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: Cryptoassets stayed volatile last week as the AI trade consolidation intensified, yet Bitcoin again outperformed major equity indices, behaving as a macro canary that prices in a growing chance of easier monetary policy rather than as a leveraged Nasdaq proxy. With token-price deflation, stagnating frontier-lab revenues and stranded compute exposing the scale of AI capital misallocation, our base case remains a stop-and-go environment in which Bitcoin outperforms equities but likely lags cash near term, with downside risks elevated until a decisive policy pivot materialises.
- Cryptoasset Sentiment Index: Our inhouse Cryptoasset Sentiment Index has declined somewhat last week and currently signals a slightly bearish level of sentiment.
- Chart-of-the-Week: The AI trade has effectively been losing steam since mid-2026, as slowing revenue growth at lofty valuations, token price deflation and mounting evidence of capital misallocation weigh on hyperscalers and semiconductors - a loss of momentum that is spilling over into financial markets broadly, including Bitcoin and cryptoassets.
Chart of the Week
GS thematic baskets: GSTMTMEM (memory), GSTMTDAT (data centres),
GSTMTSEM (semis), GSTMTAIP (broad AI), SPXXAI (S&P 500 ex-AI).
Indexed to 100 on the first common observation on/after 01 Jan 2025.
Performance
Cryptoassets remained volatile last week as the ongoing consolidation in the AI trade intensified.
Slowing revenue growth at lofty valuations, token price deflation, tighter financial conditions, and rising evidence of capital misallocation continued to weigh on hyperscalers, semiconductors, and related risk assets.
Bitcoin once again showed relative resilience, outperforming major equity indices amid the AI-driven sell-off, consistent with the pattern observed so far in October, while remaining sensitive to any dovish shifts in central bank commentary.
The AI complex continues to face structural headwinds. As we have highlighted since July, the scale of the current build-out risks becoming one of the larger capital misallocation episodes of the modern era that even hedge fund veterans are starting to admit.
Demand for compute remains real, but token prices have been deflating sharply, producing stagnating or even declining revenues at the AI frontier labs precisely when those revenues need to scale aggressively to service significant unfunded commitments.
The result is a circular dynamic in which AI-related capex itself is a primary driver of reported revenues. Any deceleration in spending therefore feeds directly into weaker top-line momentum across the AI supply chain.
In this context, it is no surprise that the AI trade has effectively been losing steam since mid-2026 (Chart-of-the-week) which is affecting all kinds of financial markets including Bitcoin and crypto markets.
Elon Musk’s recent observation that we are likely to see “a lot of stranded compute in partially complete data centers” crystallises this risk. GPUs can be ordered and delivered in months, yet grid connections, transformers, permitting, and power infrastructure often take years.
The mismatch is already producing idle or underutilised capacity, an outcome that raises the probability of write-downs, slower capex growth, and a broader reappraisal of returns on the multi-trillion-dollar data infrastructure bet. Consensus appears to be catching up to a thesis that has been visible for some time. The combination of elevated valuations, decelerating billings, and physical bottlenecks is incompatible with perpetual expansion.
Against this backdrop, Bitcoin has continued to behave as a macro canary rather than a simple leveraged Nasdaq proxy. It has largely shrugged off the AI turbulence and concurrent risks, including softer Chinese activity and European sovereign spreads, while trading lower when AI weakness accelerates risk-off moves and higher when the same weakness raises the odds of a monetary policy response.
Lower long-term yields and rising easing expectations have already begun to appear in bond markets – the US 10-year Treasury yield has declined below 5.00% again. Bitcoin appears to be pricing a portion of that pivot in advance. Sentiment and positioning in Bitcoin itself have already reset substantially following the bear market correction, limiting the scope for further aggressive downside relative to equities although absolute drawdown risks remain elevated for Bitcoin and other major cryptoassets.
Looking ahead, the base case remains a stop-and-go environment for Bitcoin.
Bitcoin will likely continue to trade down with further AI consolidation and equity volatility, yet respond positively to any credible dovish commentary from central banks that is itself a consequence of AI-related growth and financial-condition pressures.
Relative outperformance versus stocks is the higher-probability outcome as Bitcoin sniffs out an increasing chance of easier policy and a potential rotation of capital out of semiconductor ETFs into Bitcoin ETPs – which we have been observing since August 2026.
