- Last week, cryptoassets sold off sharply in line with traditional risk assets as escalating trade tensions due to newly announced tariffs by President Trump increased market volatility.
- Our in-house “Cryptoasset Sentiment Index” currently signals a bearish sentiment and is indicating an attractive risk-reward set-up.
- US tariffs have increased FX uncertainty via a stronger Dollar which has weighed on major cryptoassets like Bitcoin and Ethereum.
Chart of the Week
US tariffs have increased FX uncertainty and weighed on cryptoassets
Source: Bloomberg, Bitwise Europe
Performance
Last week, cryptoassets sold off sharply in line with traditional risk assets as trade tensions ratcheted higher due to the newly announced tariffs by President Trump on Canadian, Mexican, and Chinese imports.
More specifically, 25% tariffs on Canada and Mexico (with a 10% carve-out for Canadian oil) and 10% on Chinese imports were scheduled to go into effect on Saturday, but have been delayed until Tuesday, Feb. 4.
Retaliatory measures from Canada and Mexico were announced shortly thereafter, potentially setting the stage for a broader trade conflict.
- Mexico's President Claudia Sheinbaum announced non-tariff countermeasures as part of "Plan B" and proposed a U.S.-Mexico working group on crime, rejecting White House claims of cartel protection.
- Canadian Prime Minister Justin Trudeau imposed a 25% counter-tariff on U.S. goods, with potential non-tariff actions in the energy sector under consideration.
- Canada may introduce energy export tariffs, which could disrupt U.S. energy supply and raise costs for industries, including Bitcoin mining, which holds 36% of the global hashrate (Luxor).
However, this unorthodox approach is likely to prove inflationary and undermine global confidence in the U.S. financial system. As the rest of the world bears the brunt of dollar debasement, the relative scarcity and creditworthiness of alternative reserve assets like gold and bitcoin should come into sharper focus.
Key data points that reinforce this thesis include:
- The sharp divergence between gold prices and real yields on long-dated US Treasuries, which suggests investors are losing confidence in government bonds as a reliable store of value. Gold is approaching $3,000/oz for the first time in history despite long-term US treasury bonds having the worst performance in history - a breakdown in the historical relationship that points to a potential regime change in global macro.
- There has been a significant restocking of commercial gold reserves in the US, resulting in a spike in gold inventories in New York, especially by JPMorgan. It is the highest spike in gold inventories since the Covid-related surge in 2020.
- Central banks continue to diversify out of US Treasuries and into gold. They are buying record amounts of gold while moving out of US Treasuries.
- Growing interest from sovereign wealth funds and corporate treasuries in holding bitcoin as a pristine reserve asset. The Czech National Bank has recently announced plans to look into diversifying part of their reserves into Bitcoin. The key reason cited is the low correlation of Bitcoin to government bonds.
These developments underscore Bitcoin's rising appeal as a "hard money" reserve asset among institutional investors. With its fixed supply and decentralized settlement network, Bitcoin serves as a hedge against monetary disorder, particularly in an era of financial repression and competitive currency duations.
In the short term, tariffs are strengthening the U.S. dollar and contracting global liquidity, creating tighter financial conditions and economic headwinds. However, this pressure is unlikely to be sustainable.
As the Federal Reserve grapples with slowing global growth and worsening financial conditions, it will likely be forced to reignite quantitative easing (QE) and cut rates more aggressively to prevent further dollar appreciation.
This shift would mark the beginning of a long-term tailwind for Bitcoin and gold, as investors seek alternative, apolitical reserve assets in an increasingly unstable monetary system.
Cross Asset Performance (Week-to-Date)
Source: Bloomberg, Coinmarketcap; performances in USD exept Bund Future
Top 10 Cryptoasset Performance (Week-to-Date)
Source: Coinmarketcap
In general, among the top 10 crypto assets, TRON, Bitcoin, and BNB were the relative outperformers.
The trend of altcoin outperformance vis-à-vis Bitcoin continues to be low last week, with only 10% of our tracked altcoins managing to outperform Bitcoin on a weekly basis. Ethereum has also underperformed Bitcoin last week.
Sentiment
Our in-house “Cryptoasset Sentiment Index” currently signals a bearish sentiment and is indicating an attractive risk-reward set-up.
At the moment, only 1 out of 15 indicators are above their short-term trend.
We are currently observing significant declines in the Crypto Fear & Greed Index as well as the Crypto Hedge Fund Beta.
The Crypto Fear & Greed Index currently signals a “Fear” level of sentiment as of this morning.
Performance dispersion among cryptoassets has continued its decline to very low levels, signalling that altcoins have continued to be increasingly correlated with the performance of Bitcoin lately.
