- Last week, overall cryptoassets underperformed as market sentiment deteriorated following the largest exchange hack in history. The unwind of basis “carry trades” added to selling pressure, driving significant volatility.
- Our in-house “Cryptoasset Sentiment Index” now signals a rather neutral sentiment after having triggered technical contrarian buying signals last week.
- The ByBit hack significantly weighed on market sentiment, triggering technical contrarian signals early in the week. Additionally, bearish sentiment in crypto markets coincided with the highest bearish readings in the AAII US equity retail survey since 2022.
Chart of the Week
Performance
Last week, overall cryptoassets underperformed due to a significant decline in market sentiment following the biggest exchange hack in history.
More specifically, around 1.4 bn USD worth of Ethereum (ETH) were stolen from the UAE-based crypto exchange ByBit – the biggest cryptocurrency hack in history. We have explained this event in more detail in our report last week here.
The ByBit hack clouded market sentiment quite significantly which also triggered technical contrarian buying signals in our Cryptoasset Sentiment Index (below -1 standard deviation) at the beginning of last week already (Chart-of-the-Week).
Moreover, there was an interesting confluence of bearish sentiment both in crypto markets and in US equity markets based on the AAII US equity retail survey where bearish readings reached the highest level since 2022.
However, the slightly negative performance of most cryptoassets last week masks significant volatility throughout the week – at one point, Bitcoin alone recorded a -27.6% price drawdown from all-time highs and was technically mired in a bear market.
The selling pressure last week mostly appeared to be related to an unwind of basis “carry trades”.
In a basis trade, traders short the calendar future and long the underlying spot asset to establish a market neutral position which yields the so-called “basis rate”. This basis rate had previously declined significantly for both Bitcoin and Ethereum as the futures curve's contango has come down.
For instance, in the case of Bitcoin, the 3-months annualised basis rate has come down from a high of 16.3% p.a. in November 2024 to only 6.7% p.a. more recently.
In fact, the majority of realized losses on Tuesday last week (26/02) - when the bulk of the sell-off happened - originated from large short-term investors (“whales”) from the 1k-10k BTC wallet cohort and a holding period between 1 day and 1 week.
As a result, we have also seen the largest daily and weekly net outflows from global crypto ETPs, especially from US spot Bitcoin ETFs which recorded a -1,138.9 mn USD net outflow on the 25/02 alone (see also the chart in the appendix). However, this generally underscores the excessively bearish market sentiment and should generally be regarded as contrarian signal as well.
One of the key reasons is that we generally expect even higher net inflows into US spot Bitcoin ETFs in 2025 than in 2024, which was a record year. This implies that we should see structurally positive flows into these ETFs over the coming months.
Cryptoasset prices have recently reversed higher again. Two key catalysts have contributed to this: Firstly, BlackRock announced to include Bitcoin in their model portfolios which would potentially entail a 1%-2% strategic portfolio allocation across their in-house multiasset portfolios.
Secondly, Donald Trump announced on Truth Social to establish a “U.S. Crypto Reserve” which would cover the top 5 non-stablecoin cryptoassets by market cap: Bitcoin (BTC), Ethereum (ETH), XRP, Solana (SOL), and Cardano (ADA). This immediately sent crypto prices soaring again, with Bitcoin adding almost +10% on Sunday alone.
In fact, the probability for a US national Bitcoin reserve in 2025 immediately jumped on Polymarket above 50% again. At the time of writing, the probability stands at around 62%.
More details about these developments are expected to be revealed at the first ever White House “Crypto Summit” which will take place on Friday (7 th of March) this week.
In general, among the top 10 crypto assets Cardano, Hedera and XRP were the relative outperformers.
Overall altcoin outperformance vis-à-vis Bitcoin inched up last week, with 55% of our tracked altcoins managing to outperform Bitcoin on a weekly basis. However, Ethereum underperformed Bitcoin last week.
Sentiment
Our in-house “Cryptoasset Sentiment Index” now signals a rather neutral sentiment after having triggered technical contrarian buying signals last week.
At the moment, 7 out of 15 indicators are above their short-term trend.
We are observing a reversal in key indicators, including the Crypto Hedge Fund Beta and the Altseason Index, alongside improving metrics such as a slight uptick in Bitcoin exchange inflows.
The Crypto Fear & Greed Index currently signals a “Fear” level of sentiment as of this morning.
Performance dispersion among cryptoassets has shown a moderate improvement from last week's lows, indicating that altcoins are beginning to decouple slightly from Bitcoin's recent performance.
Altcoin outperformance vis-à-vis Bitcoin has increased from last week, with around 55% of our tracked altcoins managing to outperform Bitcoin on a weekly basis. However, Ethereum exhibited a reversal, underperforming 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 signals a bearish risk appetite at the moment.
Sentiment in traditional financial markets as measured by our in-house measure of Cross Asset Risk Appetite (CARA) slightly declined last week while remaining at similar levels. The index continues to indicate a slightly bullish cross-asset risk appetite.