On historical flow-to-performance relationships, that shift could still be material. Absolute underperformance versus cash or defensive assets remains likely in the near term, however, and downside risks stay elevated until a decisive policy pivot materialises.
Bottom Line: Cryptoassets stayed volatile last week as the AI trade consolidation intensified, yet Bitcoin again outperformed major equity indices, behaving as a macro canary that prices in a growing chance of easier monetary policy rather than as a leveraged Nasdaq proxy. With token-price deflation, stagnating frontier-lab revenues and stranded compute exposing the scale of AI capital misallocation, our base case remains a stop-and-go environment in which Bitcoin outperforms equities but likely lags cash near term, with downside risks elevated until a decisive policy pivot materialises.
Sentiment
Our in-house “Cryptoasset Sentiment Index” [1] deteriorated from neutral sentiment to negative sentiment.
At the moment, 4 out of 15 indicators remain above their short-term trend.
The most notable change was the increased momentum of BTC Exchange Inflows suggesting traders are bringing more coins onto exchange. Perhaps in anticipation of further selling amidst a rougher macro backdrop and investor sentiment continuing to break down.
The Crypto Fear & Greed Index decreased slightly over the past week, transitioning from the “Greed” zone to the “Neutral” zone.
Performance dispersion decreased slightly suggesting pockets of strength and momentum have consolidated. This is in line with Net ETP Fund Flows suggest a rotation from altcoins into Bitcoin.
Altcoin outperformance vis-à-vis Bitcoin decreased to 25% of the altcoins tracked in our index. This is inline with decreasing performance dispersion and a rotation of net ETP flows into Bitcoin. Subsectors such as L2s, Gaming and DeFi underperformed Bitcoin, recording returns of -13.3% and -7.5% week over week.
Sentiment in traditional financial markets as measured by our in-house measure of Cross Asset Risk Appetite (CARA) has decreased from -0.04 to -0.38 over the past week, signalling risk appetite has further declined within TradFi as the macro backdrop worsens for riskier assets.
The CME Bitcoin Commercials Net Positioning metric captures the difference between long and short CME Bitcoin futures contracts. The reading has increased from –13.01% to –12.79% of open interest, suggesting traders have slightly decreased their short leverage as price has declined from the local peak of ~$87k.
Bottom Line: TradFi risk appetite (CARA) remains negative and declined even further. This likely had a negative knock-on effect in crypto with Crypto Fear and Greed and our in-house Sentiment Index also declining. Altcoins continue to feel the brunt of the pain with further net ETP outflows rotating into Bitcoin. Hence altcoin outperformance and performance dispersion declined.
Fund Flows
Global crypto ETPs experienced around +50.7 mn USD in net inflows last week, across all types of cryptoassets, after -645.3 mn USD in net outflows the previous week.
Global Bitcoin ETPs experienced net inflows of +293.4 mn USD last week, of which +298.2 mn USD in net inflows were related to US spot Bitcoin ETFs.
The Bitwise Bitcoin ETF (BITB) in the US experienced net outflows of -18.4 mn USD last week.
In Europe, the Bitwise Physical Bitcoin ETP (BTCE) experienced net outflows equivalent to -1.7 mn USD, as the Bitwise Core Bitcoin ETP (BTC1) experienced net outflows of around -17.4 mn USD.
The Grayscale Bitcoin Trust (GBTC) posted net outflows of -51.9 mn USD, whereas the iShares Bitcoin Trust (IBIT) experienced net inflows of around +565.6 mn USD last week.
Meanwhile, global Ethereum ETPs experienced -236.6 mn USD in net outflows last week, of which US spot Ethereum ETFs recorded net outflows of around -205.6 mn USD on aggregate.
The Grayscale Ethereum Trust (ETHE) posted net outflows of -11.5 mn USD, whilst the iShares Ethereum Trust (ETHA) saw net outflows of -233.2 mn USD.
The Bitwise Ethereum ETF (ETHW) in the US experienced net inflows of +0.9 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 outflows of -6.0 mn USD.
Altcoin ETPs ex Ethereum also saw net outflows of -4.1 mn USD last week.
Thematic & basket crypto ETPs posted net outflows of -2.0 mn USD on aggregate last week. The Bitwise MSCI Digital Assets Select 20 ETP (DA20) recorded no net inflows or outflows last week.
