In the third quarter of 2025, the digital asset market is caught in a battle between the macro environment and capital flows. The fluctuations in inflation and interest rate policies, large-scale capital inflows and short-term profit-taking, along with risk signals from the derivatives market, collectively shape the price trajectory of BTC and ETH.
Macro environment: The tug-of-war between easing expectations and uncertainty
Recent U.S. inflation data has become the market focus. July's CPI remained stable at 2.7% year-on-year, below the expected 2.8%, with core CPI at 3.1% year-on-year and +0.3% month-on-month, indicating that inflationary pressures are gradually easing. This trend reinforces expectations for the Federal Reserve to cut interest rates in September, with federal funds futures showing a probability of over 80% for a rate cut. Meanwhile, the growth rate of broad money supply (M2) in major global economies continues to rebound, with an index tracking eight countries rising 5% since April and maintaining a high correlation of 0.9 with BTC prices. Ample liquidity and potential monetary easing support the medium to long-term performance of risky assets.
However, some data keeps the market cautious. July's PPI surged 0.9% month-on-month (far exceeding the expected 0.2%), with a year-on-year increase of 3.3%, and core PPI also rising above expectations, indicating significant wholesale inflation pressure. This raises concerns that the Federal Reserve may 'maintain high interest rates for a longer time,' and strong employment data (initial jobless claims at only 224,000) further confirms this. The coexistence of macroeconomic positives and constraints ultimately leads to increased short-term market volatility.
Capital flow: Institutional buying and profit-taking intertwine
The dynamics of the funding aspect are an important factor supporting the rise of digital assets. CoinShares data shows that mid-July saw digital asset investment products record a net inflow of $4.39 billion in a single week, setting a historical record and bringing the total industry management scale to $220 billion. Especially for ETH, recent capital inflows reached $2.12 billion, breaking records, with cumulative inflows of $6.2 billion in 2025, exceeding last year's total.
What drives funds into the market is not only the expectation of easing but also favorable policies and institutional support. U.S. President Trump signed an executive order allowing 401(k) retirement funds to invest in digital assets, potentially releasing $8.7 trillion in funding space. Wall Street giants like BlackRock are actively increasing their positions, with the iShares BTC Trust reaching $10 billion, and the spot ETH ETF seeing continuous net subscriptions for eight days in early August, with daily inflows exceeding $1 billion, pushing ETH prices to a new yearly high. Meanwhile, the number of listed companies holding BTC globally is rapidly increasing, with Japan's Metaplanet making a one-time purchase of 775 BTC as a typical case.
However, the market also showed signs of short-term profit-taking after a strong rise. Since mid-August, ETH ETF products recorded a net outflow of about $197 million, and BTC also saw a slight pullback. Despite this, large-scale stablecoin inflows into exchanges (up to $1.8 billion in a single day) indicate that institutions and whales are still accumulating on dips. Overall, the main theme of the funding aspect remains 'incremental funds continue to enter the market.'
Derivatives market: A differentiated pattern of short-sell in the short term and long-buy in the long term
The options and futures markets reveal the complex emotions of investors. The 30-day implied volatility of BTC rose to 35%, significantly higher than the historical volatility of 25%, indicating that investors are willing to pay a premium to hedge against future risks. The options 25-Delta skew indicator jumped to +11%, with a large amount of downside protection being purchased, reflecting concerns about short-term pullbacks.
The sentiment around ETH is even more volatile. Early August saw strong bullish skew in short-term options driven by ETF news, with the risk reversal indicator quickly flipping from -11% to +4.8%. However, as prices quickly retraced, short-term sentiment returned to bearish, reflecting the retreat of speculative buying. Nevertheless, bullish skew in longer-term options still exists, indicating that investor confidence in ETH's long-term prospects remains unchanged.
In terms of futures, the funding rate for BTC perpetual contracts turned negative after reaching a peak, indicating a cooling of bullish sentiment, but the annualized premium for three-month futures remains in the 6%-7% range, with ETH even showing an inverted futures premium at one point, indicating strong upward momentum. Overall, it presents a 'short-sell in the short term and long-buy in the long term' scenario: strong short-term hedging demand exists, but long-term optimistic sentiment remains.
On-chain data: Long-term funds continue to enter
On-chain indicators show that chips are concentrating in the hands of long-term holders. Over 92% of new BTC has been absorbed by wallets holding for more than 155 days, and the exchange's BTC balance has dropped to 2.903 million coins, accounting for 14.6%, hitting a multi-year low. In other words, the available selling chips have decreased, and selling pressure has diminished.
ETH's on-chain activity has also reached new highs, with average daily transactions surpassing 1.5 million and active addresses nearing 600,000. More importantly, gas fees remain at a moderate level, indicating that the increase in activity comes from robust demand rather than speculative trading. Institutional funds are accelerating their entry, with ETH TVL climbing to $97 billion, a new high since 2021. ETH's low inflation or even deflationary supply mechanism, combined with continuous capital inflows, significantly improves its supply-demand structure.
Stablecoin flows also provide emotional signals. Before BTC surged to $124k in August, exchanges recorded large-scale stablecoin inflows, becoming an important precursor to price increases. This logic has been validated again, suggesting that stablecoin trends can continue to be monitored as a forward-looking indicator.
Investment strategy: Use structured products to smooth returns
Under the influence of multiple factors including the macro environment, funding dynamics, derivatives market, and on-chain data, the future prices of BTC and ETH are likely to maintain a wide range of fluctuations. We believe investors should not be fixated on a single directional judgment but should flexibly use structured products for strategy allocation according to their market views and risk preferences. The Matrixport platform offers diverse tools (such as Accumulator, Decumulator, Daily Dual Currency) that can achieve a balance of offense and defense under different market conditions.
Author: Daniel YU, Head of Asset Management (This article only represents the author's personal views)
