Crypto Stabilizes: Undervaluation and Fed Shift Hint at a Rebound

André Dragosch, PhD Director, Head of Research — Europe

Max Shannon Senior Research Associate

Luke Deans Senior Research Associate

André Dragosch, PhD Director, Head of Research — Europe

Max Shannon Senior Research Associate

Luke Deans Senior Research Associate

Overview

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

Last week, cryptoasset performances have stabilised as positive flows into crypto ETPs and risk appetite gradually returned.
Our in-house “Cryptoasset Sentiment Index” continues to hover around neutral levels.
Chart of the Week: Based on our estimations, the derived total cost of production for a single bitcoin is currently at around $71k which is why we are already seeing a decline in network difficulty which suggests increasing financial pain among bitcoin miners as well. bitcoin is relatively undervalued again which is why even bitcoin miners are already feeling the economic pressure. This usually tends to be a signal for a tactical bottom in itself.

Chart of the Week

Performance

Last week, cryptoasset performances have stabilised as positive flows into crypto ETPs and risk appetite gradually returned.

In our view, one of the key reasons for the return in risk appetite appears to be related to seller exhaustion and increasingly attractive valuations.

We have repeatedly seen significant capitulation among market participants, especially among the short-term holder (STH) investor cohort as highlighted in one of our previous Crypto Market Compass reports. In this context, short-term holders are investors with a holding period of less than 155 days which often tend to be rather unsophisticated investors.

Technically speaking, our Cryptoasset Sentiment Index has flashed a contrarian signal on the 21st of November signalling significant financial “pain” and seller exhaustion in the market. Another factor that has contributed to the recent stabilization in market sentiment is MSTR.

More specifically, Michael Saylor's Strategy Inc. (MSTR) has eased concerns over the possibility of potential bitcoin sales with its latest announcements of a $1.4 bn cash reserve. This has certainly lifted market sentiment as well as MSTR has been the key buyer of bitcoins this year and is also the biggest bitcoin treasury company.

We generally think the risk of a sale of bitcoins by MSTR is very low as explained in our latest CIO Memo as well. To the contrary, a recent post by Michael Saylor on Twitter/X suggests that MSTR continues to accumulate bitcoins.

What is more is that we are generally approaching attractive valuation levels. As highlighted in our latest Bitcoin Macro Investor report, bitcoin currently appears to be undervalued relative to gold, relative to global money supply, and also relative to the macro growth outlook.

Moreover, Bitcoin valuation metrics such as the MVRV z-Score are also signalling increasingly attractive valuation levels.

In fact, based on our estimations, the derived total cost of production for a single bitcoin is currently at around $71k which is why we are already seeing a decline in network difficulty which suggests increasing financial pain among bitcoin miners as well (Chart-of-the-Week).

The key takeaway from these observations is that bitcoin is relatively undervalued again which is why even bitcoin miners are already feeling the economic pressure. Both hash rate and difficulty have declined more recently. Mining difficulty has seen the biggest decline since July 2025.

This usually tends to be a signal for a tactical bottom in itself.

This week, markets will be awaiting new guidance from the Fed on Wednesday. As of this morning, the market expects the Fed to cut interest rates by 25 basis points with a 92% probability and prices in another 50 bps in cuts for the year 2026.

The Fed has just announced the end of its Quantitative Tightening policy (“QT”) on December 1st which implies that monetary policy continues to become more accommodative at the margin – this tends to be a net tailwind for bitcoin and cryptoassets as well.

There could be additional positive catalysts from the Bitcoin MENA conference which is taking place from the 8th to the 9th of December in Abu Dhabi, UAE.

In general, among the top 10 crypto assets Bitcoin Cash (BCH), Ethereum, and BNB were the relative outperformers.

Overall, altcoin outperformance vis-à-vis bitcoin remained low last week, with only 35% of our tracked altcoins managing to outperform bitcoin on a weekly basis. However, Ethereum continued to outperform bitcoin last week.

Sentiment

Our in-house “Cryptoasset Sentiment Index” showed mixed readings, with four of the past seven days printing negative values. The end of the week turned positive, although this is not a definitive indication that sentiment will stabilise or strengthen in the week ahead.

At the moment, 5 out of 15 indicators are above their short-term trend.

Last week, the Hedge Fund Beta, BTC Put-Call Volume, BTC Exchange Inflows, Crypto Dispersion Index, and Cross Asset Risk Appetite metrics showed positive momentum.

