Macro update

The Thanksgiving period offered the first sign of stabilisation after weeks of forced selling. Over the past week, BTC climbed steadily from the mid-80s to the low-90s, with retail flow improving early and institutional flow turning positive toward the end of the week. After a ~30 percent drawdown since early October and with total crypto market cap barely holding $3T, the market last week’s more orderly market came as a welcomed gift. Below the performance of the past week, indicating the shift in continued underperformance of digital assets.

This, however, was short-lived.

On Monday morning, Japan signalled that a rate hike at the 19 December meeting is under active consideration. It is the second time in a month that markets have been forced to confront the risk of a BOJ hawkish shift. Japan’s risk-free rate matters because of the carry trade it creates and the importance of that trade on global funding. When JGB yields jump, the economics of that carry compress immediately, triggering deleveraging across assets financed through yen.

Crypto, with its liquidity characteristics and sensitivity to global dollar and funding dynamics, sat squarely in the crosshairs. The sell-off occurred during one of the thinnest liquidity windows of the year (Sunday + Thanksgiving), enhancing the mechanical impact of each unwind. BTC fell ~4k before European markets opened, not due to structural stress but due to the absence of depth.

Gold rallied through the unwind while BTC moved sharply lower. It’s a clear reminder that, when macro stress hits, defensive capital still defaults to gold. BTC’s “digital gold” narrative holds in stable environments, but in true risk-off episodes it is still far from being treated as a safe haven. The hierarchy remains intact, and it matters in periods like this.

Outside of macro drivers, it feels like the sentiment in the space is generally pretty low with a lot of net-negative narratives being pushed very hard accompanied by little excitement

From a market-structure perspective, conditions beneath the surface are actually improving. Basis has collapsed to cycle lows, BTC 90-day annualised basis near 4–5%, ETH near 3–4%, reflecting that continued directional, levered-long exposure. Funding has reset to neutral/negative across majors for the first time since October, and total perpetual open interest has fallen from ~USD 230bn in early October to ~USD 135bn today. This clears a significant amount of excess leverage and reduces the probability of further mechanical unwinds.

Spot has taken a larger share of volume, and depth has held up better than expected given the holiday calendar. This shift, lower leverage, negative funding, and healthier spot participation — is typically what the market needs before consolidation becomes possible once macro stabilises.

At the moment, majors are trading as a single macro factor, while lower-cap names show only brief, idiosyncratic strength before being overwhelmed by broader macro flow. As we’ve seen the past two months, most of the narrative strength is still used as an opportunity to sell and exit positions by investors as the consensus that majors need to move first and will be the first recipients of fresh liquidity entering the market is still very much alive.

The exhibit above rolls Monday-Monday, hence discrepancy vs first exhibit

Sector performance was weak across the board, with higher-beta areas leading the declines. AI (-14.4%), DePIN (-13.6%), Gaming (-12.7%), and L2s (-12.5%) underperformed, while Small Caps (-10.4%) and Mid Caps (-9.7%) also lagged. L1s (-7.0%) and the GMCI-30 (-7.3%) held up relatively better, but the move was broadly indiscriminate and clearly macro-driven.

Our take:

“Last week’s support zone, helped by cleaner positioning, offered a brief stabilisation, but the BOJ shock quickly overwhelmed it before any real consolidation could form."

Macro still drives the tape, but the underlying market is the cleanest it has been in weeks. Leverage continues to reset while basis and funding have fully reset, and spot liquidity absorbed flow relatively well despite the BOJ shock. While alt-narratives continue to unwind and lower-cap strength remains brief, majors will likely trade with far less fragility. While this month’s loaded macro calendar will decide the direction of the market, at least the prerequisites for consolidation are finally in place.