bitwise Bitcoin ETF (BITB) in the US experienced net outflows of –38.7 mn USD last week.
In Europe, the Bitwise Physical Bitcoin ETP (BTCE) experienced net inflows equivalent to +0.4 mn USD, as the Bitwise Core Bitcoin ETP (BTC1) experienced net inflows of around +5.5 mn USD.
The Grayscale Bitcoin Trust (GBTC) posted net outflows of –54.6 mn USD whereas, the iShares Bitcoin Trust (IBIT) experienced net inflows of around +450.2 mn USD last week.
Meanwhile, global Ethereum ETPs experienced –255.3 mn USD in net outflows last week, of which US spot Ethereum ETFs recorded net outflows of around –138.0 mn USD on aggregate.
The Grayscale Ethereum Trust (ETHE) posted net outflows of –27.9 mn USD, whilst the iShares Ethereum Trust (ETHA) saw net outflows of –13.7 mn USD.
The Bitwise Ethereum ETF (ETHW) in the US experienced no net inflows or outflows last week.
In Europe, the Bitwise Physical Ethereum ETP (ZETH) recorded net outflows of –0.8 mn USD, whilst the Bitwise Ethereum Staking ETP (ET32) saw net outflows of –0.2 mn USD.
Altcoin ETPs ex Ethereum also saw net outflows of –101.7 mn USD last week.
Thematic & basket crypto ETPs posted net outflows of –3.4 mn USD on aggregate last week. The Bitwise MSCI Digital Assets Select 20 ETP (DA20) recorded net inflows of +0.2 mn USD last week.
Bottom Line: Flows cooled abruptly after the previous week's outsized intake, with global crypto ETPs slipping into modest net outflows as investors favoured Bitcoin over Ethereum and altcoins. Ethereum bore the brunt at –255.3 mn USD globally, a little over half of it via US spot Ethereum ETFs, whilst altcoin ETPs ex Ethereum swung from +245.2 mn USD of net inflows the prior week to –101.7 mn USD of net outflows. The backdrop points to a risk-off turn: Cross Asset Risk Appetite (CARA) slid from 0.38 to around zero over the week and the Altseason Index dropped from 85 to as low as 5, suggesting investors sheltered in Bitcoin and cut exposure to higher-beta assets.
On-Chain Data
Bitcoin pushed higher over the past week, reaching approximately $87k before retracing back towards the $83k region and subsequently recovering to around $85k. Importantly, price continues to hold above the average ETF cost basis and the prior technical higher-high threshold, reinforcing the view that this former resistance zone is beginning to establish itself as support. As noted in the September edition of the Bitcoin Macro Investor, we believe decisive break above this area marked the transition into a new bull-market structure, and the successful retest so far remains constructive.
In the event of downside, Bitcoin also retains a meaningful cushion before the broader constructive structure would come under pressure. Notably, the True Market Mean, Short-Term Holder cost basis and 200-day moving average measures currently are clustered between roughly $74k and $77k of which price remains comfortably above this zone. A future pullback towards this area that is successfully absorbed would remain consistent with constructive risk-on conditions and further reinforce the transition of former resistance into support.
Interestingly, Bitcoin’s volume profile remains highly selective across market segments. Spot and futures activity are both deeply subdued, sitting around the 27th and 29th percentiles of their respective one-year distributions, indicating relatively weak participation across the core trading venues. By contrast, options and on-chain volumes remain elevated at roughly the 82nd and 75th percentiles, suggesting that activity is currently concentrated more heavily in derivatives positioning and on-chain capital movement. ETF turnover is similarly subdued near the 26th percentile, while DAT activity sits closer to the middle of its historical range.
| Market Segment | 7-Day Volume | 1-Year Percentile |
|---|---|---|
| Spot | $41.9bn | 26.8th |
| Futures | $281.6bn | 29.2nd |
| Options | $44.7bn | 82.2nd |
| On-chain | $46.9bn | 75.4th |
| ETF | $10.8bn | 26.0th |
| DAT | $15.3bn | 57.1st |
Overall, participation remains fragmented rather than broad-based, with elevated activity in options and on-chain flows not yet translating into a more general expansion in spot and futures volume.
With price recovering, Bitcoin’s Percent Supply in Profit has risen to roughly 74.7%, bringing the metric back towards its long-term mean and placing investor profitability near a broader market equilibrium.
