Bitcoin Nears ATH as Cross-Asset Sentiment Spikes and Sovereign Risk Narrative Builds

André Dragosch, PhD Director, Head of Research — Europe

Ayush Tripathi Research Analyst

Übersicht

Chart of the Week
Performance
Sentiment
Fund Flows
On-Chain
Futures, Options & Perpetuals
Bottom Line
Appendix

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Bitcoin and cryptoassets have continued to recover on a weekly basis and have managed to outperform traditional assets as well.
Our Cryptoasset Sentiment Index continues to signal a bullish sentiment in crypto markets.
Chart of the Week: The momentum in Cross Asset Risk Appetite (CARA) has increased to a 5-year high so that both cryptoasset and cross asset sentiment are now decisively bullish.

Chart of the Week

Performance

Bitcoin and cryptoassets have continued to recover on a weekly basis and have managed to outperform traditional assets as well. Bitcoin also reclaimed 110k USD and is close to its previous all-time high.

Market sentiment has continued to be bullish but the recovery in sentiment has been even more pronounced in traditional financial markets.

In fact, the momentum in Cross Asset Risk Appetite (CARA) has increased to a 5-year high so that both cryptoasset and cross asset sentiment are now decisively bullish (Chart-of-the-Week).

These very positive sentiment readings are somewhat surprising given the elevated policy uncertainty in the US which was once again underscored by the recent public spat between Elon Musk and US president Donald Trump. A key reason for this new dispute appears to be related to Musk's recent departure from the Department of Government Efficiency (DOGE) amid the realisation that government spending cuts alone won't be able to reduce the US deficit sustainably.

Musk has even made negative public remarks on the proposed “One Big Beautiful Bill Act” that will most likely exacerbate the fiscal debt situation on account of the proposed tax cuts. In fact, US Credit Default Swaps (CDS) which ensure bond holders against a default of US Treasury bonds remain elevated at around 50 bps on 1-year basis although they have declined a bit more recently.

As we have pointed out in our latest monthly report as well, bitcoin can provide an alternative “portfolio insurance” against widespread sovereign defaults as a scarce decentralized asset which is free of counterparty risks. Quantitative models estimate bitcoin's hypothetical “fair value” amid the current sovereign default probabilities at around 230k USD today. This estimation is dovetailed by bitcoin's increasing scarcity which also points to an ascend towards 200k USD by the end of the year.

We also expect that the US fiscal debt situation will most likely continue to deteriorate over the coming years which is also the official projection by the Congressional Budget Office (CBO): Net interest expenses will likely triple towards the end of this decade already – from ~$1 trillion to ~$3 trillion by the year 2030. Non-discretionary government outlays – i.e. those that are mandatory and required by law - such as interest expenses, social security, unemployment insurance etc. already exceed 100% of fiscal revenues. The proposed tax cuts by the Trump administration will likely exacerbate this situation.

The quarrel between Musk and Trump has also led to a short-term risk-off period in cryptoassets last week when bitcoin revisited 100k USD as well. However, bitcoin has already recovered swiftly from these temporary lows on the back of an increase in short futures liquidations.

That being said, US economic policy uncertainty has most likely passed its zenith already and continues to decline at the margin which has so far also fuelled the recovery in traditional financial markets and overall cross asset risk appetite.

On the data front, US non-farm payroll growth beat consensus expectations in May with +139k new jobs. However, the first release likely overstates the true momentum of employment growth in the US as previous revisions have shown. This implies that US recession odds still remain elevated.

In general, among the top 10 crypto assets TRON, Hyperliquid and XRP were the relative outperformers.

Despite elevated cryptoasset sentiment, overall altcoin outperformance vis-à-vis bitcoin remained very low last week, with only 15% of our tracked altcoins managing to outperform bitcoin on a weekly basis. Furthermore, Ethereum underperformed bitcoin last week.

Sentiment

Our in-house “Cryptoasset Sentiment Index” signals a bullish sentiment, as broader investor sentiment shifts firmly into positive territory.

At the moment, 12 out of 15 indicators are above their short-term trend.

Cross-asset risk appetite improved, as highlighted in our Chart of the Week. Crypto market dispersion and BTC Short-Term Holder Net Unrealized Profit/Loss (STH-NUPL) also showed positive movement. However, the Altseason Index did not reflect a similar improvement.

The Crypto Fear & Greed Index currently signals a “Greed” level of sentiment as of this morning, continuing to improve from last week.

Performance dispersion among cryptoassets remained stagnant last week, signalling that altcoins have kept their correlation with the performance of Bitcoin.

Altcoin outperformance vis-à-vis Bitcoin has increased from last week, with around 15% of our tracked altcoins managing to outperform Bitcoin on a weekly basis. Furthermore, Ethereum managed 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 outperformance signals a bullish risk appetite at the moment.

