Eyes on the Market: Relief Despite Uncertainty

• Crypto held up better than equities this week. Market cap +1.7% to $2.31T while the S&P and Nasdaq fell. The CLARITY Act's ethics package cleared the White House, unlocking a path through the Senate, a real bullish catalyst alongside the softer CPI print.
• Oil markets aren't fully buying the peace talks: funding, backwardation, and elevated vol all suggest more caution than equities are pricing in.
• BTC volatility stayed near 1-year lows even through the shock. A compression that historically doesn't last. Positioning (OI, funding) and ETF flows are both cautiously building but nowhere near danger zone territory yet.
• Crypto is showing healthier, more independent market structure. Promising, but one good week isn't a confirmed trend.

A Slight Relief

Crypto market cap is at $2.31 trillion, +1.7% over the week. Now, 1.7% isn't much but in a week where both the S&P and Nasdaq are down -1.6% and -2.9% respectively, +1.7% is a sign of strength.

BTC gained 4.4% on 15 July to ~$65K on a softer-than-expected June CPI print. From there it dipped slightly to mid $62K as the Iran conflict escalated and chip stocks sold off. As of this morning (July 21) it's recovered to $66K.

ETH isn't doing too badly itself, closely tracking BTC's movements. $1,774 (Jul 14) → $1,890 (+6.6%) on the CPI print → $1,917 intraweek high → settling around $1,932.

Beyond the softer-than-expected CPI print, sentiment also got a lift from progress on the CLARITY Act. The White House agreed to an ethics compromise, which has resolved a months-long blockade.

Escalations and De-escalations

The weekend saw escalations between the US and Iran military. Brent crude hit $90.70/bbl as an intensifying confrontation curtailed traffic through the Strait of Hormuz, then cooled toward the mid-$80s as peace talk hopes emerged. Current levels are well below the $114 seen at the peak in May, but elevated compared to the $71 level where July started.

We saw funding rates for the WTIOIL-USDC perp on Hyperliquid spike last week, going from +5.6% annualized on Wednesday to +20.2% annualized on Saturday as the strikes intensified. At 19:00 UTC Saturday, funding hit 184% annualized in that one hour as price hit the peak of $84.62. A clear indicator of the rapid increase in longs in response to the situation, during a time where traditional markets remained closed.

Interestingly, funding flattened on Sunday to --0.7% before going back up to +12.2% on Monday. Oil volatility (OVX) was running roughly 3.2x the VIX. Brent's curve had already flipped into backwardation the week before ($8.92/bbl front-month premium, widest since June 10). All of these points towards oil markets not fully buying the peace talks and the relief that equities are pricing in as of 21 July.

The 10-year yield rose toward 4.60% on the energy-driven inflation scare, and the dollar index climbed back toward 101.00. The Fed's next meeting (July 29) is priced at a high probability of a hold (~75% per CME's FedWatch tool).

Volatility has Dried Up

Deribit's DVOL index puts BTC's IV Rank at 8.1 and IV Percentile at 20.2, an increase from 5.9 and 10.4 on Monday, but still near the bottom of the range over the past year. In a window where the VIX surged +12.2% to 18.77, MOVE (bond vol) increased +4.0% and equities sold off on war risk, BTC volatility would have been expected to increase. It didn't. Historically, volatility doesn't stay compressed for long, and periods of expansion and contraction should be anticipated.

Longs are Picking Up

Coinglass's live BTC futures OI snapshot shows total OI at $51.12b, up 3.4% from last week. Long/short tilted to 52.1% : 47.9% from a near-even 50.9% : 49.1% split earlier in the week. Cumulative BTC funding on Binance, totaled 0.1763% over the entire past 7 days (9% annualized). Roughly 4x the 30-day and trailing-1-year pace (~2.4% annualized).

Both OI and funding grew in lock step. For now, funding levels remain relatively low, nowhere near the 50-100%+ annualized levels seen at blow-off tops. Leverage is cautiously building, and we're not in danger-zone territory yet.

ETF's Best Streak Since Early May

We spent the previous issue documenting the worst half we've seen in BTC ETF history. Outflows were rampant and accelerated throughout May and June. The past 5 trading days saw that trend flip. From July 14 to 20, we had 5 consecutive days of inflows totaling $727M. The best 5 day streak we've had since the start of May. Cumulative net flows since launch are now $51.6B, $400M above where June ended.

ETH ETF flows are following suit. One outflow day (July 16) didn't stop $159M in net inflows across the period. Cumulative net flows are up ~200M since the end of June, to $11.1B.

New Found Resilience or Temporal Strength

Crypto held up well against a week of uncertainty. Market structure looks healthier than it has in a while, more mature and more independent of the macro whipsaw. We're not ready to plant that flag permanently, though. One good week of resilience is a data point and a potential start, but not yet a defined trend.

If the market continues to absorb shocks like this one, the trend gets confirmed. For now, we're watching OI and funding, how BTC reacts to the next macro surprise, and bracing for the move that compressed volatility tends to eventually produce.