Macro update

Between the Fed’s rate cut, the FOMC minutes, and a handful of U.S. tech earnings, last week was always going to be volatile. We got the 25bp cut as expected, quantitative tightening (QT) officially wrapped up, and results from the Mag7 came in decently, yet markets still wobbled after Powell walked back the near-certainty of another cut in December. What was a 95% priced-in move going into the meeting has now slipped to roughly 68%, prompting a quick rotation risk-off as traders recalibrated.

The selloff itself didn’t feel like panic, but more like re-positioning. Some investors got caught leaning too bullish into the event which was a classic “travel and arrive” scenario where the 25bps was already completely priced in by the market. Equities stabilised quickly after, but crypto didn’t bounce the same way. BTC and ETH have been stuck in chop since, hovering around ~107k and ~3.7k levels respectively as of writing, while alts trading choppy, with outperformance largely driven by short term narratives. Compared to other asset classes, crypto is the worst performer.

Also on the index level, the broader space sold off sharply last week, with the GMCI-30 down -12%. Losses were broad-based, Gaming (-21%), L2s (-19%), and Memes (-18%) led the decline, while Mid and Small Caps fell around -15-16%. Only AI (-3%) and DePIN (-4%) showed relative resilience, helped some strength in names like TAO and the agents earlier last week. Overall, the move looked flow-driven rather than fundamental, consistent with post-FOMC liquidity unwind.

So WHY is crypto still lagging this much while global risk assets are pushing higher. The short answer is liquidity, not the lack of it, but where it’s going.

Global liquidity is clearly expanding. Central banks are cutting into relative strength, not weakness, something we’ve only seen a few times before, typically followed by strong risk-on regimes. The problem is that the incremental liquidity isn’t flowing into crypto like it used to.

Stablecoin supply continues to grind higher (+50% YTD, +$100B), but ETF inflows have stalled around since summer with for ex BTC ETF AuM hovering around $150B, and the once-hot DAT pipeline has gone quiet with secondary volumes traded on exchanges like the Nasdaq collapsing. 

That shows the inflow engines, ETFs, stables, and DATs, are slowing net-net. The novelty has worn off, ETF allocations have normalised, and retail has drifted elsewhere, chasing momentum in equities, AI, and prediction markets.

Out of the three inflow engines that drove the first half of the year, only one is still working, stablecoins. ETF flows have plateaued, DAT activity has dried up, and while overall liquidity remains abundant, the share directed toward crypto has clearly shrunk. In other words, the tap isn’t off, it’s just pointed somewhere else.

So while global liquidity is healthy, crypto’s share of that liquidity is shrinking. It’s a distribution issue, not a macro one. Until that rotation shifts back our way, through renewed ETF demand, another wave of stablecoin issuance, or new catalysts that pull mindshare back on-chain, crypto will likely keep lagging broader markets despite having a supportive macro backdrop.

In short: the setup’s fine, but the flow isn’t. Liquidity’s growing, but not here, yet. When it returns, it’s the clearest path to re-coupling with equities and resuming the broader uptrend into year-end.

Our take:

“The market backdrop is still strong as is evidenced by the equity market performance. Liquidity is just not reaching crypto yet"

Markets are still digesting the liquidation shock, but structure looks solid, leverage flushed, vols contained, and macro supportive. BTC remains the anchor with steady ETF inflows and tight exchange supply, while ETH and select L1/L2s are showing early signs of relative strength.

The concept of the four-year cycle is no longer relevant, even as increasingly loud voices on CT are starting to scribe negative price performance to it. The mechanics that once drove it, ie. the miner supply and halving dynamics simply don’t matter anymore in a mature market. What drives performance now is liquidity.

Macro remains very supportive, cuts underway, QT done, equities near highs, but crypto’s lagging because liquidity isn’t trickling down. Of the three inflow engines that mattered in 1H and last year, (ETFs, stablecoins, and DATs) only stables are looking healthy. Monitoring ETF inflows and DAT activity more closely will be key, they’ll likely be one of the first signals of renewed liquidity returning to crypto.