Bottom Line: Global crypto ETP flows swung back into modest positive territory last week, a marked improvement on the -645.3 mn USD of net outflows seen the week before. The recovery was almost entirely a Bitcoin story. Ethereum and Altcoin ETPs Ex Ethereum remained the clear weak spot for another week. Investors likely favoured Bitcoin's relative quality over broader crypto exposure as TradFi risk appetite and Crypto Sentiment both declined.
On-Chain Data
Bitcoin has remained range-bound over the past week, oscillating between roughly $80k and $85k without establishing a decisive move in either direction. The $83k-$84k region remains the key hurdle, combining the average ETF cost basis and the prior technical higher-high threshold. Weakness towards the lower end of the range has continued to attract buyers, while attempts to move higher have struggled to gain traction.
The 50% threshold for invested capital in profit, currently near $84k, adds further significance to this area. Bitcoin is trading close to the point at which roughly half of invested capital sits in profit and half at a loss, effectively placing the market around its economic midpoint. A sustained move above this threshold would return the majority of invested capital to profit and provide stronger evidence that the market is progressing beyond its current transition phase.
Bitcoin also remains above the broader structural levels below spot. The True Market Mean near $78k, Short-Term Holder Cost Basis around $76k and 200-day moving average near $73k continue to form what we view as the wider bull-market transition zone. A move into this region would therefore not necessarily invalidate the broader constructive structure, provided these levels are successfully defended.
Investor spending remains profit-dominated, which continues to be constructive. Over the past seven days, realised profits have exceeded realised losses by almost five to one, while the Realised Cap has increased by roughly $4.1bn, indicating that Bitcoin’s invested capital base continues to expand.
However, while the direction of spending remains constructive, its magnitude is exceptionally subdued. The Sell-Side Risk Ratio measures the combined magnitude of realised profit and loss relative to Bitcoin’s invested capital base. Elevated readings indicate significant economic value being realised relative to the capital stored in the asset, while low readings indicate that profit and loss realisation is comparatively small.
At present, the metric sits around the 5.5th percentile of the past three years. This suggests that despite profits continuing to dominate losses, the overall scale of investor spending remains unusually small. Historically, when realised activity becomes this compressed relative to the capital base, price has often needed to move beyond the prevailing range to unlock latent supply and re-engage investor spending.
The same compression is visible in the spot market, where realised volatility remains subdued across every major horizon relative to the past three years. The effect is particularly pronounced across shorter and intermediate windows, with one-month realised volatility sitting near the bottom of its historical distribution.
Options markets reinforce the same message. At-the-money implied volatility remains historically compressed across the curve, with both front-end and longer-dated tenors sitting towards the lower end of their three-year distributions. Volatility expectations are therefore subdued across maturities rather than being isolated to a particular segment of the market.
At the same time, Realised Supply Density remains elevated, with roughly 22.8% of circulating supply held within ±10% of spot, ranking around the 91st percentile since 2015. A large proportion of supply is therefore clustered close to prevailing prices, leaving many investors’ profitability increasingly sensitive to relatively modest market moves.
Taken together, on-chain spending, realised volatility and options pricing all point towards an unusually subdued market regime, while elevated supply density suggests that this equilibrium may be increasingly fragile. Historically, similar conditions have often been resolved through a widening of the trading range and an expansion in volatility as price moves far enough to re-engage investor activity. The signal remains direction agnostic, but the potential for a larger move appears to be building.
Futures, Options & Perpetuals
Over the past week, BTC perpetual futures open interest increased by around 14.6k BTC, or approximately 3.4%, rising to roughly 444.8k BTC. This marks a more meaningful rebuilding in positioning than observed over recent weeks and indicates that leverage has begun to return to perpetual markets. While open interest does not yet appear particularly stretched, the increase is now large enough to represent a clearer change from the relatively subdued positioning seen previously.
CME futures open interest also increased by around 5.5k BTC over the same period, pointing to a broader rise in futures exposure rather than a move confined to crypto-native venues. The three-month rolling futures basis remains broadly stable at approximately 5.2%. Overall, futures positioning has therefore expanded across both perpetual and CME markets this week.
Liquidations moderated to approximately $2.35bn in combined long and short liquidations, down from around $3.0bn previously. Forced deleveraging therefore remains sizeable, but has eased from the elevated levels observed over recent weeks.
Perpetual funding rates have also risen materially. Measured on a seven-day moving average, annualised funding ended the week at approximately 6.2%, up from around 3.0% previously. Funding therefore points to a firmer long bias alongside the increase in open interest. Taken together, higher open interest and stronger funding indicate that leveraged long positioning has rebuilt more clearly this week, although conditions remain below the more aggressive levels associated with heavily stretched markets.
