Bitcoin and cryptoassets underperformed due to increased risk aversion amid rising geopolitical tensions in the Middle East.
The armed conflict between Israel and Iran has led to a flight to safe-haven assets such as gold and bonds. It's worth noting that major cryptoassets like Bitcoin and Ethereum have still managed to outperform traditional risk assets such as US stocks amid widespread dollar weakness.
It should be noted that geopolitical risk events historically tend to have a short-term effect on bitcoin's performance.
Following the top 20 past geopolitical risk events, bitcoin performed on average +31.2% 50 days after the event (weekly chart).
This implies that major geopolitical risk events tend to be good buying opportunities for bitcoin and other cryptoassets.
This is especially true when market sentiment appears to be relatively weak, which also happened last Friday when our Cryptoasset Sentiment Index briefly turned negative. The index is once again slightly bullish at the start of the week.
On the macroeconomic front, rising US unemployment and disappointing inflation figures have increased the likelihood of future rate cuts by the Fed, supporting crypto asset prices due to a sharp depreciation of the US dollar. The dollar index (DXY) fell to its lowest level since March 2022. Federal funds futures now price in 1.9 rate cuts by December 2025.
Another notable development was ETH’s nearly 200 basis point outperformance versus BTC despite heightened risk aversion. One major factor that may have contributed to this is the acceleration of overall capital flows into Ethereum ETPs relative to Bitcoin ETPs. Ethereum ETPs managed to attract $577.3 million, while Bitcoin ETPs managed to garner $1,038.4 million in capital. Net inflows into Ethereum ETPs accounted for half of Bitcoin ETP flows, which is not common. On average, Ethereum ETP net flows tend to represent less than 20% of overall cryptoasset flows.
Meanwhile, public companies continued to net Bitcoin purchases. Michael Saylor posted another message on Platform X suggesting a larger-than-usual acquisition. Additionally, Metaplanet in Japan acquired an additional 1,112 BTC for its corporate treasury and now holds 10,000 BTC in total.
Structural demand for ETPs and corporate treasuries, along with favorable macroeconomic tailwinds from a weak dollar and expanding global money supply, continue to support positive developments in the crypto market.
Weekly capital flows into global crypto ETPs improved, despite heightened risk aversion caused by geopolitical tensions in the Middle East. They recorded approximately USD +1,600.7 million in weekly net inflows across all crypto asset types, following USD +488.5 million in net inflows the previous week.
Bitcoin ETPs recorded net inflows totaling USD +1,038.4 million, of which USD +1,369.9 million of net inflows were related to US ETFs.
The Bitwise Bitcoin ETF (BITB) in the United States saw net inflows totaling +82.8 million USD. In Europe, the Bitwise Physical Bitcoin ETP (BTCE) saw net outflows equivalent to -4.9 million USD and the Bitwise Core Bitcoin ETP (BTC1) saw net outflows of -0.2 million USD.
The Grayscale Bitcoin Trust (GBTC) recorded net inflows of +15.0 million USD. The iShares Bitcoin Trust (IBIT) saw net inflows of approximately +1,116.0 million USD.
Flows into Ethereum ETPs continued their positive trend last week, with approximately USD +577.3 million in net inflows.
US ETFs also saw net inflows of approximately USD +528.1 million in total. The Grayscale Ethereum Trust (ETHE) posted net inflows of USD +13.3 million in total.
The Bitwise Ethereum ETF (ETHW) in the US recorded net inflows of USD +14.8 million in total. In Europe, the Bitwise Physical Ethereum ETP (ZETH) recorded net inflows of USD +10.8 million while the Bitwise Ethereum Staking ETP (ET32) recorded net inflows of approximately USD +3.2 million in total.
Altcoin ETPs excluding Ethereum continued their positive trend and recorded +18.0 million USD in net inflows overall. Crypto thematic and basket ETPs saw net outflows of approximately -33.1 million USD in total. The Bitwise MSCI Digital Assets Select 20 ETP (DA20) saw no movements last week (+/- 0 million USD).
Crypto hedge funds reduced their exposure to Bitcoin. Their 20-day beta consolidated at around 0.70 at Sunday's close, down from 0.84 the previous week.
On-chain data
Overall, on-chain activity on the Bitcoin network remained slightly bullish.
Trading continued to experience selling pressure of approximately -$1.02 billion, compared to -$0.53 billion two weeks ago.
The cumulative cash volume delta (CVD), which tracks the difference between buying and selling volumes, also remained mostly negative throughout the week.
Regarding supply dynamics, we observe a different trend. Whales withdrew their Bitcoin from exchanges on a net basis, withdrawing -169,527 BTC last week. It is important to note that towards the end of the week, this trend began to slow down.
Furthermore, according to Glassnode, the downward trend in bitcoin reserves held on exchanges remains intact. The current level stands at 2.92 million BTC, or approximately 14.6% of the total circulating supply.
It's worth noting that Bitcoin's 30-day "apparent demand" metric remains positive, although momentum has begun to decline in recent days. BTC dominance is at 63.85%.
Looking at the losses locked in on-chain, while there was a spike in realized losses last week at -$55.5 million, the overall trend has been downward week-over-week since mid-April. This trend suggests that investors have remained largely unfazed by the recent market declines.
Futures, options and perpetuals
BTC futures open interest decreased by -12.7k BTC on exchanges and -0.9k BTC on the CME.
Perpetual open interest also decreased by approximately -15.0k BTC.
BTC perpetual funding rates remained positive, despite being negative from Thursday to Friday.
The annualized 3-month BTC base rate held steady at around 6.7% on various futures exchanges last week. BTC options open interest increased by approximately +15.4k BTC. The put-call open interest ratio ended the week at 0.61.
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 calls now commanding a premium over puts. The market is increasingly pricing in upward volatility, reflecting growing bullish positioning or greater demand for hedging.
BTC options implied volatilities remained moderate, while 1-month realized volatility ended the week up at 30.3%.
At the time of writing, the implied volatilities of 1-month Bitcoin options are approximately 40.85% per year.
