- Bitcoin and cryptoassets underperformed last week on account of heightened risk aversion amid renewed geopolitical tensions in the Middle East but still managed to outperform US equities.
- Our Cryptoasset Sentiment Index briefly dipped into negative territory last week but is now signalling a slightly bullish sentiment again.
- Chart of the Week: across the past top 20 major geopolitical risk events, bitcoin performed on average +31.2% after 50 days after the respective event (+10.2% median) which suggest that major geopolitical risk events tend to be good buying opportunities for bitcoin and other cryptoassets.
Chart of the Week
Performance
Bitcoin and cryptoassets underperformed last week on account of heightened risk aversion amid renewed geopolitical tensions in the Middle East.
The armed conflict between Israel and Iran led to a classical flight to safety in gold and fixed income assets. It is worth noting that major cryptoassets like Bitcoin and Ethereum still managed to outperform traditional risky assets such as US equities amid broad-based Dollar weakness.
It is worth highlighting that geopolitical risk events historically tend to have a rather short-term effect on the performance of bitcoin.
More specifically, across the past top 20 major geopolitical risk events, bitcoin performed on average +31.2% after 50 days after the respective event (+10.2% median) – see our Chart-of-the-Week.
The implication is that major geopolitical risk events tend to be good buying opportunities for bitcoin and other cryptoassets.
This is particularly true when market sentiment appears to be relatively low which also happened last week on Friday, when our Cryptoasset Sentiment Index briefly turned negative. The index is now slightly bullish again as of this morning.
On the macro front, the slow grind higher in continuing unemployment claims in the US as well as the underwhelming inflation prints led to higher rate cut expectations for the Fed which also buoyed cryptoassets due to a pronounced depreciation of the US Dollar. The Dollar Index (DXY) fell to the lowest level since March 2022. Fed Funds Futures are now pricing in 1.9 rate cuts until December 2025.
Another notable development was the renewed outperformance of ETH vis-à-vis BTC by almost 200 bps despite heightened risk aversion. A major factor that might have contributed to this was the acceleration in global Ethereum ETP fund flows relative to Bitcoin ETP fund flows. More specifically, global Ethereum ETPs managed to attract +$577.3 mn while Bitcoin ETPs managed to +$1038.4 mn in capital. So, net inflows in global Ethereum ETPs already made-up half of global Bitcoin ETP flows which doesn't occur frequently. On average, net flows into global Ethereum ETPs tend to make up less than 20% of global cryptoasset flows.
Meanwhile, public companies continued buying bitcoin on a net basis last week. Amongst other things, Michael Saylor made another post on the social media platform X that suggested a stronger-than-usual acquisition of bitcoins by Strategy (MSTR). Besides, Metaplanet in Japan managed to acquire an additional 1,112 BTC for their corporate treasury and now hold 10,000 BTC in total.
Structural demand by both ETPs and corporate treasuries as well as continued macro tailwinds via Dollar weakness and global money supply expansion still support a positive market development for bitcoin and cryptoassets.
In general, among the top 10 crypto assets Hyperliquid, Ethereum, and Solana were the relative outperformers.
Despite elevated cryptoasset sentiment, overall altcoin outperformance vis-à-vis bitcoin continued to be very low last week, with only 15% of our tracked altcoins managing to outperform bitcoin on a weekly basis. However, Ethereum outperformed bitcoin last week.
Sentiment
Our in-house “Cryptoasset Sentiment Index” signals a slightly bullish sentiment, as broader investor sentiment shifts firmly into positive territory.
At the moment, 10 out of 15 indicators are above their short-term trend.
BTC Exchange Inflows and Crypto ETP Fund Flows also showed positive movement. However, the Crypto Hedge Fund Beta 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 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 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 decreased slightly, moving from 0.48 to 0.33.
Fund Flows
Weekly fund flows into global crypto ETPs have improved week-over-week, despite the heightened risk aversion amid renewed geopolitical tensions in the Middle East.
Global crypto ETPs saw around +1600.7 mn USD in weekly net inflows across all types of cryptoassets, after +488.5 mn USD in net inflows the previous week.
Global Bitcoin ETPs have experienced net inflows totalling +1038.4 mn USD last week, of which +1369.9 mn USD in net inflows were related to US spot Bitcoin ETFs.