Across options markets, BTC open interest was effectively unchanged, ending the week at approximately 466.4k BTC compared with 466.7k BTC previously.
The put-to-call open interest ratio across major crypto-native exchanges was similarly unchanged at approximately 0.60. Across IBIT options, however, the ratio increased further to around 0.78 from 0.75, placing it among the highest readings observed to date. The divergence is notable, with the ETF options complex showing a substantially greater relative concentration of put open interest than crypto-native venues. Taken alongside elevated positive skew, this is consistent with a more defensive options structure around IBIT even as aggregate options open interest remains stable.
The 25-delta skew curve also continues to reflect a substantial premium for downside protection.
| Tenor | Current | 7-Day Change | 3-Year Percentile |
|---|---|---|---|
| 1w | +0.1012 | -0.0465 | 75th |
| 1m | +0.1341 | +0.0393 | 89th |
| 3m | +0.0924 | +0.0225 | 80th |
| 6m | +0.0610 | +0.0133 | 75th |
The shape of the move has changed somewhat from last week. One-week skew has eased from approximately +0.15 to +0.10, indicating that the extreme front-end premium for puts has moderated. However, downside skew has increased materially across one-, three- and six-month maturities, with one-month skew now around the 89th percentile of its three-year distribution.
The defensive premium has therefore shifted further out the curve rather than simply disappearing. Combined with the elevated IBIT put-to-call ratio, options markets continue to reflect a meaningful preference for downside protection. Importantly, the increase across longer maturities suggests that this has become a broader feature of the options structure rather than a temporary short-dated response to immediate volatility.
Gamma exposure remains meaningfully positive in aggregate. The latest strike-level snapshot shows approximately +$8.4bn of positive gamma against -$4.1bn of negative gamma, leaving net exposure around +$4.3bn. This is only modestly below last week’s net positive exposure and continues to imply a comparatively stabilising aggregate dealer-hedging environment.
The concentration around the prevailing market price is particularly notable. The $80k strike now carries approximately +$3.0bn of positive gamma, while $82k and $85k hold around +$1.0bn and +$0.9bn respectively. This creates a substantial positive-gamma concentration around the low-$80k region, where dealer hedging may act more countercyclically and dampen realised movement.
Further above spot, negative gamma remains concentrated around $88k and $90k at approximately -$0.6bn and -$0.9bn respectively. These exposures could produce more procyclical hedging if price moves decisively higher, although the negative concentration around $90k is considerably smaller than it was last week. The current gamma structure therefore appears more stabilising around spot, with less pronounced negative exposure immediately above the market.
On balance, futures leverage has rebuilt more clearly over the past week. Perpetual and CME open interest have both increased, while funding has risen materially and now points to a firmer long bias. Liquidations remain sizeable but have moderated from last week. By contrast, overall options exposure is broadly unchanged, with the more important development occurring in its composition. IBIT put open interest has risen to one of its highest relative levels on record, while the premium for downside protection has broadened further out the curve. Aggregate gamma remains positive and strongly concentrated around the low-$80k region, leaving the immediate market structure comparatively stabilising despite the increasingly defensive options positioning.
Bottom Line
- Performance: Cryptoassets stayed volatile last week as the AI trade consolidation intensified, yet Bitcoin again outperformed major equity indices, behaving as a macro canary that prices in a growing chance of easier monetary policy rather than as a leveraged Nasdaq proxy. With token-price deflation, stagnating frontier-lab revenues and stranded compute exposing the scale of AI capital misallocation, our base case remains a stop-and-go environment in which Bitcoin outperforms equities but likely lags cash near term, with downside risks elevated until a decisive policy pivot materialises.
- Cryptoasset Sentiment Index: Our inhouse Cryptoasset Sentiment Index has declined somewhat last week and currently signals a slightly bearish level of sentiment.
- Chart-of-the-Week: The AI trade has effectively been losing steam since mid-2026, as slowing revenue growth at lofty valuations, token price deflation and mounting evidence of capital misallocation weigh on hyperscalers and semiconductors - a loss of momentum that is spilling over into financial markets broadly, including Bitcoin and cryptoassets.
Appendix
Data subject to change
Combined positioning = futures and options in % of Ol
Notes
[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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