- Last week, cryptoassets outperformed traditional assets supported by an acceleration in global crypto ETP net inflows.
- Our in-house “Cryptoasset Sentiment Index” has continued to increase and currently signals a bullish level of sentiment again; the index has now increased to the highest level since March 2024.
- Last week, net inflows into global crypto ETPs accelerated to the highest level since mid-July 2024.
Chart of the Week
Performance
Last week, cryptoassets outperformed traditional assets supported by an acceleration in global crypto ETP net inflows.
Last week, net inflows into global crypto ETPs accelerated to the highest level since mid-July 2024. Net inflows into global crypto ETPs topped +1.2 bn USD of which almost +1.1 bn USD net inflows were related to US spot Bitcoin ETFs alone.
It should be highlighted that the combined net buying volume of US spot Bitcoin ETFs alone was equivalent to more than 1 month of new mined Bitcoin supply – in a single week.
More specifically, US spot Bitcoin ETFs bought a combined amount of 16,774 BTC last week, while BTC miners mine approximately 13,500 BTC per month. This is also intensifying the current supply shock emanating from the latest Bitcoin Halving in April 2024.
Moreover, cumulative net inflows into US spot Bitcoin ETFs since trading launch have topped +20 bn USD last week. In this context, it is worth noting that the US spot Bitcoin ETFs were the most successful ETF launch ever, even outpacing initial net inflows into very successful ETFs like the Invesco QQQ Trust Series 1 ETF (QQQ US Equity) or the SPDR Gold Shares ETF (GLD US Equity).
One of the major catalysts for this acceleration in global ETP flows appears to be major policy reversal in September by the PBoC and the Chinese government more broadly.
More specifically, the PBoC made its largest-ever cut to the 1-year medium term-lending facility (MLF) rate, cutting it from 2.3% to 2.0%. The MLF rate is regarded to be the key policy rate of the PBoC.
Moreover, the PBoC announced a cut of 50 bps to the reserve requirement ratio for commercial banks aimed at releasing more than 1 trn CNY in liquidity into the Chinese banking system.
Furthermore, the PBoC has announced reductions in mortgage rates and down payments for first-time home buyers which were supported by reductions in home purchase curbs in big cities like Shanghai, Guangzhou and Shenzhen.
These latest measures of the PBoC follow the footsteps of other major central banks such as the Fed, ECB or Bank of England that all have started to ease monetary policy again.
So, we are now clearly entering a global easing cycle which should provide a significant tailwind for Bitcoin and other cryptoassets going forward.
As a result, Chinese stocks had its best performance week since 2008 and industrial commodities such as Iron Ore have also surged to multi-month highs.
It is quite possible that these measures come too late for the Chinese economy which already appears to be sliding into recession based on the contraction in Chinese M1 money supply and other indicators.
That being said, it is quite likely that the recent policy actions will lead to a renewed business cycle expansion with a lag in 2025 which already appears to being priced by Chinese assets and China-sensitive commodities.
Meanwhile, US presidential candidate Kamala Harris made a pro-crypto statement at the Economic Club of Pittsburgh last week where she highlighted that the US should
[...] remain dominant in AI, quantum computing, blockchain, and other emerging technologies.
Although polls have narrowed more recently in favour of Trump, the latest betting odds still imply a significant lead of Harris over Trump. At the time of writing, betting markets are pricing the odds of a Harris win at 51.8% vs 47.4% for Trump.
In general, among the top 10 crypto assets, Dogecoin, Cardano, and Solana were the relative outperformers.
Overall, altcoin outperformance vis-à-vis Bitcoin has picked up compared to last week with around 65% of our tracked altcoins managing to outperform Bitcoin on a weekly basis. However, Ethereum slightly underperformed Bitcoin last week.
Sentiment
Our in-house “Cryptoasset Sentiment Index” has continued to increase and currently signals a bullish level of sentiment again. The index has now increased to the highest level since March 2024.
At the moment, 13 out of 15 indicators are above their short-term trend.
Last week, there were significant increases to the upside in global crypto ETP flows and the BTC short-term holder net unrealized profit/loss ratio (STH-NUPL).
The Crypto Fear & Greed Index currently signals a “Greed” level of sentiment as of this morning.
Performance dispersion among cryptoassets has increased significantly last week, albeit from very low levels. This signals that altcoins are still very much correlated with the performance of Bitcoin.
Altcoin outperformance vis-à-vis Bitcoin has picked up compared to last week, with around 65% of our tracked altcoins managing to outperform Bitcoin on a weekly basis. However, Ethereum slightly 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 pick-up in altcoin outperformance could signal an increasing risk appetite at the moment.
Meanwhile, sentiment in traditional financial markets as measured by our in-house measure of Cross Asset Risk Appetite (CARA) also continued to recover and currently signals a slightly bullish sentiment in traditional financial markets as well.
Fund Flows
Fund flows into global crypto ETPs have accelerated significantly to the highest level since mid-July last week.
Global crypto ETPs saw around +1,222.2 mn USD in net inflows across all types of cryptoassets which shows that net inflows have accelerated significantly compared to prior week's +293.2 mn USD in net inflows.
Global Bitcoin ETPs saw net inflows totalling +1,062.3 mn USD last week, of which +1,092.0 mn USD in net inflows were related to US spot Bitcoin ETFs alone. US spot Bitcoin ETF net inflows also accelerated significantly compared to the previous week.
