Author: Jasper De Maere , OTC Strategist at Wintertermute Compiled by: Tim, PANews The macroeconomic environment remains supportive, with positive events such as interest rate cuts, the end of quantitative tightening, and stock indices nearing high levels occurring one after another. However, the crypto market continues to lag behind as post-Federal Reserve policy meeting liquidity is waning. Global liquidity continues to expand, but funds are not flowing into the crypto market. ETF inflows have stagnated, decentralized AI activity has dried up, and only stablecoins are maintaining growth. Leverage has been cleared, and the market structure appears healthy, but a rebound in ETF or DAT funds would be the key signal for a liquidity recovery and the start of a potential catch-up rally. Macroeconomic Status Quo Last week, the market experienced volatility due to the Federal Reserve's rate cut, the FOMC meeting minutes, and earnings reports from several US technology companies. We saw the expected 25 basis point rate cut, officially concluding quantitative tightening, and the earnings of the "Big Seven" US stocks were generally positive. However, market volatility occurred after Powell downplayed the near certainty of another rate cut in December. The probability of a rate cut, which had been priced in by the market before the meeting (95%), has now fallen to 68%, prompting traders to reassess their strategies and triggering a rapid shift towards risk aversion. This sell-off didn't seem driven by panic, but rather resembled position adjustments. Some investors had over-bet on a rise before the event, creating a classic "sell the news" situation, as the market had already fully priced in the 25 basis point rate cut. The stock market subsequently stabilized quickly, but the cryptocurrency market did not see a synchronized rebound. Since then, BTC and ETH have been trading sideways, hovering around $107,000 and $3,700 respectively as of this writing. Altcoins have also exhibited a volatile pattern, with their excess gains primarily driven by short-term narratives. Compared to other asset classes, cryptocurrencies are the worst-performing asset class. From an index perspective, crypto assets in a broad sense experienced a significant sell-off last week, with the GMCI-30 index falling 12%. Most sectors closed lower. The gaming sector plummeted 21%. Layer 2 network sector plunges 19% The meme coin sector declined by 18%. Mid-cap and small-cap tokens fell by approximately 15%-16%. Only the AI (-3%) and DePIN (-4%) sectors showed relative resilience, mainly due to the strong performance of TAO tokens and AI proxy concept coins in the early part of last week. Overall, this volatility seems more like a money-driven phenomenon, consistent with the tightening liquidity following the Fed's decision, rather than caused by fundamental factors. So why are cryptocurrencies lagging behind while global risk assets are rising? In short: liquidity. But it's not a lack of liquidity, but rather a problem of where it flows. Global liquidity is clearly expanding. Central banks are intervening in relatively strong rather than weak markets, a situation that has only occurred a few times in the past, usually followed by a strong surge in risk appetite. The problem is that this new liquidity is not flowing into the crypto market as it has in the past. Stablecoin supply continues to climb steadily (up 50% year-to-date, adding $100 billion), but Bitcoin ETF inflows have stagnated since the summer, with assets under management hovering around $150 billion. The once-booming crypto treasury DAT has fallen silent, and related concept stocks listed on exchanges like Nasdaq have seen a significant drop in trading volume. Of the three major funding engines driving the market in the first half of this year, only stablecoins are still playing a role. ETF funding has peaked, DAT activity has dried up, and although overall liquidity remains ample, the share flowing into the crypto market has shrunk significantly. In other words, the tap for funds hasn't been turned off; it's just that the funds have flowed elsewhere. The novelty of ETFs has worn off, allocation ratios have become more normalized, and retail investors' funds have flowed elsewhere, turning to chase the trends in stocks, artificial intelligence, and prediction markets. Our Viewpoint The stock market performance proves that the market environment remains strong; liquidity has simply not yet been transmitted to the crypto market. Although the market is still digesting the 10/11 liquidation, the overall structure remains robust—leverage has been cleared, volatility is under control, and the macroeconomic environment is supportive. Bitcoin continues to act as a market anchor thanks to stable ETF inflows and tight exchange supply, while Ethereum and some L1 and L2 tokens have begun to show signs of relative strength. While a growing number of voices on crypto social media are attributing the price weakness to the four-year cycle theory, this concept is no longer truly applicable. In mature markets, the miner supply and halving mechanisms that once drove cycles have long since failed; the core factor truly determining price performance is now liquidity. The macroeconomic environment continues to provide strong support—the interest rate cut cycle has begun, quantitative tightening has ended, and the stock market is frequently hitting new highs—but the crypto market has lagged behind, primarily due to the lack of effective liquidity inflows. Compared to the three major drivers of capital inflows last year and in the first half of this year (ETFs, stablecoins, and DeFi yield assets), only stablecoins are currently showing a healthy trend. Close monitoring of ETF inflows and DAT activity will be key indicators, as these are likely to be the earliest signals of liquidity returning to the crypto