Sentiment in traditional financial markets as measured by our in-house measure of Cross Asset Risk Appetite (CARA) has increased decisively, moving from 0.22 to 0.48.

Fund Flows

Weekly fund flows into global crypto ETPs have moderated, with net inflows continuing at a tempered but sustained pace.

Global crypto ETPs saw around +488.5 mn USD in weekly net inflows across all types of cryptoassets, after +526.0 mn USD in net inflows the previous week.

Global Bitcoin ETPs have experienced net inflows totalling +254.9 mn USD last week, of which +525 mn USD in net inflows were related to US spot Bitcoin ETFs.

The Bitwise Bitcoin ETF (BITB) in the US experienced net inflows, totalling +78.1 mn USD last week.

In Europe, the Bitwise Physical Bitcoin ETP (BTCE) experienced minor net outflows equivalent to -3.4 mn USD, while the Bitwise Core Bitcoin ETP (BTC1) experienced minor net inflows of +1.0 mn USD.

The Grayscale Bitcoin Trust (GBTC) has posted net outflows of -24.1 mn USD. The iShares Bitcoin Trust (IBIT), however, experienced net inflows of around +332.4 mn USD last week.

Meanwhile, flows into global Ethereum ETPs continued its positive trend last week, with around +260.9 mn USD in net inflows last week

US Ethereum spot ETFs, also recorded net inflows of around +255.6 mn USD on aggregate. The Grayscale Ethereum Trust (ETHE), had sticky AuM (+/- 0 mn USD).

The Bitwise Ethereum ETF (ETHW) in the US had also followed suit.

In Europe, the Bitwise Physical Ethereum ETP (ZETH) saw minor net inflows of +0.8 mn USD while the Bitwise Ethereum Staking ETP (ET32) saw net inflows of around +5.4 mn USD on aggregate.

Altcoin ETPs ex Ethereum reversed course last week and saw +6.0 mn USD in global net inflows.

However, thematic & basket crypto ETPs experienced net outflows of around -33.3 mn USD on aggregate last week. The Bitwise MSCI Digital Assets Select 20 ETP (DA20) had sticky AuM (+/- 0 mn USD).

Global crypto hedge funds have increased their market exposure to Bitcoin. The 20-days rolling beta of global crypto hedge funds' performance to Bitcoin consolidated to around 0.77 per yesterday's close, up from 0.70 from the week before.

On-Chain Data

Broadly speaking, Bitcoin's on-chain activity has remained slightly bullish last week.

While Bitcoin spot exchanges continued to see selling pressure, net selling volumes decreased to approximately -$0.53 bn compared to -$1.78 bn two weeks ago.

The Spot Cumulative Volume Delta (CVD), which tracks the difference between buying and selling volumes, also remained mostly negative throughout last week while decelerating.

In terms of supply dynamics, we are observing a different pattern. Whales have removed bitcoins from exchanges on a net basis, indicating a decrease in whale selling pressure. More specifically, BTC whales removed -390,632 BTC to exchanges last week. Network entities that possess at least 1,000 Bitcoin are referred to as whales.

Furthermore, based on recent data from Glassnode, the overall downward trend in exchange-held Bitcoin reserves remains intact. The current level stands at 2.91 million BTC, representing approximately 14.6% of the total circulating supply, representing a 0.3% decline week-over-week.

It's worth noting that the 30-day measure of “apparent demand” for Bitcoin remains positive, though momentum has started to decline in recent days.

Futures, Options & Perpetuals

Last week, BTC futures open interest increased last week by +2.2K BTC across all exchanges, and by +6.4K BTC on CME Exchange. Perpetual open interest also increased by around +3.0k BTC.

BTC perpetual funding rates remained positive last week, despite being negative from Friday to Sunday, indicating a bullish sentiment among traders in the perpetual futures market.

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 maintained around 6.3% p.a. averaged across various futures exchanges last week. BTC option open interest increased by around +27.3k BTC. The put-call open interest ratio had spiked to 0.57 before ending the week at 0.55.

The 1-month 25-delta skew for BTC remained in negative territory throughout the week, ranging from a low of -3.89% to a high of -0.51%, before closing at -1.81%. The persistence of negative skew indicates continued preference for downside protection, with bearish positioning less pronounced than in prior weeks.

BTC option implied volatilities remained muted last week, while the 1-month realized volatility ended the week decreasing to 28.2%.

At the time of writing, implied volatilities of 1-month ATM Bitcoin options are currently at around 41.13% p.a.

Bottom Line

Bitcoin and cryptoassets have continued to recover on a weekly basis and have managed to outperform traditional assets as well.
Our Cryptoasset Sentiment Index continues to signal a bullish sentiment in crypto markets.
Chart of the Week: The momentum in Cross Asset Risk Appetite (CARA) has increased to a 5-year high so that both cryptoasset and cross asset sentiment are now decisively bullish.

Appendix

WICHTIGER HINWEIS:

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