The crypto market is undergoing a broad recalibration, shaped by softer demand from ETFs and DATs, a reset in leverage across futures and DeFi, and still-shallow spot liquidity.
These factors have weighed on prices, but they also leave the system healthier, less levered, more neutral in positioning, and increasingly anchored by fundamentals.
ETF Demand Fades Amidst Shallow Liquidity
Recent data compiled by CoinMetrics shows that major absorption channels have weakened. Spot Bitcoin ETFs have experienced multi-week net outflows of $4.9 billion since mid-October, the largest redemption cycle since April 2025, while DATs are seeing cost-basis pressure that compresses their premiums to NAV and limits their ability to raise capital or increase crypto holdings per share.
Michael Saylor-led Strategy, the largest DAT holding 649,870 BTC at an average cost of $74,333, has slowed accumulation as its equity valuation softened, similar to a broader cooling across treasuries. At the same time, leverage has reset across futures and DeFi markets following the October 10th liquidation cascade, which erased over 30% of perpetual futures open interest in hours and pushed OI well below pre-crash highs.
Funding rates have drifted toward neutral or slightly negative, and DeFi lending has seen a similar unwind: active loans on Aave V3 have declined since late September, with the sharpest contraction in stablecoin borrowing after Ethena’s USDe depegging triggered a 65% drop in USDe loans.
ETH-based borrowing, including WETH and LSTs, declined by 35-40%, amidst reduced looping and lower leverage appetite. Spot liquidity has yet to recover, and top-of-book depth for BTC, ETH, and SOL is still 30-40% below early-October levels. This has kept markets more fragile and vulnerable to outsized price moves. Liquidity conditions in altcoins remain even weaker, which is indicative of persistent risk aversion and reduced market-making activity.
CoinMetrics observed that this internal reset is taking place against a macro backdrop that remains a headwind as uncertainty around rate-cut expectations, weakness in technology equities, and a broader risk-off tone have tempered appetite for digital assets.
Primed for Recovery?
Bitcoin’s recent divergence from gold, which is up over 50% year-to-date, and the loss of momentum in AI-driven tech stocks highlight how changing macro conditions have influenced sentiment. While these pressures have weighed on prices, they also leave the market in a more neutral, less levered state, as positioning gets cleansed and systemic vulnerabilities are reduced.
A steady recovery in the major demand channels such as ETF inflows, renewed DAT accumulation, and stablecoin supply expansion, alongside a rebound in spot liquidity, would provide the foundation for stabilization and eventual reversal. Until these elements turn, markets will continue to be shaped by the tension between an unfriendly macro regime and a crypto market structure that is internally healthier but still waiting for stronger demand to return.
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