Cryptoassets Surge Past Equities as Fed Rate Cut Bets Grow - Bitcoin ETF Flows Signal Renewed Bullish Momentum | Bitwise

André Dragosch, PhD Director, Head of Research — Europe

Max Shannon Senior Research Associate

Ayush Tripathi Research Analyst

André Dragosch, PhD Director, Head of Research — Europe

Max Shannon Senior Research Associate

Ayush Tripathi Research Analyst

Overview

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

Cryptoassets outperformed global equities again amid rising risk appetite and an increasing probability for Fed rate cuts this week.
Our in-house Cryptoasset Sentiment Index has rebounded to a new 1-month high, signalling a return to slightly bullish sentiment.
Chart of the Week: The rising risk appetite can also be seen in the reversal in global Bitcoin ETP flows. More specifically, flows into US spot Bitcoin ETFs have surpassed new supply growth across different time frames again which has supported the latest recovery.

Chart of the Week

Performance

Cryptoassets outperformed global equities again amid rising risk appetite and an increasing probability for Fed rate cuts this week.

The rising risk appetite can also be seen in the reversal in global Bitcoin ETP flows. More specifically, flows into US spot Bitcoin ETFs have surpassed new supply growth across different time frames again which has supported the latest recovery (Chart-of-the-Week).

Weekly flows into global Bitcoin ETPs have also surpassed those into Ethereum ETP again – the second consecutive week of higher relative flows into Bitcoin ETPs. It is important to note that, flows into Bitcoin ETPs tend to be a dominant performance driver for bitcoin as outlined in our recent Crypto Market Espresso.

Based on the latest Bloomberg data, year-to-date, Bitcoin ETPs have attracted around $22.4 bn in new capital while global Ethereum ETPs have attracted around $11.4 bn, respectively.

Soft inflation data from the US have cemented the view that the Fed will announce further rate cuts after their FOMC meeting this week on Wednesday. As of this morning, Fed Funds Futures price in a 100% probability for a 25 basis points cut in the Fed Funds Target Rate this week and even a 93% chance of 75 bps reduction until year end.

The rise in risk appetite was also underscored by a flurry of major crypto-related IPOs and announcements last week: 3 major crypto companies went public in the US – Figure, Gemini, and SOL Strategies (STKE).

IPOing companies have been in a clear bull market based on the Renaissance Macro IPO Index. Seen from a macro perspective, this tends to signal a return in excess liquidity growth which is also bound to support bitcoin and cryptoassets going forward.

Besides, the biggest stablecoin issuer Tether also announced a new US-compliant stablecoin USAT which will be headed by former White House crypto advisor Bo Hines. This once again underscores the regularity clarity for digital assets and stablecoins in particular broad by the GENIUS Act.

The rising risk appetite was also evident in the persistent outperformance of altcoins.

In general, among the top 10 crypto assets Dogecoin, Solana, and Hyperliquid were the relative outperformers.

Overall, altcoin outperformance vis-à-vis bitcoin was very positive last week, with 80% of our tracked altcoins managing to outperform bitcoin on a weekly basis. Ethereum also outperformed bitcoin last week.

Sentiment

Our in-house “Cryptoasset Sentiment Index” has rebounded to a new 1-month high, signalling a return to slightly bullish sentiment.

At the moment, 8 out of 15 indicators are above their short-term trend.

Last week, Bitcoin options metrics and the global crypto fund flows positive momentum.

The Crypto Fear & Greed Index currently signals a “Neutral” level of sentiment as of this morning.

Performance dispersion among cryptoassets continued to decline last week, signalling that altcoins have not been so correlated with the performance of bitcoin.

Altcoin outperformance vis-à-vis Bitcoin has increased from last week, with around 80% of our tracked altcoins managing to outperform Bitcoin on a weekly basis. Ethereum also managed to outperform 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 increasing risk appetite at the moment.

Sentiment in traditional financial markets as measured by our in-house measure of Cross Asset Risk Appetite (CARA) has also increased, moving from 0.45 to 0.62.

Fund Flows

Weekly fund flows into global crypto ETPs had flipped positive last week. This could likely be a result of macro volatility, paired with a neutral market sentiment and a “re-rotation” of capital away from Ether back to Bitcoin.

Global crypto ETPs saw around +3149.9 mn USD in weekly net inflows across all types of cryptoassets, after -448.1 mn USD in net outflows the previous week.

Global Bitcoin ETPs have continued to experienced net inflows totalling +2392.7 USD last week, of which +2343.6 mn USD in net inflows were related to US spot Bitcoin ETFs.

