Liquidity to Ledger: Mapping Bitcoin’s Path in an Easy‑Money Era

André Dragosch, PhD Director, Head of Research — Europe

Max Shannon Senior Research Associate

Performance: August highlighted a decisive rotation from Bitcoin into Ethereum and major altcoins, supported by strong ETP inflows and improving risk appetite. While September’s seasonality suggests continued volatility, growing signs of seller exhaustion alongside macro tailwinds could set the stage for stabilization into Q4.
Macro: Overall, while weakening US labour market indicators increase the likelihood of Fed rate cuts, rising global excess liquidity and a steepening yield curve remain supportive of global growth expectations. This dynamic continues to provide a constructive backdrop for Bitcoin and other cryptoassets in the months ahead.
On-Chain: Despite near-term profit-taking and neutral sentiment, strong accumulation across wallet cohorts and sustained corporate treasury adoption point to solid underlying demand. While short-term downside risks remain, valuations and macro conditions suggest the current bull cycle is unlikely to peak in 2025, potentially breaking the historic 4-year halving pattern.

Chart of the Month

Performance

Cryptoasset performance in August was defined by an ongoing rotation out of Bitcoin and into Ethereum and other major altcoins, a trend that was also reflected in significant net inflows into ETPs. While Bitcoin itself largely stalled, the relative strength of ETH and select altcoins suggested a tentative return of global risk appetite.

Historically, such rotations have often proven constructive for Bitcoin as well. However, peak Google search interest in terms like “Ethereum,” “altcoin,” and “crypto” indicates that the rally in alts may already be somewhat stretched, leaving room for consolidation.

From a seasonal perspective, September has consistently been the weakest month for Bitcoin dating back to 2010, mirroring the broader pattern of soft equity returns typically seen in the S&P 500 during the same period. This suggests that the final quarter of 2025 could prove more decisive for crypto markets, as investors return from summer holidays and reassess portfolio allocations heading into year-end and 2026.

On the macro side, August saw Powell's remarks at the Jackson Hole symposium initially provide a short-lived tailwind to Bitcoin and broader cryptoassets. Nevertheless, global growth expectations - a key driver of Bitcoin's performance, according to our analysis - have decelerated more recently, weighing on market momentum. Heading into September, macro developments remain firmly in the driver's seat.

In Europe, French Prime Minister François Bayrou faces a crucial confidence vote on September 8th tied to his austerity budget. A loss, as widely expected, could collapse the government, increase political instability, and potentially trigger early elections.

French borrowing costs have already spiked, prompting warnings from the finance ministry that an IMF bailout could be necessary. Such risks highlight Bitcoin's potential role as “portfolio insurance” against rising sovereign default fears as highlighted in one of our Espressos.

Meanwhile, attention in the U.S. is turning toward the September 16–17 FOMC meeting, where Fed Funds Futures currently imply an 87% probability of at least a 25bp cut. We would expect monetary easing to act as a net positive for bitcoin and cryptoassets, steepening the yield curve and supporting money supply growth.

In the lead-up, key data releases, including ISM Manufacturing (September 2nd) and non-farm payrolls (September 5th), are likely to inject additional volatility into markets.

Encouragingly, our Cryptoasset Sentiment Index has already turned more bearish, while short-term holders are realizing losses at an accelerating pace. This dynamic often represents a necessary condition for tactical bottoms, suggesting that a phase of “seller exhaustion” and eventual stabilization may not be far off.

Structurally, Ethereum continues to benefit disproportionately from investor flows. Last week alone, global Ethereum ETPs recorded +$1,332 mn in net inflows versus +$682 mn for Bitcoin. Over the last 30 sessions, ETH has captured roughly 95% of all ETP flows, underscoring its relative strength. This trend has been reinforced by both improved global risk appetite, as captured in our Cross Asset Risk Appetite index, and accelerated treasury purchases from entities such as BitMine (BMNR), whose ETH holdings expanded by +187% over the past month.

By contrast, Bitcoin faces growing uncertainty around its protocol roadmap. The debate between Core and Knots reflects diverging visions for Bitcoin's future: Core emphasizes openness and permissionless innovation, while Knots prioritizes Bitcoin's efficiency as a financial network. Knots adoption has risen to 18% of all full nodes, exacerbating the perception of uncertainty at a time when Ethereum's trajectory has become clearer following May's Pectra upgrade.

A closer look at our product performances also reveals the strong outperformance of major altcoins like ETH and SOL vis-à-vis BTC which exhibited a negative performance in August.

Performance dispersion among altcoins has declined though, i.e. the correlation among them has actually increased. In the month of August, 80% of our tracked altcoins managed to outperform Bitcoin. Meanwhile, Bitcoin's market cap dominance has declined by 4%-points in August. At the time of writing, Bitcoin still commands a market cap share of ~58% while Ethereum commands a market cap share of approximately 14.4%.