The Crypto Fear & Greed Index currently signals a “extreme fear” level of sentiment as of this morning. The index has spent the whole month of November and December, so far, in either “fear” or “extreme fear” territory.

Performance dispersion among cryptoassets declined last week from 0.45 to 0.37. When dispersion is evident, it means that the market appears to be driven by a more diverse set of narratives which tends to be a sign of increasing risk appetite.

Altcoin outperformance vis-à-vis Bitcoin increased last week, with around 35% of our tracked altcoins managing to outperform Bitcoin on a weekly basis. Meanwhile, Ethereum underperformed 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 still signals increasing risk appetite at the moment.

Sentiment in traditional financial markets as measured by our in-house measure of Cross Asset Risk Appetite (CARA) increased significantly, moving from 0.47 to 0.77. This is a notable divergence between TradFi and crypto asset sentiment that should be watched closely.

Fund Flows

Global crypto ETPs saw renewed inflows last week, mainly in Bitcoin and Altcoin Ex-Ethereum products.

Global crypto ETPs saw around +465.2 mn USD in weekly net inflows across all types of cryptoassets, after -1962.1 mn USD in net outflows the previous week.

Global Bitcoin ETPs have continued to experience net inflows totalling +306.4 mn USD last week, of which –87.8 mn USD in net outflows were related to US spot Bitcoin ETFs.

The Bitwise Bitcoin ETF (BITB) in the US experienced net inflows, totalling +9.3 mn USD last week.

In Europe, the Bitwise Physical Bitcoin ETP (BTCE) experienced net inflows equivalent to +6.3 mn USD, as the Bitwise Core Bitcoin ETP (BTC1) also experienced minor net inflows of +2.3 mn USD.

The Grayscale Bitcoin Trust (GBTC) has posted net outflows of – 29.8 mn USD and the iShares Bitcoin Trust (IBIT) also experienced net outflows of around –49 mn USD last week.

Meanwhile, global Ethereum ETPs also experienced +1.7 mn USD in net inflows last week.

US spot Ethereum ETFs, also recorded net outflows of around –65.6 mn USD on aggregate. The Grayscale Ethereum Trust (ETHE), has posted net outflows of –53.2 mn USD.

The Bitwise Ethereum ETF (ETHW) in the US has posted net inflows of +4.5 mn USD.

In Europe, the Bitwise Physical Ethereum ETP (ZETH) saw minor net inflows of +1.2 mn USD while the Bitwise Ethereum Staking ETP (ET32) saw +1.7 mn of net inflows.

Altcoin ETPs ex Ethereum experienced net inflows of +103.8 mn USD last week, of which Solana ETFs saw +19.2 mn USD of net inflows.

Thematic & basket crypto ETPs posted net outflows of -53.4 mn USD on aggregate last week. The Bitwise MSCI Digital Assets Select 20 ETP (DA20) has experienced net inflows of +0.6 mn USD on aggregate.

Global crypto hedge funds exposure to Bitcoin declined slightly last week. The 20-days rolling beta of global crypto hedge funds' performance to Bitcoin moved from 1.01 to around 0.98 per yesterday's close.

On-Chain Data

Sell-side pressure across exchanges remains marginal, with intraday spot buying minus selling turning negative and closing the week at approximately -$370mn.

At the same time, on-chain profit taking remains steady at around $340mn per day, indicating that de-risking among profitable investors has likely found a floor and is largely exhausted within this price range.

As of current, approximately 6.5mn BTC is held at a loss, one of the highest readings of the cycle.

Additionally, the average underwater investor is carrying around $16.1k in paper losses per coin, with only 5% of trading days recording a more severe condition in USD terms. This highlights the severity of the current contraction and suggests that a period of accumulation within this range may be required to repair sentiment and establish a durable market floor.

Furthermore, the pressure on underwater investors is now being expressed on-chain, with realised losses elevated at $492mn per day. The scale of this capitulation is the largest since the FTX collapse in terms of loss taking. While this creates short term headwinds for price, such capitulation is often a prerequisite for constructing durable market floors, as supply transitions from weak hands to stronger, more convicted holders.

Positively, the Accumulation Trend Score, which tracks changes in supply held across wallets of all sizes, continues to suggest that buy-side demand is stepping into this price range, reflecting growing investor confidence amongst value investors, who will be crucial in the formation of a market floor.