The ETC Group Physical Bitcoin ETP (BTCE) experienced net outflows equivalent to -11.0 mn USD, while the ETC Group Core Bitcoin ETP (BTC1) experienced neither net in-/ nor outflows (+/- 0 mn USD).
Outflows from the Grayscale Bitcoin Trust (GBTC) slightly decelerated, with around -21.9 mn USD last week. iShares Bitcoin Trust (IBIT) experienced a sharp acceleration in net inflows of +499.0 mn USD.
Meanwhile, global Ethereum ETPs saw a positive reversal in ETP flows with around +106.6 mn USD in net inflows after net outflows of around -29.9 mn USD the week before.
US Ethereum spot ETFs saw around +84.6 mn USD in net inflows in aggregate. Continuing net outflows from the Grayscale Ethereum Trust (ETHE) which totalled around -127 mn USD last week were more than offset by positive net inflows into other spot Ethereum ETFs.
Both the ETC Group Physical Ethereum ETP (ZETH) and the ETC Group Ethereum Staking ETP (ET32) saw positive net inflows of +1.3 mn USD and +2.6 mn USD, respectively.
Net inflows into Altcoin ETPs ex Ethereum decelerated somewhat, with only around +1.0 mn USD last week.
Besides, net inflows into Thematic & basket crypto ETPs continued to surprise to the upside with net inflows of around +52.2 mn USD last week. The ETC Group MSCI Digital Assets Select 20 ETP (DA20) experienced neither net in-/ nor outflows last week (+/- 0 mn USD).
Meanwhile, global crypto hedge funds slightly reduced their exposure to Bitcoin last week. The 20-days rolling beta of global crypto hedge funds' performance to Bitcoin declined to around 0.85 per yesterday's close, after 0.91 the week before.
On-Chain Data
In general, Bitcoin on-chain metrics continued to improve last week.
Bitcoin spot intraday net buying volumes on exchanges continued to be positive last week with around +165 mn USD over the past 7 days, after around +21.2 mn USD the week before. This is also consistent with ongoing positive performance in Bitcoin and other cryptoassets.
Bitcoin whales also continued to accumulate bitcoins. More specifically, BTC whales have transferred 10,902 BTC off exchanges last week on a net basis. Whales are defined as network entities that control at least 1,000 BTC.
Overall BTC on-exchange balances also continued to drift lower to the lowest level since June 2024 according to Glassnode data. However, in this context other data providers such as CryptoQuant already signal that BTC exchange balances have reached fresh multi-year lows.
This also appears to be consistent with the general observation that liquid supply is decreasing as well as highlighted in our last month's report, signalling that the supply deficit emanating from the Bitcoin halving is indeed intensifying.
As far as Ethereum is concerned, overall ETH exchange balances have recently stabilised at higher levels and have stopped increasing, which is a positive sign. ETH exchange balances currently hover near the highest level since June 2024. A renewed decrease in ETH exchange balances is certainly one of the major signals that is necessary for a more sustainable outperformance of ETH vis-à-vis BTC.
Futures, Options & Perpetuals
Last week, derivatives traders have started to decrease their exposure to BTC futures, while exposure to BTC perpetuals increased only slightly.
More specifically, BTC futures' open interest decreased by around -7k BTC while perpetual open interest increased by +1k BTC. Meanwhile, short liquidations in Bitcoin futures continued to be somewhat elevated but without any significant spikes.
Meanwhile, BTC perpetual funding rates have steadily positive throughout last week. This implies that the market continues to exhibit a long bias at the moment.
When the funding rate is positive (negative), long (short) positions periodically pay short (long) positions. A positive funding rate tends to be a sign of bullish sentiment in perpetual futures markets.
However, the BTC 3-months annualised basis increased significantly last week and is currently around 8.1% p.a. which signals a return in risk appetite.
Besides, BTC option open interest decreased significantly last week due to the large end-of-quarter options expiries. Meanwhile, the put-call open interest ratio also declined significantly, which implies many BTC puts were not rolled over after expiry. This also signals a gradual return in risk appetite.
The 1-month 25-delta skews for BTC also continued to drift lower last week, signalling a declining relative demand for put options. The skew is now clearly in favour of delta-equivalent calls, signalling that the market has flipped to a long bias more recently.
Furthermore, BTC option implied volatilities have increased slightly, albeit from low levels. At the time of writing, implied volatilities of 1-month ATM Bitcoin options are currently at around 50.8% p.a.
Bottom Line
- Last week, cryptoassets outperformed traditional assets supported by an acceleration in global crypto ETP net inflows.
- Our in-house “Cryptoasset Sentiment Index” has continued to increase and currently signals a bullish level of sentiment again; the index has now increased to the highest level since March 2024.
- Last week, net inflows into global crypto ETPs accelerated to the highest level since mid-July 2024.
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.
Before investing in crypto ETPs, potentional investors should consider the following:
Potential investors should seek independent advice and consider relevant information contained in the base prospectus and the final terms for the ETPs, especially the risk factors mentioned therein. The invested capital is at risk, and losses up to the amount invested are possible. The product is subject to inherent counterparty risk with respect to the issuer of the ETPs and may incur losses up to a total loss if the issuer fails to fulfill its contractual obligations. The legal structure of ETPs is equivalent to that of a debt security. ETPs are treated like other securities.
