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: Crypto assets underperformed last week amid a rebound in traditional financial markets, with Bitcoin (-3%) and Ethereum (-4%) trailing the Nasdaq 100 (+1%) - a reversal of the prior week's leadership. Weakness was amplified by the Coldcard hardware wallet hacks (~1,400 BTC drained), though Bitcoin remains ahead of both the Nasdaq and semiconductors since the SOX peaked on 22 June. Bitwise products were not affected by the incident.
- Sentiment: Our in-house Cryptoasset Sentiment Index has declined somewhat and now signals a neutral level of sentiment, consistent with sluggish net flows into global crypto ETPs and a macro backdrop of tightening financial conditions that favours continued consolidation in crypto markets for the time being.
- Chart of the Week: Oil prices, the Japanese yen and the Chinese yuan are all signalling that US Treasury yields sit at a critical threshold - any further yen depreciation or rise in oil prices could push yields to new record highs. A significant dislocation in Treasury markets could be the key catalyst forcing the Fed to intervene and provide liquidity, which would likely act as a major tailwind for Bitcoin and other cryptoassets.
Chart of the Week
Index = WTI × USDJPY × USDCNH (2022-01-01 = 100)
Higher = greater pressure on China & Japan to sell US Treasuries
Performance
Bitcoin and other crypto assets moved lower last week amid a major rebound in traditional financial markets, especially AI-related equities. More specifically, Bitcoin and Ethereum were down -3% and -4%, respectively, while the Nasdaq 100 rose around +1%. This marks a clear reversal of performance leadership between crypto assets and tech equities compared to the previous week. That being said, major crypto assets like Bitcoin are still up against both the Nasdaq and semiconductors (SOX) since semiconductors peaked on the 22nd of June as highlighted in last week’s report.
Apart from that, one of the major reasons for Bitcoin's underperformance were the Coldcard wallet hacks that drained significant amounts of BTC, mostly from the wallets of early Bitcoin adopters. At the time of writing this report early Monday morning, approximately ~1,400 BTC had been drained from wallets secured by Coldcard hardware devices. The Coldcard device was considered "the gold standard" among Bitcoin hardware wallets for cold storage, which is why the whole Bitcoin community has been shaken by this incident. It is still unknown who is behind this hack.
It is important to note in this context that Bitwise products have not been affected by this incident. Bitcoins held in our ETPs are custodied by professional custodians using multisig security, and individual wallets are also insured. In addition, we make use of an independent administrator that has to confirm outgoing transactions as well. Read more here about our additional security features.
Apart from that, a major source of volatility was the FOMC meeting, which left the Fed funds target rate unchanged. However, a record number of dissents implies that upward pressure on key interest rates is rising within the committee. In fact, following the latest FOMC meeting, long-term US Treasury bond yields have continued to grind higher to new multi-decade highs. Fed funds futures are already pricing in a 67% probability of a rate hike in September. This implies that monetary policy - and financial conditions more broadly - are continuing to tighten.
It is also worth noting in this context that both the Japanese Ministry of Finance and the US Treasury have conducted interventions in FX markets to support the yen. We think a major reason for these interventions is to prevent long-term US Treasury bond yields from rising further: both the US 10-year and 30-year Treasury yields are at critical thresholds that could induce a major market rout. By stemming the depreciation of the yen, Japan faces less pressure to sell US Treasury bonds to pay for higher oil imports - both a higher oil price and a weaker yen are contributing to a rising energy import bill in Japan.
We also think that the recent jawboning by the US administration with respect to the ongoing conflict in Iran is motivated by the incentive to cap oil prices - and, by derivation, to keep US Treasury yields from rising further.
In fact, oil prices, the Japanese yen and the Chinese yuan are all signalling that US Treasury yields are at a very critical threshold, and any further yen depreciation and/or rise in the oil price could lead to new record highs in US Treasury yields (Chart of the Week).
We think that a significant dislocation in US Treasury markets may be a key catalyst for the Fed to intervene and provide liquidity to financial markets. Any type of monetary policy intervention may provide a significant tailwind for bitcoin and other major cryptoassets.
Besides, a significant reversal in the yen exchange rate could mark the end of the global carry trade, in which Japanese investors, having sought higher yields in foreign markets, repatriate capital from overseas. This could lead to a further tightening of global financial conditions in the meantime.
The uncertain macro environment will probably lead to continued consolidation in crypto markets, which is also supported by rather sluggish net flows into global crypto asset ETPs. It is quite likely that more "pain" in traditional financial markets is needed - i.e. in equity and bond markets - in order for a positive catalyst like renewed monetary policy easing to re-emerge.
However, we think that this point-to-time is closer than most analysts expect as clear cracks in traditional financial markets are already emerging (e.g. in equity markets, bonds markets, commodity and FX markets).
In general, among the top 10 crypto assets Ethereum, TRON, and XRP were the relative outperformers. Ethereum also outperformed bitcoin last week.
Sentiment
Our in-house “Cryptoasset Sentiment Index” has declined somewhat and now signals a neutral level of sentiment.
At the moment, 9 out of 15 indicators remain above their short-term trend.
