Testing the lower bound

Macro

Last week, risk assets rallied through a 19-year high of the U.S. 10y. Crypto led the board with altcoins +5% and BTC just behind, the Nasdaq was the only equity index meaningfully in the green, and the money came out of duration and havens, with 20Y+ Treasuries the worst performer of the week and gold and Brent both down. A 25bp hike and a 5% 10-year did not produce a single down week in the risk complex.

There was also the Trump-Xi visit which produced a thin package of headlines which were highly telegraphed. In short, there's been a two-month extension of the trade truce until 10 January 2027, tariff relief on about $30b each way, a Chinese commitment to buy at least 10 million tonnes of US coal in 2027 and 2028 and an AI indecent working group. Nothing on rare earths or advanced chips which would have made it interesting. The market seems to treat it at "at least it's not worse", which in this environment allows for a continuation of constructive sentiment.

The key driver from a macro perspective seems to be oil and will decide if we carry +ve sentiment throughout October. From the latest info, it seems like Hormuz is still running a fraction of the pre-conflict 20 million barrels a day. Saudi is rerouting through Oman and Ras Tanura while Bab el-Mandeb remains impaired. Tehran floated the idea to reopen but Washington rejected the draft.

It's safe to assume that Brent will largely drive the probability of a fresh rate hike in October. If it stays close to or above $100, the hike will remain largely priced in. The next question is how many hikes can risk assets (including crypto) digest in a short period of time while the bond market is selling before it also re-rates.

Digital Assets

Starting by having a look at the ETFs, spot BTC ETFs took $999m on Monday, the largest day of 2026 after which inflows declined every session falling just to under $150m by Friday. The flow on our desk ran the other way, with BTC registering net selling pressure across the week, mainly driven by retail that continues to take profit to rotate into alts.BTC’s first weekly close above the 50-week average since early November survived the hike. This morning’s dip feels like the first test since last week's breakout. It’s not to be seen if the $82.5k, which was the upper bound of the previous range, can hold here and it wouldn’t be surprising if we retested it a couple of times in short succession here.

Bitcoin dominance rose again last week and should continue to do so again over the next couple of weeks if we want to stay in this regime of price discovery and alt rallies. At the moment breadth (% of tokens performing +ve) is very stretched. In >80% of the cases when we hit these levels, the weeks after that are flat to negative, however early on in the cycle this happens more frequently where we see that +ve performance throughout.On the option side we continue to see range hedges being replaced by cheap year-end convexity in the form of low-delta Dec calls and call spread of BTC and ETH. That said, we treat the ATH chatter more as bullish positioning rather than explicit target as we (as many others) don’t expect BTC to B-line back to $126k. This is just an environment where topside’s still relatively cheap.

Our take:

“BTC will come into focus as it tests the bounds of the new range while macro narratives continue to develop into the next FOMC”

$82.5k is the level to watch this week, because it capped the range for weeks and a hold there turns the first weekly close above the 50-week since November into a base rather than a wick. We expect it to be tested more than once in short succession, and a close back below it puts the breakout in question. Until that is answered, we expect alts to keep rotating +ve performance between sectors, as we have seen from RH chain into AI over the past two weeks.

Macro stays a live risk as we head into a potential second hike, and as covered above, oil will largely set that probability, so a Hormuz headline in either direction matters more to crypto this week than any single datapoint. With alt breadth this stretched, we want to see BTC dominance rising on any second push higher, since a bounce led by alts that BTC does not confirm is the setup that has historically resolved flat to negative.

ETF flows are currently carrying the majors while we see profit taking at desk level, and based on last week's run they should stay positive, but they need to. While alts are selectively putting in +ve performance, we expect focus to shift back to the majors, because BTC has to push higher to reset this alt cycle and recycle new wealth into it. Until then we see selective opportunities in alts, with macro increasingly defining the trajectory into quarter-end on Wednesday and payrolls on Friday.