Altcoin outperformance vis-à-vis Bitcoin has also remained low last week, with around 10% of our tracked altcoins managing to outperform Bitcoin on a weekly basis. Ethereum has also continued to underperform 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 bearish risk appetite at the moment.
Sentiment in traditional financial markets as measured by our in-house measure of Cross Asset Risk Appetite (CARA) declined last week. However, the index still signals a neutral cross asset risk appetite.
Fund Flows
Weekly fund flows into global crypto ETPs have continued to be very positive last week.
Global crypto ETPs saw around +761.1 mn USD in weekly net inflows across all types of cryptoassets, after +2,221.0 mn USD in net inflows the previous week.
Global Bitcoin ETPs flows have slightly decelerated with net inflows totalling +673.0 mn USD last week, of which +559.8 mn USD in net inflows were related to US spot Bitcoin ETFs.
The Bitwise Bitcoin ETF (BITB) in the US experienced net outflows, totalling -125.6 mn USD last week.
In Europe, the Bitwise Physical Bitcoin ETP (BTCE) experienced minor net inflows equivalent to +6.7 mn USD, while the Bitwise Core Bitcoin ETP (BTC1) managed to attract capital of around +0.9 mn USD.
Outflows from the Grayscale Bitcoin Trust (GBTC) continued unabated, with around -125.6 mn USD in net outflows last week. The iShares Bitcoin Trust (IBIT) saw around +751.0 mn USD in net inflows last week.
Meanwhile, flows into global Ethereum ETPs saw a significant deceleration, with around +3.2 mn USD in net inflows after +214.5 mn USD in net inflows the week before.
US Ethereum spot ETFs also recorded net outflows with around -45.5 mn USD on aggregate. The Grayscale Ethereum Trust (ETHE) continued to experience net outflows with around -172.2 mn USD last week.
The Bitwise Ethereum ETF (ETHW) in the US experienced -8.3 USD in net outflow last week.
In Europe, the Bitwise Physical Ethereum ETP (ZETH) experienced minor net outflows of -6.5 mn USD while the Bitwise Ethereum Staking ETP (ET32) experienced some net outflows of around -0.3 mn USD.
Altcoin ETPs ex Ethereum continued to attract capital last week, with around +52.6 mn USD in global net inflows on aggregate. The Bitwise Physical Solana ETP (ESOL) and the Bitwise Solana Staking ETP (BSOL) both did not experience any creations or redemptions last week (+/- 0 mn USD).
Furthermore, thematic & basket crypto ETPs experienced increasing net inflows of around +32.3 mn USD on aggregate last week. The Bitwise MSCI Digital Assets Select 20 ETP (DA20) also saw positive net inflows last week (+0.8 mn USD).
Global crypto hedge funds have decreased their market exposure to Bitcoin last week. The 20-days rolling beta of global crypto hedge funds' performance to Bitcoin has declined to around 0.48 per yesterday's close, down from 0.62 the week before.
On-Chain Data
In general, Bitcoin's on-chain developments have continued to be less of a tailwind more recently.
Last week we saw some of the lowest retail investor demand this cycle.
Selling pressure continued to be relatively high, with around -1.56 bn USD in net selling volumes on BTC spot exchanges.
However, this also implies that we are likely approaching seller exhaustion in the market.
In terms of Spot Cumulative Volume Delta (CVD), which measures the difference between buying and selling volume, the metric remains negative, indicating dominance of sell-side pressure. Dollar order volumes similarly reflect a higher presence of spot sell orders. However, it is worth noting that supply dynamics on exchanges tend to provide a slightly clearer explanation of price action.
On a positive note, exchange balances continued to drift lower last week, indicating a continuous drop in the amount of liquid supply available on exchanges, indicating that the overall supply deficit in Bitcoin is still intensifying.
At the time of writing, only 2.735 million BTC remain on exchanges, according to data provided by Glassnode.
We also observe whales starting to take bitcoins off exchanges on a net basis. More specifically, BTC whales removed -8,976 BTC from exchanges, indicating an increase in whale buying pressure. Network entities that possess at least 1,000 Bitcoin are referred to as whales.
We are currently observing an interesting development in ETH/BTC relative on-chain developments: Our in-house composite of relative on-chain indicators between ETH L1 and BTC L1 has shown a reversal in trend, signalling a mismatch in ETH's price and its improving on-chain fundamentals, despite the continued underperformance more recently.
Futures, Options & Perpetuals
This week, BTC futures open interest remained steady, with market attention shifting to Trump's announcement of new tariffs.
Meanwhile, BTC futures long have slightly increased while short liquidations remained relatively moderate last week.
BTC perpetual funding rates have declined following last week's highs but remains somewhat elevated signalling a muted bullish sentiment among BTC perpetual traders.
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-months annualised basis decreased slightly to around 11.4% p.a. averaged across various futures exchanges.