Bottom Line: August highlighted a decisive rotation from Bitcoin into Ethereum and major altcoins, supported by strong ETP inflows and improving risk appetite. While September's seasonality suggests continued volatility, growing signs of seller exhaustion alongside macro tailwinds could set the stage for stabilization into Q4.

Macro Environment

One of the key macro events in August was the central bank symposium in Jackson Hole, Wyoming. Powell's remarks at the conference were widely interpreted as dovish, although some economists pointed out that natural language processing suggested a rather hawkish tone. Indeed, Bloomberg's Fed Speak Index – which measures the relative hawkishness or dovishness across different Fed speeches on a daily basis – has been ticking up recently.

Nonetheless, our general view is that the Fed remains ‘behind the curve'. A standard Taylor Rule based on the U3 unemployment rate and core inflation, for example, still implies that the Fed Funds Target Rate should be around ~50 basis points lower than today. Moreover, despite the hot July PPI print, both inflation and labour market data surprises in the US remain at Covid-era lows, which in our view still warrants further downside repricing of Fed rate cut expectations:

Macro remains firmly in the driver's seat, but global growth concerns appear more important than dollar dynamics for the performance of Bitcoin (in contrast to our previous report). In fact, changes in ‘Global Growth' have explained above 80% of performance variations in bitcoin over the past 6 months as shown below:

The implication is clear: further declines in global growth expectations could pose a headwind for the current rally in the short term. A variety of indicators in the US continue to flash weakness, with the ratio of the Conference Board Leading Economic Index (LEI) to the Coincident Economic Index now at its lowest level since 2009.

This suggests that other coincident indicators, such as employment, are likely to weaken further as well. In fact, leading indicators like the Conference Board labour market differential suggest that the unemployment rate should continue to trend higher over the coming months increasing the probability of further Fed rate cuts.

In this context, it is probably no surprise that Powell has drawn his attention to the (weakening) labour market rather than recent inflation dynamics that could very well be related to the hike in import tariffs. The strong downward revisions in payrolls in both May and June speak volumes in the regard. It should be noted that the magnitude of these 2-months downward revisions is unprecedented outside of recessions.

That being said, high levels of excess liquidity growth across the globe should support more positive business outlooks in forward-looking confidence surveys, especially in light of potential Fed rate cuts.

It is important to highlight the fact that employment tends to be a coincident to lagging indicator while liquidity growth tends to be a leading indicator of the business cycle. The latter is more important for the future performance of bitcoin and other cryptoassets.

We are generally assuming the following chain of causation (“from liquidity to ledger”):

Weakness in US employment -> higher Fed rate cut odds -> steepening of the yield curve -> acceleration in liquidity growth -> improvement in business confidence surveys and global growth expectations -> positive tailwind for Bitcoin

Note the interaction between deteriorating lagging indicators (employment) and improving leading indicators (liquidity growth).

In our previous edition of the Bitcoin Macro Investor report, we highlighted the strong growth in global excess liquidity and the fact that preceding rate cuts by other major central banks around the globe (ECB, Bank of England, SNB etc) have been a key driver of this trend.

Declines in policy rates tend to affect the steepness of the yield curve, which in turn incentivizes higher bank credit and money supply growth. Yield curves across the US (Treasuries), Eurozone (Bunds), UK (Gilts), and Japan (JGBs) continue to steepen. While much of this steepening has so far been driven by lower liquidity at the long end and higher long-term yields, further Fed rate cuts should reinforce the move.

Altogether, this dynamic should continue to support the ongoing global recovery in leading indicators, sustain positive global growth expectations, and ultimately remain a tailwind for bitcoin and cryptoassets.

The reason is that changes in the steepness of the yield curve tend to lead changes in leading macro indicators such as ISM Manufacturing New Orders to Inventiories or Empire State Future Expectations as shown in the first chart below. These leading macro indicators tend to cycle with global growth expectations priced by financial markets (as shown in the chart on the right).

Note that the same global growth expectations shown in the chart above have explained approximately 80% of the performance variation of bitcoin over the past 6 months (as noted earlier above).

Bottom Line: Overall, while weakening US labour market indicators increase the likelihood of Fed rate cuts, rising global excess liquidity and a steepening yield curve remain supportive of global growth expectations. This dynamic continues to provide a constructive backdrop for Bitcoin and other cryptoassets in the months ahead.

On-Chain Developments

August has continued to see an increase in exchange balances due to ongoing profit-taking by (short-term) investors. This increase in liquid supply on exchanges was largely responsible for the pull-back we have seen from new all-time highs in August as well.

