Key Insights: Stuck in Neutral

Derivatives positioning remained restrained despite a modest January rebound in spot. BTC open interest rose +4.3% WoW, while ETH OI slipped -4%, underscoring a divergence between BTC-led positioning and broader risk appetite. Funding rates stayed constructive but not euphoric, suggesting leverage is being added selectively rather than chased aggressively. Notably, options markets continue to express optimism further out the curve, with traders increasingly targeting $100,000 BTC call options on Deribit.

Institutional flows remained under pressure this week, with net ETF outflows concentrated in Bitcoin and Ethereum products. Bitcoin ETFs saw roughly -$680m in net outflows, while Ethereum products recorded approximately -$69m, bringing total digital asset ETF redemptions to over -$700m on the week. Outflows were led by larger vehicles, including IBIT and ETHA, while activity elsewhere remained muted. Despite the near-term softness, aggregate AUM remains elevated suggesting institutions continue to manage exposure tactically rather than exit the space outright as markets consolidate.

Sector performance narrowed this week, with gains concentrated in a handful of attention-driven narratives. DePIN (+2.0%), Privacy (+1.5%), and Bridge (+1.1%) outperformed, with privacy, led by Monero and Zcash, once again showing relative consistency as other sectors faltered. Elsewhere, weakness was broad, led by RWAs (-11.1%), Memecoins (-8.7%), and Layer-1s (-8.0%), underscoring a market where capital is rotating toward narratives with sustained attention while the broader complex continues to grind lower.

Our Take: Altcoin markets are showing signs of base-building. Buyers are stepping in on weakness, while rallies continue to meet supply, leaving price action range-bound rather than directional. This is typically the phase where external catalysts set the tone for the next move. Until then, the recent push higher in BTC toward the mid-$90k range appears to be loosening risk constraints, allowing select altcoin segments to regain traction even as broader conviction remains restrained.

This week, we saw onchain rates firm modestly, signalling a continued shift away from December’s defensive positioning. Stablecoin yields edged higher on a WoW basis, with USDC up 2.5% and USDT up a staggering 18.5%, pointing to improving utilisation as capital cautiously rotated back into onchain activity. Beneath the headline move, however, liquidity dynamics remain nuanced. On Aave, supply declined across all major assets, most notably USDT (-9.2%) and USDC (-6.2%), suggesting that higher rates were driven more by reduced liquidity, with capital rotating either up the risk continuum, or offchain altogether. The key point here being that this was not a meaningful resurgence in borrowing demand alone. Borrowing conditions for volatile assets remained muted, with WBTC flat and WETH rates drifting lower.

Looking at liquidity flows between chains, we see a clear rotation towards volatility and execution venues, reinforcing this shift towards onchain engagement. Chain netflows reflected a clear rotation toward volatility and execution venues. Hyperliquid stood out with a sizable +$151.5m inflow, consistent with renewed speculative engagement as traders repositioned into leverage-heavy perps following recent consolidation. In contrast, Ethereum saw a notable -$253m outflow, extending recent weakness likely tied to institutional rebalancing and L2 migration.

RWA flows were modestly positive at the aggregate level (+1.75% WoW), spurred on by Paxos (+6.8%), which drew capital as institutions rotated into regulated RWA exposures with year-end positioning and attractive tokenised treasury yields. Ondo (+1.8%) and Maple (+1.1%) also saw inflows, with the catalyst being Bitget Wallet’s expanded onchain equity and tokenised securities offerings, including over 200 tokenised U.S. stocks integrated on January 8th. Securitize (+0.7%) posted modest gains, while Centrifuge (-6.7%) lagged, consistent with flows favouring more liquid, standardised RWA structures over less fungible assets.

Our Take: Onchain conditions are continuing to improve at the margin. Rising stablecoin rates alongside falling supply point to cautious re-engagement, while chain flows show capital rotating selectively into volatility and execution venues rather than core settlement layers. RWAs continue to act as a stabilising anchor, benefiting from yield demand and regulatory clarity. This appears to still be early-year positioning and liquidity normalisation.

This week we’ll be highlighting a chart from our heavily anticipated ‘12 Charts to Watch in 2026’ article, being released in collaboration with Dune this week. The chart shows monthly spend volume processed through crypto-linked payment cards, using data queried from Dune by @obchakevich. Since early 2023, card volumes have grown from effectively zero to a meaningful consumer payments rail that exceeded $100m by EOY 2025. The acceleration becomes particularly striking from 2025 onward, with monthly spend rising from roughly $17m at the start of the year to over $120m by December, representing a >6x expansion in under 12 months.

Crypto cards sit at an intersection of onchain infrastructure and real-world utility. They allow users to spend crypto and stablecoin balances without changing behaviour, making them one of the lowest-friction onboarding vectors into crypto today. While the user experience looks familiar, the backend is fully crypto-native, powered by stablecoins, wallets, and blockchain settlement rails, thus also acting as a capital influx mechanism for stablecoins. The sharp inflection in spend during 2025 suggests this model is resonating, particularly as UX improves and cards are increasingly embedded directly into wallets.

Our Take: Our desk sees crypto cards as one of the most underappreciated demand drivers in the ecosystem. Despite explosive growth in 2025, this vertical still feels early. Looking into 2026, we expect spend volumes to compound again, with monthly card spend reaching at least $500m at some point during the year, and exiting 2026 at a $200m-$600m monthly run-rate. Our thesis catalysts here are tighter wallet integration, better UX, and protocol-level incentive schemes that blend spending with yield. Longer term, we expect a winner-takes-most market structure, mirroring traditional payments, though competition remains intense enough that it’s too early to back a single dominant player.

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