Historically, sustained breaks above this mean have often been associated with a strengthening bull-market regime, as a growing share of supply moves back into profit. However, the mean can also act as resistance during transitional phases when profitability has only recently recovered. Continued expansion above this level would therefore provide further evidence of increasing durability in the bull-market structure, while repeated rejection could lead to local downside.
As covered in last week’s note, Realised Supply Density remains elevated and continues to climb, rising further to approximately 21.5% of circulating supply within ±10% of spot. This keeps the metric well above its +1σ threshold and suggests that volatility conditions are continuing to tighten beneath the surface. With an increasingly large share of supply clustered close to the prevailing market price, relatively small moves can affect a broader group of holders, increasing market sensitivity and leaving the market more vulnerable to a larger volatility expansion should price break decisively from the current range.
Taken together, Bitcoin’s broader market structure remains constructive. Price continues to hold above the average ETF cost basis and prior higher-high threshold, while key structural pricing levels remain comfortably below spot. At the same time, participation remains selective rather than broad-based, with subdued spot and futures volumes contrasting against stronger options and on-chain activity, creating an uneven participation profile across the market.
Notably, investor profitability has recovered back towards equilibrium, a level that has historically acted as an important inflection point between transitional and more euphoric bull-market conditions. At the same time, volatility conditions continue to tighten beneath the surface, with an increasing share of supply now concentrated close to the prevailing spot price. The key question remains whether Bitcoin can continue to defend the $83k region and translate the improvement in market structure into a broader expansion in participation, profitability and ultimately price.
Futures, Options & Perpetuals
Over the past week, BTC perpetual futures open interest declined by around 5.1k BTC, or approximately 1.2%, falling to roughly 416.0k BTC. The contraction is considerably smaller than the 35.2k BTC reduction observed last week, suggesting that the more aggressive deleveraging across perpetual markets has slowed.
CME futures open interest also declined materially, falling by around 11.3k BTC over the same period. This represents a sizeable reversal from last week’s increase and may partly reflect some unwinding of cash-and-carry positioning, although the decline cannot be attributed entirely to basis trading. More broadly, the reduction suggests that institutionally oriented futures exposure has also contracted over the past week. Overall, futures positioning has declined across both perpetual and CME markets, leaving little evidence of a renewed build-up in speculative leverage.
Liquidations declined to approximately $1.9bn in combined long and short liquidations, down from around $2.7bn previously. The largest outstanding liquidation clusters are concentrated near $82.5k and $87.5k. These levels are notable because the lower cluster broadly aligns with the average ETF cost basis, while the upper cluster sits close to the recent local high. A decisive move towards either region could therefore interact with a relatively large concentration of estimated liquidation exposure, potentially amplifying price movement through forced deleveraging.
Perpetual funding rates have also moderated further. Measured on a seven-day moving average, annualised funding ended the week at approximately 4.0%, down from around 4.3% previously. Funding therefore remains positive, but the combination of softer funding and lower open interest continues to point towards relatively contained leverage conditions.
Across options markets, BTC open interest on major exchanges ended the week at approximately 410.4k BTC, broadly unchanged from the roughly 409.9k BTC recorded following last week’s quarterly expiry. Although open interest temporarily rebuilt towards 435.5k BTC during the week, much of that increase subsequently reversed. The quarterly expiry reset has therefore not yet been followed by a meaningful net rebuilding of outstanding options positioning.
The put-to-call open interest ratio across major crypto-native exchanges increased to approximately 0.56 from 0.52, while the equivalent ratio across IBIT options edged higher to around 0.70 from 0.69. Both measures therefore point to a modest increase in the relative concentration of put positioning, although IBIT continues to retain a higher put-to-call ratio than crypto-native venues.
The 25-delta skew curve has shifted more materially at the front end over the past week.
| Tenor | Current | 7-Day Change | 3-Year Percentile |
|---|---|---|---|
| 1w | -0.0579 | -0.0858 | 12th |
| 1m | +0.0112 | -0.0050 | 47th |
| 3m | +0.0242 | -0.0006 | 65th |
| 6m | +0.0138 | +0.0035 | 67th |
The most notable development is the sharp repricing at the front end of the skew curve. One-week skew has fallen from approximately +0.03 to -0.06, moving from a slight premium for puts to a clear premium for calls. This indicates that near-term upside optionality has become materially more expensive relative to downside protection, pointing to a renewed short-dated upside bias.