Although we have seen singular large exchange inflows by whales (holders that control more than 1,000 BTC), the overall level of profit-taking has recently declined. That means that the amount of selling pressure has also abated over the past months. Realized losses by both long- and short-term holders have also been negligible which is a positive sign.

Moreover, key megatrends like the corporate treasury adoption of bitcoin remain intact.

The third quarter (July and August) alone has already seen 28 new bitcoin treasury companies being established and an increase in +140.6k BTC in aggregate BTC holdings according to data provided by bitcointreasuries.net.

That is almost equivalent to a whole year of newly mined supply (~164k BTC) – within just 2 months.

That being said, we have seen relatively weak net inflows into global bitcoin ETPs lately which is largely due to the investor rotation away from Bitcoin into Ether. In fact, we have already seen a significant “flippening” in terms of ETP flow dominance of Ethereum vis-à-vis Bitcoin as the following table shows:

It s important to highlight that around 95% of all global ETP net inflows over the past 30 days have accrued to Ethereum. We are observing a similar pattern with respect to the amount of overall on-chain capital invested where ETH has been leading BTC over the past 3 weeks.

That being said, although ETPs have not provided a significant tailwind for bitcoin lately, other investor cohorts appear to have increased their rate of accumulation. In fact, we have seen a significant increase in accumulation across the majority of BTC wallet cohorts despite the fact that we have only seen a relatively minor price correction. Based on our own average accumulation score, the average rate of accumulation across all wallet cohorts has already increased to the highest level since April 2025 (“Liberation Day correction”) when BTC declined almost by -30%.

Such a high rate of accumulation tends to precede major breakouts to the upside and at the minium limits the downside potential of BTC significantly.

However, in the short term, BTC may face a bit more downside risks since sentiment has not turned decisively bearish, yet. Based on our in-house Cryptoasset Sentiment Index, overall market sentiment still remains rather neutral to slightly bearish.

The good news is that short-term holder realized cost basis (“STH realised price”) currently lies around 108k USD. Any pull-backs below that price level will likely induce increasing selling pressure by short-term holders that tend to be rather unsophisticated investors. This tends to be a signal for increasing “seller exhaustion” and ultimately a tactical bottom.

A key question remains wheher we will see a cycle top in bitcoin over the coming months?

In fact, based on past post-Halving performance patterns, a cycle top should likely be reached over the next 1-2 months, i.e. in September/October this year.

However, we don't think that this is the likeliest scenario for the following reasons:

The macro cycle is rather at the beginning than the end based on the observations made in the chapter above and the fact that additional rate cuts by Fed will likely prolong the macro cycle even further.
Valuations remain close to “fair value” and are not excessive: Past cycle tops have usually been associated with excessive valuations in indictators like the MVRV ratio (Market Value to Realized Value / ”Price-to-Book ratio”) which we are not observing now.
Bitcoin's MVRV ratio does not signal an imminent cycle top
Source: Glassnode, Bitwise Europe
Demand factors have become significantly more important than supply factors: Net demand via institutional purchases such as Bitcoin Treasury Companies and ETPs have outsized the Halving induced supply deficit by a very wide margin (Chart-of-the-Month). These demand factors tend to be influenced by the wider macro cycle rather than the Halving.

In other words, although there still remain downside risks in the short term we don't think that the bitcoin cycle will reach its top in 2025. We think that especially this bull run we could see a break of the typical 4-year Halving performance pattern.

Bottom Line: Despite near-term profit-taking and neutral sentiment, strong accumulation across wallet cohorts and sustained corporate treasury adoption point to solid underlying demand. While short-term downside risks remain, valuations and macro conditions suggest the current bull cycle is unlikely to peak in 2025, potentially breaking the historic 4-year halving pattern.

Bottom Line

Performance: August highlighted a decisive rotation from Bitcoin into Ethereum and major altcoins, supported by strong ETP inflows and improving risk appetite. While September’s seasonality suggests continued volatility, growing signs of seller exhaustion alongside macro tailwinds could set the stage for stabilization into Q4.
Macro: Overall, while weakening US labour market indicators increase the likelihood of Fed rate cuts, rising global excess liquidity and a steepening yield curve remain supportive of global growth expectations. This dynamic continues to provide a constructive backdrop for Bitcoin and other cryptoassets in the months ahead.
On-Chain: Despite near-term profit-taking and neutral sentiment, strong accumulation across wallet cohorts and sustained corporate treasury adoption point to solid underlying demand. While short-term downside risks remain, valuations and macro conditions suggest the current bull cycle is unlikely to peak in 2025, potentially breaking the historic 4-year halving pattern.

Appendix

Cryptoasset Market Overview

Cryptoassets & Macroeconomy

Cryptoassets & Multiasset Portfolios

Cryptoasset Valuations

On-Chain Fundamentals

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