Whiplash

Key Takeaways

BTC violently broke down from $94k last week, with most alts following lower
U.S. spot BTC ETFs saw the highest weekly net outflows since inception
On Sunday, President Trump announced plans for a U.S. crypto strategic reserve

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Digital Asset Commentary

Bitcoin’s extended period of low volatility ended last week with a sharp breakdown below $94K, ultimately finding support in the $80K range near the yearly pivot. Historically, similar drawdowns of over 20% have occurred in past multi-year bullish cycles, followed by recovery and trend continuation. Moving forward, Bitcoin is likely to remain in a higher volatility environment within the current range until a clearer direction emerges in Q2. The 20-week moving average, currently at $91.8K, could serve as a key indicator for bullish continuation or a potential bearish reversal.

The price breakdown was accompanied by a significant outflow from spot BTC ETFs, totaling -$2.61B for the week. These ETFs are used not only to establish a net long BTC position but also act as one leg of a basis trade arbitrage, with a corresponding futures short position completing the trade. CME BTC futures open interest also declined by approximately $3.0B last week, while the annualized basis dropped to around 4.0%, suggesting that some basis trade arbitrage positions were closed. Meanwhile, spot ETH ETFs have struggled to attract the same level of interest as BTC ETFs. However, this could change if and when ETH ETFs gain the ability to stake and generate yield.

On Sunday, crypto prices surged following President Trump’s announcement of a U.S. crypto strategic reserve, naming five cryptocurrencies specifically - BTC, ETH, XRP, SOL & ADA. This policy shift, along with the dismissal of several lawsuits against exchanges, marks a sharp reversal from the Biden administration’s previous stance. While concrete plans for the reserve have yet to be detailed, ADA spiked 60% on the news, with many other tokens gaining over 10%.

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