Capital inflows into Bitcoin continue to contract, with 30-day Realised Cap growth slowing to just +0.75% per month. This indicates that profit taking and loss taking are now broadly balanced, with losses only marginally outweighing gains. This rough equilibrium suggests the market has entered a state of rest, with neither side exerting meaningful dominance. A larger transition in liquidity and/or sentiment is therefore likely required before the next decisive trend can form.

Price continues to attempt to break through the $93.5k threshold, which we have highlighted as a critical region to claim for market momentum. However, repeated failure to break through the $93.5k level would bring the $82k-$75k price range back into consideration, where the average investor purchasing price, the MSTR cost basis and the US spot Bitcoin ETF cost basis reside.

If the market can decisively reclaim the $93.5k level, the next key areas of interest sit at the $100k psychological threshold, the Short-Term Holder cost basis at $103.1k and the 200-day moving average at $109.2k. Each successive level reclaimed would signal a growing degree of market confidence, as these thresholds represent increasingly meaningful layers of resistance that, once broken, would indicate a strengthening recovery in market structure.

Futures, Options & Perpetuals

Over the past week, BTC perpetual futures open interest declined by -11.8k BTC across all exchanges, while CME futures open interest declined by a further -2k BTC, indicating a decline in institutional positioning. In aggregate, total open interest remains relatively subdued compared to recent months, suggesting that the futures market is not the primary driver of current price action.

BTC perpetual funding rates have shown slight growth but remain close to neutral, highlighting a meaningful moderation in investor risk appetite. This is a constructive development, as funding rates resetting toward equilibrium suggests that derivatives positioning is no longer driving market behaviour, supporting the observation that spot flows are exerting greater influence over price direction.

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-month annualised basis remained steady this week, falling slightly from 5.4% to 5.2% this week. The lack of significant movement here reinforces the notion that derivatives positioning is relatively muted.

Week-on-week, open interest continues to build at the $94k level, adding confluence to the observation that $93.5k remains a critical threshold for further constructive price action. This area is likely to be highly sensitive, with short traders defending their positions.

BTC options open interest has increased by approximately +43.6k BTC, indicating a more organic rebuild in positioning following the monthly expiry reset. In addition, the put to call open interest ratio remains broadly stable at 0.54 after last week's sharp decline, suggesting that demand for downside protection remains balanced. Overall, the options market is signalling a neutral stance as participants await clearer directional cues amid an uncertain market backdrop.

However, across the 25-delta skew, the 1-week tenor experienced a notable contraction this week, suggesting that short term demand for downside hedging has begun to moderate. However, the 1-month, 3-month and 6-month tenors all recorded an uptick, indicating that investors continue to seek protection over the medium horizon, with uncertainty around the broader trend still elevated.

Bottom Line

Last week, cryptoasset performances have stabilised as positive flows into crypto ETPs and risk appetite gradually returned.
Our in-house “Cryptoasset Sentiment Index” continues to hover around neutral levels.
Chart of the Week: Based on our estimations, the derived total cost of production for a single bitcoin is currently at around $71k which is why we are already seeing a decline in network difficulty which suggests increasing financial pain among bitcoin miners as well. bitcoin is relatively undervalued again which is why even bitcoin miners are already feeling the economic pressure. This usually tends to be a signal for a tactical bottom in itself.

Appendix

Important information:

This article does not constitute investment advice, nor does it constitute an offer or solicitation to buy financial products. This article is for general informational purposes only, and there is no explicit or implicit assurance or guarantee regarding the fairness, accuracy, completeness, or correctness of this article or the opinions contained therein. It is advised not to rely on the fairness, accuracy, completeness, or correctness of this article or the opinions contained therein. Please note that this article is neither investment advice nor an offer or solicitation to acquire financial products or cryptocurrencies.

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About Bitwise

Bitwise is one of the world’s leading crypto specialist asset managers. Thousands of financial advisors, family offices, and institutional investors across the globe have partnered with us to understand and access the opportunities in crypto. Since 2017, Bitwise has established a track record of excellence managing a broad suite of index and active solutions across ETPs, separately managed accounts, private funds, and hedge fund strategies—spanning both the U.S. and Europe.

In Europe, for the past four years Bitwise (previously ETC Group) has developed an extensive and innovative suite of crypto ETPs, including Europe’s largest and most liquid bitcoin ETP.

This family of crypto ETPs is domiciled in Germany and approved by BaFin. We exclusively partner with reputable entities from the traditional financial industry, ensuring that 100% of the assets are securely stored offline (cold storage) through regulated custodians.

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