The Bitwise Bitcoin ETF (BITB) in the US experienced net inflows, totalling +138.5 mn USD last week.

In Europe, the Bitwise Physical Bitcoin ETP (BTCE) experienced net outflows equivalent to –2.9 mn USD, while the Bitwise Core Bitcoin ETP (BTC1) experienced minor net inflows of +0.9 mn USD.

The Grayscale Bitcoin Trust (GBTC) has posted net inflows of +13.3 mn USD. The iShares Bitcoin Trust (IBIT), however, experienced net inflows of around 1036.9 mn USD last week.

Meanwhile, flows into global Ethereum ETPs also flipped positive last week, with around 672.3 mn USD in net inflows.

US spot Ethereum ETFs, also recorded net inflows of around 637.7 mn USD on aggregate. The Grayscale Ethereum Trust (ETHE), has posted net inflows of 56.9 mn USD.

The Bitwise Ethereum ETF (ETHW) in the US has posted also net inflows of 44.6 mn USD.

In Europe, the Bitwise Physical Ethereum ETP (ZETH) saw minor net inflows of 1 mn USD while the Bitwise Ethereum Staking ETP (ET32) saw minor net inflows of +0.2 mn USD.

Altcoin ETPs ex Ethereum also experienced minor net inflows of +89.8 mn USD last week underscoring a relatively low risk appetite for altcoins (which can be explained by the decrease in our CARA reading for last week).

Thematic & basket crypto ETPs posted minor net outflows of -5 mn USD on aggregate last week. The Bitwise MSCI Digital Assets Select 20 ETP (DA20) had experienced zero net inflows of 0 mn USD on aggregate.

Global crypto hedge funds exposure to Bitcoin has increased last week. The 20-days rolling beta of global crypto hedge funds' performance to Bitcoin decreased to around 0.73 per yesterday's close, up from 0.64 from the week before.

On-Chain Data

Intraday Spot Buying minus Selling volume continued to be negative but had slightly decelerated midweek last week with net selling volumes at approximately -$14.18 bn on bitcoin spot exchanges by week-end.

Bitcoin whales (entities that hold at least 1k BTC) have deposited bitcoins on exchanges on a net basis. This indicates a decrease in whale HODLing and tends to exert selling pressure. More specifically, BTC whales added +1158 BTC to exchanges last week which tends to put downward pressure on prices.

Furthermore, based on recent data from Glassnode, the overall downward trend in exchange-held Bitcoin reserves has reversed slightly higher. The current level stands at 2.972 million BTC, representing approximately 14.91% of the total circulating supply - a 41 bps increase from last week.

It's worth noting that the 30-day measure of “apparent demand” for Bitcoin remained positive and continued to reaccelerate over the past week. This is signalling a continuing influx of short-term holders as well.

All in all, on-chain metrics have deteriorated but there is still room for further upside especially with respect to the amount of net buying volumes on bitcoin exchanges. Overall net selling volumes are significantly influenced by a high volume of profit-taking at the moment, near the key average Short Term Holder level.

Futures, Options & Perpetuals

Last week, BTC futures open interest decreased last week by -864 BTC across all exchanges and increased by +7.6k BTC on CME. Meanwhile, perpetual open interest increased by around -49 BTC.

BTC perpetual funding briefly turned negative last week indicating excessively bearish sentiment among traders in the perpetual futures market and a short bias.

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 increased significantly last week to around 8.72% p.a., averaged across various futures exchanges.

BTC option open interest increased by around +26.7k BTC while the put-call open interest ratio decreased slightly to 0.61. We observed some spikes in the put-call volume ratio indicating an increasing appetite for downside protection during this rally.

Meanwhile, the 1-month 25-delta skew for BTC decreased throughout the week from +10.7% to +7.1% signalling increasing appetite for call options but still heavily put-biased. The presence of a positive skew still indicates some preference for downside exposure.

BTC option implied volatilities decreased slightly compared to last week, consistent with the decline in 1-month realized volatility.

At the time of writing, implied volatilities of 1-month ATM Bitcoin options are currently at around 32.3% p.a. on Deribit.

Bottom Line

Cryptoassets outperformed global equities again amid rising risk appetite and an increasing probability for Fed rate cuts this week.
Our in-house Cryptoasset Sentiment Index has rebounded to a new 1-month high, signalling a return to slightly bullish sentiment.
Chart of the Week: The rising risk appetite can also be seen in the reversal in global Bitcoin ETP flows. More specifically, flows into US spot Bitcoin ETFs have surpassed new supply growth across different time frames again which has supported the latest recovery.

Appendix

Important information:

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About Bitwise

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