By contrast, one-month skew remains close to neutral, while three- and six-month maturities continue to price a modest premium for downside protection. The shift is therefore concentrated almost entirely at the front end rather than representing a broad change in directional option pricing across the curve.
Implied volatility has also compressed further and remains close to the bottom of its historical distribution across every major tenor. One-week IV has fallen from 31.2% to 29.5%, placing it near the 3rd percentile of its three-year history, while one-month IV has declined to 33.3%, around the 4th percentile. Three-month IV now sits near the 1st percentile, while six-month IV remains below the 1st percentile.
| Tenor | Last Week | Current | 3-Year Percentile |
|---|---|---|---|
| 1w | 31.2% | 29.5% | 3rd |
| 1m | 33.9% | 33.3% | 4th |
| 3m | 37.1% | 36.6% | 1st |
| 6m | 38.0% | 37.6% | <1st |
Gamma exposure remains modestly positive in aggregate, but substantial offsetting concentrations persist across individual strikes. The latest snapshot shows approximately +$12.1bn of positive gamma against -$10.6bn of negative gamma, leaving net exposure around +$1.6bn.
With Bitcoin near $84.8k, the gamma distribution immediately around spot is more balanced than last week. The $84k and $84.5k strikes carry approximately -$0.4bn and -$0.3bn of gamma respectively, while the $85k and $85.5k strikes hold around +$1.1bn and +$0.4bn. Further above spot, however, larger negative concentrations remain at $88k and $90k at approximately -$1.9bn and -$5.1bn respectively. These are followed by a sizeable positive concentration near $95k at around +$5.3bn, while approximately -$1.5bn of negative gamma remains concentrated near $100k.
The gamma structure therefore appears somewhat more stabilising around the prevailing market price than it did last week, but this changes materially towards the upper-$80k region. A move through the negative concentrations around $88k and particularly $90k could cause dealer hedging to become more procyclical, potentially reinforcing price movement. This is particularly relevant given that the largest upper liquidation cluster also sits near $87.5k, creating a region where forced liquidation flows and dealer hedging could interact if price moves decisively higher.
On balance, derivatives positioning has become somewhat less levered over the past week. Perpetual open interest has declined modestly, CME open interest has fallen more materially, funding has softened and liquidation activity has decreased. Options open interest remains broadly unchanged following the quarterly expiry reset, while short-dated skew has shifted back towards a pronounced upside bias. Aggregate gamma remains positive and relatively stabilising around spot, although sizeable negative gamma concentrations and liquidation exposure across the upper-$80k region leave scope for more reflexive price action should Bitcoin break decisively higher.
Bottom Line
- Performance: Bitcoin, Ethereum and the top 20 digital assets outperformed this week as equities, commodities and bonds fell. Global bond yields rose, with the US 10-year at 5.2% and France's spread over Germany at 141bps, the widest since 2012. Two-year yields remain above policy rates, and the RBA hiked to 4.60%, its fourth rise this year. US labour and inflation data mostly missed, though GDP growth beat expectations at 2.2%, driving a twist steepener in the yield curve. Decoupling from equities, a softer AI trade and a weaker dollar could support Bitcoin further, although euro, gilt, Iran or Fed shocks could strengthen the dollar in the short term.
- Cryptoasset Sentiment Index:[3] Our in-house Cryptoasset Sentiment Index increased into positive territory although sits subdued relative to the past several weeks. It has now regained significant headroom having softened substantially already, pointing to a potential reversal of risk appetite.
- Chart-of-the-Week: A slowdown in the AI trade, alongside global bond yields increasing could further weaken the US dollar from capital outflows which may provide a tailwind for Bitcoin given its negative 30-day and 90-day correlation at -0.29 and -0.4, respectively. Risks such as a Eurodollar flare up and continued geopolitical tensions may provide a short tailwind for a safe haven bid. However, also note that correlations with equity markets are starting to increase again, with the 30-day at 0.69 suggesting any AI spill over could be a temporary net detractor to performance.
Appendix
Data subject to change
Combined positioning = futures and options in % of Ol
Notes
[1], [2], [3] 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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