Key Insights: No Country For Bold Bets

Markets endured a turbulent week as risk-off sentiment gripped global assets, with the crypto market erasing more than $1t in total market capitalisation. This huge de-risking was driven primarily by leveraged liquidations flushing speculative positions. Institutional flows were negative on the week, with BTC ETFs seeing $1.3b in redemptions and Ethereum ETFs another $500m, marking one of the largest combined weekly outflows of the year. That said, Solana $66.5m in inflows off the back of its recent launch. By the end of the week, sentiment sank to ‘extreme fear’ on the Fear and Greed index. BTC closed the week -1%, ETH -2.8%, and SOL -4.6%.

BTC OI fell 2.4% WoW and ETH fell 11.5%, wiping out nearly all of October’s buildup. Funding rates remained barely positive, showing a lack of speculative conviction. The retracement was driven more by position trimming than forced capitulation, with perpetual spreads and options skew normalising after the early-week flush, while volume concentrated on major venues as traders avoided smaller perps. It looks like leverage is being redeployed conservatively, with priority on liquidity over narrative or momentum.

Altcoins suffered a sharper drawdown as breadth turned deeply negative again, net -70 with 15 advancers versus 85 decliners. Aggregate altcoin market cap was down 10% WoW, yet several sectors bucked the trend. File Storage led, up 77.5%, driven by Filecoin (+73%) and Internet Computer (+91%), both benefiting from AI-linked infrastructure narratives. Privacy tokens continued their run (+33.6%), spearheaded by Zcash (+74%), which flipped Monero in market cap. Data Availability (+27%) and Perp DEXs (+21%) also posted gains, while Solana ecosystem names and smaller DeFi tokens lagged. Notably, NEAR (+47.6%) rode its integration with Zcash’s privacy layer, positioning itself as a cross-chain privacy enabler.

Our Take: This week marked crypto’s first real stress test since the October recovery and the system held. We’ve seen leverage clear efficiently, while ETFs absorbed redemptions without disorder, and capital rotated toward higher-quality narratives like AI infrastructure and privacy. The flush likely resets positioning for a steadier Q4.

This week, lending markets onchain remained relatively subdued, with stablecoin yields ticking higher but activity softening after last week’s volatility. USDC and USDT supply APYs climbed to 5.1% and 4.7% on Aave, driven by supply balances for falling sharply, -41% and -58% for USDC and USDT respectively, suggesting lenders are rotating out of lower-yield pools into more opportunistic onchain instruments or parking capital offchain temporarily. WBTC and WETH yields rose modestly, pointing to measured risk re-entry following the liquidation cascade.

Chain netflows reflected a week of liquidations and subsequent defensiveness. Arbitrum led with $168m in inflows, as capital migrated from higher-risk venues like Hyperliquid following the $1b market-wide liquidation on November 4th. WorldChain followed with $56m in inflows, buoyed by identity and payment adoption within the Worldcoin ecosystem, while Hyperliquid, down $112m and Ethereum, down $178m, saw outflows amid risk reduction and ETF redemptions. DeFi liquidity appears to be consolidating upward, with Arbitrum anchoring the reallocation cycle.

Total RWA AUM fell 1.7% WoW, but dynamics varied across protocols. Maple, down 5% WoW, faced short-term redemptions as its SYRUP staking program sunset on November 1st under MIP-019, redirecting yield toward token buybacks and the Syrup Strategic Fund. Securitize, down 1.4% WoW, experienced a smaller pullback, largely due to post-SPAC volatility after announcing its $1.25b merger with Cantor Equity Partners, which triggered modest profit-taking in its BlackRock-backed BUIDL fund. Broader rate jitters and ETH ETF outflows added pressure to tokenised treasuries, though structural momentum remains intact.

Our Take: Onchain capital is repositioning. We’re seeing lending rates are stabalising at healthier levels, with L2s like Arbitrum continuing to absorb liquidity from riskier venues, and RWAs maturing through structural transitions. The market is rotating toward quality and yield sustainability, setting the stage for a calmer, more institutionally aligned phase of onchain growth through Q4.

Kalshi’s Politics OI ($133 million) has officially surpassed its Sports OI ($130 million) after the New York City mayoral election, which has catalyzed heavy political trading and drawn significant retail and institutional participation. Politics tends to be a secondary category to sports, but is now again Kalshi’s largest segment by open interest, a development that underscores how prediction markets increasingly mirror real-world attention cycles.

Prediction markets once again proved to be sharper indicators of reality than polls or pundits. While traditional forecasts and expert consensus placed Zohran Mamdani at roughly 54% odds of winning, Kalshi traders had priced his victory above 80% since last year, an information efficiency gap that reinforces why markets tend to outperform surveys in aggregating collective belief. As Kalshi’s trading base has expanded, the platform has 50× its weekly notional volume since January, placing it among the fastest-scaling regulated financial exchanges globally.

Open interest across prediction categories tends to reflect what’s top of mind. Sports contracts show high turnover and frequent resets tied to weekly event cycles, while politics and economics contracts accumulate more slowly but sustain liquidity for longer horizons. The chart illustrates this dynamic clearly as shorter-term spikes in sports activity contrast with the steady climb in political exposure leading into major events. As Kalshi’s user behavior matures and the data it generates grows more predictive, major financial and information platforms have begun to take notice.

Last week, Google Finance announced integrations with Kalshi and Polymarket, embedding prediction-market data directly alongside traditional financial metrics. The move marks an important step in legitimizing prediction markets as part of mainstream information infrastructure, an acknowledgment that markets pricing probabilities may complement traditional forecasts.

Our Take: Prediction markets are becoming a primary way the public interprets information. As platforms like Kalshi scale, they’re evolving into a new layer of financial infrastructure that prices collective belief in real time. We expect political markets to continue gaining share as prediction data becomes embedded across mainstream financial and media platforms.

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