Fund Flows
Weekly fund flows into global crypto ETPs have weakened from last week, mainly due to ongoing outflows from Bitcoin ETPs.
Global crypto ETPs saw around -2997.3 mn USD in weekly net outflows across all types of cryptoassets, after -596.5 mn USD in net outflows the previous week.
GlobalBitcoinETPs have continued to experience with net outflows totalling -2651.6 mn USD last week, of which -2618.8 mn USD in net outflows were related to US spot Bitcoin ETFs.
The Bitwise Bitcoin ETF (BITB) in the US experienced net outflows, totalling -90 mn USD last week.
In Europe, the Bitwise Physical Bitcoin ETP (BTCE) also experienced minor net outflows equivalent to -9.3 mn USD, while the Bitwise Core Bitcoin ETP (BTC1) neither in- nor outflows last week (+/- 0 mn USD).
Outflows from the Grayscale Bitcoin Trust (GBTC) continued last week with around -188.8 mn USD in net outflows last week. The iShares Bitcoin Trust (IBIT) also experienced significant net outflows of around -1174.6 mn USD last week.
Furthermore, flows into global Ethereum ETPs continued to weaken last week, with around -324.9 mn USD in net outflows last week.
US Ethereum spot ETFs experienced net outflows of around -335.4 mn USD on aggregate, and the Grayscale Ethereum Trust (ETHE) continued to experience net outflows with around -77.1 mn USD last week.
The Bitwise Ethereum ETF (ETHW) in the US saw some net outflows of -20.7 mn USD last week.
In Europe, the Bitwise Physical Ethereum ETP (ZETH) saw neither in- nor outflows last week while the Bitwise Ethereum Staking ETP (ET32) also saw net inflows last week (+13.5 mn USD).
However, Altcoin ETPs ex Ethereum saw a reversal last week, with around -16.7 mn USD in global net outflows on aggregate, aligning with the broader negative market trend in ETP flows.
The Bitwise Physical Solana ETP (ESOL) had positive net inflows of around +2.4 mn USD while the Bitwise Solana Staking ETP (BSOL) did not experience any creations or redemptions last week (+/- 0 mn USD).
Furthermore, thematic & basket crypto ETPs experienced minor net outflows of around -4.1 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 increased their market exposure to Bitcoin significantly last week. The 20-days rolling beta of global crypto hedge funds' performance to Bitcoin increased around 0.63 per yesterday's close, up from 0.52 the week before.
On-Chain Data
In general, Bitcoin's on-chain developments have rather deteriorated somewhat last week.
Selling pressure has continued to be high last week, with around -2.02 bn USD in net selling volumes on BTC spot exchanges.
On a positive note, BTC exchange balances have continued to decline which implies an ongoing increase in the supply deficit of bitcoins on exchanges.
This happened even though whales have sent bitcoins to exchanges on a net basis. More specifically, BTC whales sent +6943 BTC to exchanges, indicating a slight increase in whale selling pressure. Network entities that possess at least 1,000 Bitcoin are referred to as whales.
At the time of writing, only 2.706 million BTC remain on exchanges (13.6% of circulating supply), according to data provided by Glassnode, the lowest level since November 2018.
That being said, a measure of “apparent demand” for Bitcoin over the past 30 days turned negative last week for the first time since October 2024 and has continued to decline, signalling a sustained deceleration in Bitcoin demand.
Futures, Options & Perpetuals
Last week, BTC futures open interest declined by around -30k BTC while perpetual open interest decreased by around -2k BTC.
Bitcoin short futures liquidations spiked temporarily on Sunday to the highest level since last December.
BTC perpetual funding rates turned negative on Thursday of the week before last, signalling bearish sentiment among perpetual futures traders. However, despite remaining relatively low, funding rates stayed positive throughout last week.
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 slightly decreased last week to around 6.7% p.a. averaged across various futures exchanges.
BTC option open interest saw a decrease by around -3k BTC last week. The put-call open interest ratio increased somewhat last week, indicating a rise in relative put buying. However, it declined going into the weekend, suggesting a moderation in bearish positioning.
The 1-month 25-delta skew for BTC also increased signalling an increase in bearish sentiment.
BTC option implied volatilities also experienced an uptick from last week.
At the time of writing, implied volatilities of 1-month ATM Bitcoin options are currently at around 53.9% p.a.
Bottom Line
- Last week, overall cryptoassets underperformed as market sentiment deteriorated following the largest exchange hack in history. The unwind of basis “carry trades” added to selling pressure, driving significant volatility.
- Our in-house “Cryptoasset Sentiment Index” now signals a rather neutral sentiment after having triggered technical contrarian buying signals last week.
- The ByBit hack significantly weighed on market sentiment, triggering technical contrarian signals early in the week. Additionally, bearish sentiment in crypto markets coincided with the highest bearish readings in the AAII US equity retail survey since 2022.
Appendix