market.Author: Jasper De Maere , OTC Strategist at Wintertermute Compiled by: Tim, PANews The macroeconomic environment remains supportive, with positive events such as interest rate cuts, the end of quantitative tightening, and stock indices nearing high levels occurring one after another. However, the crypto market continues to lag behind as post-Federal Reserve policy meeting liquidity is waning. Global liquidity continues to expand, but funds are not flowing into the crypto market. ETF inflows have stagnated, decentralized AI activity has dried up, and only stablecoins are maintaining growth. Leverage has been cleared, and the market structure appears healthy, but a rebound in ETF or DAT funds would be the key signal for a liquidity recovery and the start of a potential catch-up rally. Macroeconomic Status Quo Last week, the market experienced volatility due to the Federal Reserve's rate cut, the FOMC meeting minutes, and earnings reports from several US technology companies. We saw the expected 25 basis point rate cut, officially concluding quantitative tightening, and the earnings of the "Big Seven" US stocks were generally positive. However, market volatility occurred after Powell downplayed the near certainty of another rate cut in December. The probability of a rate cut, which had been priced in by the market before the meeting (95%), has now fallen to 68%, prompting traders to reassess their strategies and triggering a rapid shift towards risk aversion. This sell-off didn't seem driven by panic, but rather resembled position adjustments. Some investors had over-bet on a rise before the event, creating a classic "sell the news" situation, as the market had already fully priced in the 25 basis point rate cut. The stock market subsequently stabilized quickly, but the cryptocurrency market did not see a synchronized rebound. Since then, BTC and ETH have been trading sideways, hovering around $107,000 and $3,700 respectively as of this writing. Altcoins have also exhibited a volatile pattern, with their excess gains primarily driven by short-term narratives. Compared to other asset classes, cryptocurrencies are the worst-performing asset class. From an index perspective, crypto assets in a broad sense experienced a significant sell-off last week, with the GMCI-30 index falling 12%. Most sectors closed lower. The gaming sector plummeted 21%. Layer 2 network sector plunges 19% The meme coin sector declined by 18%. Mid-cap and small-cap tokens fell by approximately 15%-16%. Only the AI (-3%) and DePIN (-4%) sectors showed relative resilience, mainly due to the strong performance of TAO tokens and AI proxy concept coins in the early part of last week. Overall, this volatility seems more like a money-driven phenomenon, consistent with the tightening liquidity following the Fed's decision, rather than caused by fundamental factors. So why are cryptocurrencies lagging behind while global risk assets are rising? In short: liquidity. But it's not a lack of liquidity, but rather a problem of where it flows. Global liquidity is clearly expanding. Central banks are intervening in relatively strong rather than weak markets, a situation that has only occurred a few times in the past, usually followed by a strong surge in risk appetite. The problem is that this new liquidity is not flowing into the crypto market as it has in the past. Stablecoin supply continues to climb steadily (up 50% year-to-date, adding $100 billion), but Bitcoin ETF inflows have stagnated since the summer, with assets under management hovering around $150 billion. The once-booming crypto treasury DAT has fallen silent, and related concept stocks listed on exchanges like Nasdaq have seen a significant drop in trading volume. Of the three major funding engines driving the market in the first half of this year, only stablecoins are still playing a role. ETF funding has peaked, DAT activity has dried up, and although overall liquidity remains ample, the share flowing into the crypto market has shrunk significantly. In other words, the tap for funds hasn't been turned off; it's just that the funds have flowed elsewhere. The novelty of ETFs has worn off, allocation ratios have become more normalized, and retail investors' funds have flowed elsewhere, turning to chase the trends in stocks, artificial intelligence, and prediction markets. Our Viewpoint The stock market performance proves that the market environment remains strong; liquidity has simply not yet been transmitted to the crypto market. Although the market is still digesting the 10/11 liquidation, the overall structure remains robust—leverage has been cleared, volatility is under control, and the macroeconomic environment is supportive. Bitcoin continues to act as a market anchor thanks to stable ETF inflows and tight exchange supply, while Ethereum and some L1 and L2 tokens have begun to show signs of relative strength. While a growing number of voices on crypto social media are attributing the price weakness to the four-year cycle theory, this concept is no longer truly applicable. In mature markets, the miner supply and halving mechanisms that once drove cycles have long since failed; the core factor truly determining price performance is now liquidity. The macroeconomic environment continues to provide strong support—the interest rate cut cycle has begun, quantitative tightening has ended, and the stock market is frequently hitting new highs—but the crypto market has lagged behind, primarily due to the lack of effective liquidity inflows. Compared to the three major drivers of capital inflows last year and in the first half of this year (ETFs, stablecoins, and DeFi yield assets), only stablecoins are currently showing a healthy trend. Close monitoring of ETF inflows and DAT activity will be key indicators, as these are likely to be the earliest signals of liquidity returning to the crypto market.