Meanwhile, BTC option open interest saw a significant decrease by around -58k BTC last week due to the month-end expiries. The put-call open interest ratio continued to increase significantly, signalling increased put buying last week.
This was also somewhat reflected in the 1-month 25-delta skew for BTC which also increased and signals an increase in bearish sentiment.
BTC option implied volatilities have continued to decline despite a post-tariff announcement dip in crypto markets, suggesting that traders are unwinding previous hedges rather than rushing to re-hedge against the new macro uncertainty.
At the time of writing, implied volatilities of 1-month ATM Bitcoin options are currently at around 54.8% p.a.
Bottom Line
- Last week, cryptoassets sold off sharply in line with traditional risk assets as escalating trade tensions due to newly announced tariffs by President Trump increased market volatility.
- Our in-house “Cryptoasset Sentiment Index” currently signals a bearish sentiment and is indicating an attractive risk-reward set-up.
- US tariffs have increased FX uncertainty via a stronger Dollar which has weighed on major cryptoassets like Bitcoin and Ethereum.
Appendix
Bitcoin Price vs Cryptoasset Sentiment Index
Source: Bloomberg, Coinmarketcap, Glassnode, NilssonHedge, alternative.me, Bitwise Europe
Cryptoasset Sentiment Index
Source: Bloomberg, Coinmarketcap, Glassnode, NilssonHedge, alternative.me, Bitwise Europe; *multiplied by (-1)
Cryptoasset Sentiment Index
Source: Bloomberg, Coinmarketcap, Glassnode, NilssonHedge, alternative.me, Bitwise Europe
TradFi Sentiment Indicators
Source: Bloomberg, NilssonHedge, Bitwise Europe
Crypto Sentiment Indicators
Source: Coinmarketcap, alternative.me, Bitwise Europe
Crypto Options' Sentiment Indicators
Source: Glassnode, Bitwise Europe
Crypto Futures & Perpetuals' Sentiment Indicators
Source: Glassnode, Bitwise Europe; *Inverted
Crypto On-Chain Indicators
Source: Glassnode, Bitwise Europe
Bitcoin vs Crypto Fear & Greed Index
Source: alternative.me, Coinmarketcap, Bitwise Europe
Bitcoin vs Global Crypto ETP Fund Flows
Source: Bloomberg, Bitwise Europe; ETPs only, data subject to change
Global Crypto ETP Fund Flows
Source: Bloomberg, Bitwise Europe; ETPs only; data subject to change
US Spot Bitcoin ETF Fund Flows
Source: Bloomberg, Bitwise Europe; data subject to change
US Spot Bitcoin ETFs: Flows since launch
Source: Bloomberg, Fund flows since traiding launch on 11/01/24; data subject to change
US Spot Bitcoin ETFs: 5-days flow
Source: Bloomber; data subject to change
US Bitcoin ETFs: Net Fund Flows since 11th Jan mn USD
Source: Bloomberg, Bitwise Europe; data as of 31-01-2025
US Spot Ethereum ETF Fund Flows
Source: Bloomberg, Bitwise Europe; data subject to change
US Spot Ethereum ETFs: Flows since launch
Source: Bloomberg, Fund flows since trading launch on 23/07/24; data subject on change
US Spot Ethereum ETFs: 5-days flow
Source: Bloomberg; data subject on change
US Ethereum ETFs: Net Fund Flows since 23rd July
Source: Bloomberg, Bitwise Europe; data as of 31-01-2025
Bitcoin vs Crypto Hedge Fund Beta
Source: Glassnode, Bloomberg, NilssonHedge, Bitwise Europe
Altseason Index
Source: Coinmetrics, Bitwise Europe
Bitcoin vs Crypto Dispersion Index
Source: Coinmarketcap, Bitwise Europe; Dispersion = (1 - Average Altcoin Correlation with Bitcoin)
Bitcoin Price vs Futures Basis Rate
Source: Glassnode, Bitwise Europe; data as of 2025-02-02
Ethereum Price vs Futures Basis Rate
Source: Glassnode, Bitwise Europe; data as of 2025-02-02
BTC Net Exchange Volume by Size
Source: Glassnode, Bitwise Europe
Wichtige Hinweise
Die dargestellten Meinungen spiegeln eine Einschätzung des Marktumfelds zu einem bestimmten Zeitpunkt wider und stellen weder eine Prognose zukünftiger Ereignisse noch eine Garantie für zukünftige Ergebnisse dar. Sie unterliegen weiteren Diskussionen, Ergänzungen und Änderungen.
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Nichts in dieser Mitteilung ist als Empfehlung, Befürwortung oder Aufforderung zu einer Investitionstätigkeit auszulegen. Leser werden aufgefordert, gegebenenfalls unabhängige rechtliche, steuerliche oder finanzielle Beratung in Anspruch zu nehmen.
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