For instance, the 3-months bitcoin basis rate continues to signal an improving risk appetite while the reversal in global ETP flows implies a renewed deterioration.
The Crypto Fear & Greed Index has continued to remain in the ‘fear' territory.
Performance dispersion has remained elevated although bitcoin has outperformed during the latest reversal to the downside.
When dispersion increases, it may indicate that the market appears to be driven by a more diverse set of narratives which, in our analysis, has historically been associated with periods of increasing risk appetite in prior market cycles.
Altcoin outperformance vis-à-vis Bitcoin declined somewhat to 40% of our tracked altcoins in the index. Ethereum slightly underperformed bitcoin last week. This signals a deterioration in sentiment but more dispersion.
Sentiment in traditional financial markets as measured by our in-house measure of Cross Asset Risk Appetite (CARA) has reversed higher from 0.50 to 0.58 over the past week, signalling an improvement in risk appetite.
The CME Bitcoin Commercials Net Positioning metric shows the difference between long and short CME Bitcoin futures contracts. The reading has declined further to -17.5% of open interest, from -14.8%, suggesting that overall negative positioning has firmed: a cautious outlook, with downside hedges remaining in play. That said, this creates a significant upside asymmetry for bitcoin should these short positions start to unwind.
All in all, neutral sentiment, bearish Fear and Greed, and low dispersion suggest that risk appetite remains subdued, and the lack of spot net ETP flows also supports the view of continued consolidation in the short term.
Fund Flows
Global crypto ETPs experienced around -83.5 mn USD in net outflows last week, across all types of cryptoassets, after +194.9 mn USD in net inflows the previous week.
Global Bitcoin ETPs experienced net outflows of -40.7 mn USD last week, of which -69.0 mn USD in net outflows were related to US spot Bitcoin ETFs.
The Bitwise Bitcoin ETF (BITB) in the US experienced net inflows of +3.0 mn USD last week.
In Europe, the Bitwise Physical Bitcoin ETP (BTCE) experienced net outflows equivalent to -0.3 mn USD, as the Bitwise Core Bitcoin ETP (BTC1) experienced net inflows of around +0.3 mn USD.
The Grayscale Bitcoin Trust (GBTC) posted net outflows of -52.6 mn USD whereas, the iShares Bitcoin Trust (IBIT) experienced net inflows of around +86.9 mn USD last week.
Meanwhile, global Ethereum ETPs also experienced -11.2 mn USD in net outflows last week, of which US spot Ethereum ETFs recorded net outflows of around -13.7 mn USD on aggregate.
The Grayscale Ethereum Trust (ETHE) posted net outflows of -11.3 mn USD, whilst the iShares Ethereum Trust (ETHA) saw net inflows of +36.6 mn USD.
The Bitwise Ethereum ETF (ETHW) in the US experienced net outflows of -2.5 mn USD last week.
In Europe, the Bitwise Physical Ethereum ETP (ZETH) recorded no net flows last week (+/- 0 mn USD), whilst the Bitwise Ethereum Staking ETP (ET32) also saw no net inflows or outflows.
Altcoin ETPs ex Ethereum experienced net outflows of -33.2 mn USD last week.
Thematic & basket crypto ETPs posted net inflows of +1.6 mn USD on aggregate last week. The Bitwise MSCI Digital Assets Select 20 ETP (DA20) recorded no net inflows or outflows last week.
All in all, global cryptoasset ETP flows reversed lower after 3 consecutive weeks of global net inflows. Although global ETPs saw net outflows, it is worth noting that both IBIT and ETHA saw net inflows amid an improvement in global risk appetite. Apart from that, basket and thematic crypto ETPs were the only bright spot across all types of cryptoasset ETPs.
On-Chain Data
Bitcoin continues to consolidate, ending the week near $63k. Despite volatility across bond, energy and equity markets, Bitcoin remains relatively disentangled at present and continues to trade within a narrow range.
To quantify the degree of price compression, we assess the dollar range in which Bitcoin has traded over the past 30, 60 and 90 days, before ranking each observation on a historical percentile basis. Periods of tightly coiled price action have often preceded increases in realised volatility. Consolidation can encourage investor apathy and seller exhaustion, eventually giving way to a period of expansion. Importantly, however, the direction of any volatility expansion remains uncertain.
| Window | Historical Percentile |
|---|---|
| 30-Day | 1.85% |
| 60-Day | 1.59% |
| 90-Day | 26.3% |
The 30-day and 60-day windows are exceptionally compressed, while the 90-day window remains moderately compressed. Through the lens of this framework, the probability of an increase in realised volatility appears elevated.
The investor apathy implied by this compression is also visible across major market sectors, where volumes remain heavily subdued. Seven-day spot and futures volumes both rank close to the 1st percentile over the past year. On-chain volume records the strongest relative reading at the 45.6th percentile, although part of this increase may reflect coins being moved in response to the recent Coldcard exploit, including transfers to new wallets or exchanges.