The Bitwise Bitcoin ETF (BITB) in the US experienced net inflows, totalling +82.8 mn USD last week.
In Europe, the Bitwise Physical Bitcoin ETP (BTCE) experienced minor net outflows equivalent to -4.9 mn USD, and the Bitwise Core Bitcoin ETP (BTC1) experienced minor net outflows of -0.2 mn USD.
The Grayscale Bitcoin Trust (GBTC) has posted net inflows of +15.0 mn USD. The iShares Bitcoin Trust (IBIT), however, experienced large net inflows of around +1116.0 mn USD last week.
Meanwhile, flows into global Ethereum ETPs continued its positive trend last week, with around +577.3 mn USD in net inflows last week
US Ethereum spot ETFs, also recorded net inflows of around +528.1 mn USD on aggregate. The Grayscale Ethereum Trust (ETHE), had followed suit and posted net inflows of +13.3 mn USD on aggregate.
The Bitwise Ethereum ETF (ETHW) in the US also recorded net inflows of +14.8 mn USD on aggregate.
In Europe, the Bitwise Physical Ethereum ETP (ZETH) saw net inflows of +10.8 mn USD while the Bitwise Ethereum Staking ETP (ET32) saw net inflows of around +3.2 mn USD on aggregate.
Altcoin ETPs ex Ethereum continued its positive trend last week and saw +18.0 mn USD in global net inflows.
However, thematic & basket crypto ETPs experienced net outflows of around -33.1 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 have decreased their market exposure to Bitcoin. The 20-days rolling beta of global crypto hedge funds' performance to Bitcoin consolidated to around 0.70 per yesterday's close, down from 0.84 from the week before.
On-Chain Data
Broadly speaking, Bitcoin's on-chain activity has remained slightly bullish last week.
Bitcoin spot exchanges continued to see selling pressure of approximately -$1.02 bn compared to -$0.53 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.
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 -169,527 BTC to exchanges last week. Network entities that possess at least 1,000 Bitcoin are referred to as whales. It is important to note that towards the end of the week, this trend started to lose momentum.
Additionally, based on recent data from Glassnode, the overall downward trend in exchange-held Bitcoin reserves remains intact. The current level stands at 2.92 million BTC, representing approximately 14.6% of the total circulating supply.
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. BTC Dominance is also at 63.85%.
When assessing losses locked in on-chain, while there was a spike of losses realized last week to -$55.5 mn, the general trend has been decreasing week over week since mid-April. This contained loss-taking pattern suggests that investors have remained largely unfazed by recent market drawdowns
Futures, Options & Perpetuals
Last week, BTC futures open interest decreased last week by -12.7K BTC across all exchanges, and by -0.9K BTC on CME Exchange. Perpetual open interest also decreased by around -15.0k BTC.
BTC perpetual funding rates remained positive last week, despite being negative from Thursday to Fridat, 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 6.7% p.a. averaged across various futures exchanges last week. BTC option open interest increased by around +15.4k BTC. The put-call open interest ratio had ended the week at 0.61, despite hitting lows of 0.55.
The 1-month 25-delta skew for BTC ended the week at +4.87%, after ranging from -1.81% to +5.83%. This decisive move into positive territory signals a shift in sentiment, with call options now commanding a premium over puts. The market is increasingly pricing in upside volatility, reflecting growing bullish positioning or demand for topside hedging.
BTC option implied volatilities remained muted last week, while the 1-month realized volatility ended the week increasing to 30.3%.
At the time of writing, implied volatilities of 1-month ATM Bitcoin options are currently at around 40.85% p.a.
Bottom Line
- Bitcoin and cryptoassets underperformed last week on account of heightened risk aversion amid renewed geopolitical tensions in the Middle East but still managed to outperform US equities.
- Our Cryptoasset Sentiment Index briefly dipped into negative territory last week but is now signalling a slightly bullish sentiment again.
- Chart of the Week: across the past top 20 major geopolitical risk events, bitcoin performed on average +31.2% after 50 days after the respective event (+10.2% median) which suggest that major geopolitical risk events tend to be good buying opportunities for bitcoin and other cryptoassets.
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