On balance, activity continues to reflect a severe lack of investor engagement across digital asset markets. Low volumes also create a more illiquid market surface, allowing relatively modest shocks to have an outsized impact on price and further reinforcing expectations of higher volatility.
| Market | 7-Day Volume | 1-Year Percentile |
|---|---|---|
| Spot | $27.2bn | 1.4% |
| Futures | $214.5bn | 1.1% |
| Options | $20.1bn | 6.0% |
| On-chain | $38.3bn | 45.6% |
| ETF | $9.0bn | 8.2% |
| DAT | $7.6bn | 5.5% |
Turning specifically to the on-chain market, capital inflows and outflows remain extremely shallow despite the increase in transaction volume. This is reflected in the Sell-Side Risk Ratio, which measures total realised profit and loss relative to the Realised Cap, a measure of the capital invested towards the asset.
At present, the ratio has fallen to historically low levels, with only 9% of trading days recording a lower reading. This further indicates that investors remain disengaged and that liquidity within the prevailing trading range is exceptionally constrained. Historically, when liquidity becomes this limited, price often needs to move materially to unlock latent supply and encourage renewed capital movement.
With several metrics pointing towards heightened volatility, it is prudent to assess the key price pathways.
On the downside, the Realised Price at $52.8k, representing the market’s average cost basis, and the 200-week moving average at $63.5k have historically bracketed the regions where terminal cycle lows form during deep bear markets. Our base case remains that terminal valuation forms within this range.
At present, price appears to be finding a degree of support around the 200-week moving average, which would represent a constructive development if sustained. However, a decisive loss of this level would bring the Realised Price back into focus as the next major downside reference.
To the upside, the Short-Term Holder cost basis at $68.9k, representing the average acquisition price of newer investors, and the True Market Mean at $76.1k, representing the average acquisition price of active investors, mark important local and macro equilibrium levels. A decisive reclaim of these thresholds has historically been associated with renewed momentum and a return to risk-on conditions.
Futures, Options & Perpetuals
Over the past week, BTC perpetual futures open interest decreased slightly by approximately -2.72k BTC, while CME futures open interest rose by around +4.9k BTC versus the prior week. That combination suggests offshore leverage was reduced, while more institutionally oriented venues experienced a modest rebuild in positioning.
Perpetual funding rates, measured on a 7-day moving average, ended the week positive at around +6.9% annualised. That suggests futures positioning remains long-biased with investors increasingly willing to pay for upside exposure.
At the same time, the 3-month annualised basis remained broadly unchanged from the previous week. However, it remains elevated relative to year-to-date conditions, with the gradual build suggesting that speculative activity is beginning to return to futures markets despite persistently weak volumes.
Across options markets, BTC open interest on major exchanges declined by approximately 129k BTC to 387k BTC. A significant portion of this reduction can be attributed to month-end contract expiry, with the move broadly consistent with the decline observed at the end of the previous month.
The put-to-call open interest ratio across major crypto-native exchanges rose sharply from 0.43 to 0.54, indicating increased demand for downside protection. This divergence was not observed across other major digital assets, whose put-to-call ratios remained broadly unchanged. The move may therefore reflect heightened concern following the Coldcard exploit, with some investors positioning for further market weakness.
By contrast, the equivalent ratio across IBIT options declined from 0.70 to 0.67 by the end of the week. Using the distinction between crypto-native and institutional venues as a crude proxy, this suggests that the increase in fear was concentrated among crypto-native investors rather than institutional participants.
The 25-delta skew also moved higher across the term structure, extending the upward trend that began around 21 July. This indicates that downside protection became more expensive across maturities, reflecting increasingly cautious forward price expectations among options investors.
Total gamma exposure, measured on a seven-day moving average, declined to approximately negative $1.6bn. In practical terms, negative gamma can amplify price moves in either direction, as dealer hedging may require selling into declines and buying into rallies. The largest positive gamma concentration sits at $62k, while the largest negative concentration is located at $60k. This suggests that $62k may exert a stabilising influence, while a decisive break below $60k could amplify downside volatility.
Bottom Line
- Performance: Crypto assets underperformed last week amid a rebound in traditional financial markets, with Bitcoin (-3%) and Ethereum (-4%) trailing the Nasdaq 100 (+1%) - a reversal of the prior week's leadership. Weakness was amplified by the Coldcard hardware wallet hacks (~1,400 BTC drained), though Bitcoin remains ahead of both the Nasdaq and semiconductors since the SOX peaked on 22 June. Bitwise products were not affected by the incident.
- Sentiment: Our in-house Cryptoasset Sentiment Index has declined somewhat and now signals a neutral level of sentiment, consistent with sluggish net flows into global crypto ETPs and a macro backdrop of tightening financial conditions that favours continued consolidation in crypto markets for the time being.
- Chart of the Week: Oil prices, the Japanese yen and the Chinese yuan are all signalling that US Treasury yields sit at a critical threshold - any further yen depreciation or rise in oil prices could push yields to new record highs. A significant dislocation in Treasury markets could be the key catalyst forcing the Fed to intervene and provide liquidity, which would likely act as a major tailwind for Bitcoin and other cryptoassets.
Appendix
Data subject to change
Combined positioning = futures and options in % of Ol
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