A $56 billion Illinois state budget advanced by the General Assembly on Monday includes a new digital asset tax provision that could affect crypto users and firms operating in the state. The measure, described by supporters as a revenue tool, would levy a 0.2% tax on digital asset transactions carried out by entities acting as digital asset brokers in Illinois. According to Cointelegraph, the provision is framed as a “privilege tax” within the Digital Asset Privilege Tax Act amendment to the budget.

The 1,624-page budget bill, part of the revenue and tax package intended to fund the 2027 fiscal year, was approved largely along party lines. If enacted, the tax would require digital asset brokers to register with the state and comply with enforcement provisions designed to govern Illinois-based digital asset business activity. The legislation also sets out criminal penalties for noncompliance, including potential Class 3 felonies if brokers fail to adhere to the registration and operational requirements starting January 1.

Governor JB Pritzker has indicated an intention to sign the bill into law, but as of Friday morning had not yet issued the formal signature. Lawmakers project that the crypto tax would generate roughly $60 million for the state’s 2027 budget.

Key takeaways

• The Illinois budget includes the Digital Asset Privilege Tax Act amendment, introducing a 0.2% tax on digital asset transactions by brokers operating in Illinois.
• Brokers would face mandatory registration and compliance duties; failure to comply could result in a Class 3 felony with 2–5 years’ imprisonment and fines up to $25,000.
• The measure is expected to raise about $60 million in the 2027 fiscal year as part of the state’s revenue package.
• Industry groups, including the Digital Chamber and the Illinois Blockchain Association, have publicly criticized the move, arguing it was buried in a large budget bill and lacks adequate stakeholder engagement. They contend the policy could be economically destructive and leave Illinois-based firms at a disadvantage.
• The tax comes amid broader policy actions by the governor and state authorities regarding crypto activity, including executive-order–level actions on related areas such as prediction markets.

Tax framework within the Illinois budget

The centerpiece is the Digital Asset Privilege Tax Act amendment embedded in the 2027 budget package. The 0.2% levy would apply to transactions conducted by entities acting as digital asset brokers in the state, with the expectation that brokers register and adhere to specified guidelines governing their Illinois operations. The legislation frames the tax as a privilege charge tied to the digital asset business activity conducted within Illinois’ borders, aiming to augment state revenue while shaping the regulatory perimeter for brokers.

Registration requirements would take effect in the new year, and brokers who fail to register or comply with the act’s provisions could be charged under Illinois’ criminal code as a Class 3 felony. The penalty carries a potential prison term of two to five years and fines up to $25,000 per violation, reflecting a stringent approach to enforcement for noncompliant entities.

The budget bill remains subject to the governor’s signature. If signed, the measure would formalize the tax into law and pave the way for the state to begin collecting the revenue anticipated from the levy. Illinois legislators and supporters view the tax as a mechanism to fund the 2027 budget while establishing a defined regulatory framework for digital asset activity in the state.

Industry response and regulatory implications

Industry advocates have pushed back against the measure, arguing that the tax was tucked into a sprawling budget proposal with limited stakeholder engagement. In public statements, the Digital Chamber and the Illinois Blockchain Association described the proposal as economically destructive and warned that it would impose an undue burden on Illinois-based crypto firms without adequate notice or preparation time. They also pointed to the claim that no other state has imposed a similar tax, signaling a potential competitive disadvantage for Illinois in attracting crypto-related business.

ThePushback underscores broader regulatory frictions between state-level fiscal measures and the fast-evolving digital asset landscape. If enacted, the tax would shape licensing requirements for brokers, affect KYC/AML compliance arrangements, and influence how exchanges and other intermediaries structure their Illinois operations. Moreover, the move could influence how financial institutions assess cross-border activity and banking relationships with Illinois-based crypto firms, given the state’s attempt to formalize its treatment of digital asset intermediaries.

Policy context: prediction markets, enforcement priorities, and the broader regulatory landscape

The proposed crypto tax aligns with a broader regulatory posture taken by Governor Pritzker toward digital asset activities. Earlier in the year, the governor signed an executive order banning state employees from engaging in prediction market event contracts with platforms such as Kalshi and Polymarket, citing concerns that such bets could leverage nonpublic information for personal gain. The executive order signals a broader emphasis on governance and oversight of crypto-related activities within the state and complements the tax proposal as a coordinated policy stance.

From a wider regulatory perspective, Illinois’ approach interacts with ongoing federal and international frameworks. The state’s action sits alongside debates about licensing regimes, AML/KYC standards, and the relationship between digital asset brokers and traditional financial governance. As policymakers navigate MiCA-like considerations and U.S. oversight from agencies such as the SEC, CFTC, and DOJ, Illinois’ tax design raises questions about harmonization with national standards, cross-border operations, and the role of state-level measures in shaping the regulatory landscape for crypto firms, banks, and investors.

Closing perspective

With the bill awaiting the governor’s signature, the key questions revolve around how the registration regime will be implemented, how enforcement will unfold, and what adjustments, if any, lawmakers will consider in response to industry feedback. The Illinois measure could set a notable precedent for state-level digital asset taxation, with implications for licensing, compliance, and the competitive positioning of crypto firms within Illinois and beyond.

Singapore-based crypto travel platform Travala has rolled out what it calls the world’s first agentic AI travel protocol. The system enables AI agents to search, reserve, and pay for hotels using USDC on Base, a Coinbase-backed layer-2 network. The move extends agentic AI stablecoin payments into travel bookings and positions Travala at the forefront of AI-enabled checkout infrastructure for travel commerce.

The Travala Travel Multi-Chain Protocol (MCP) is live through Claude Desktop, with external developers invited to integrate the capability into their own travel-agent experiences, the company said in a statement shared with Cointelegraph. The protocol bridges Travala’s hotel catalog with AI agents via the Model Context Protocol, an open standard designed to connect AI applications with external tools. Payments are conducted over Coinbase’s x402 protocol on Base, enabling gasless USDC transactions, near-instant settlement, and typical booking costs around $0.01.

Key takeaways

• Travala launches an agentic AI travel protocol on Base, enabling AI agents to book hotels using USDC with near-zero fees and fast settlement.
• The system links Travala’s inventory to AI agents via the Model Context Protocol, with payments executed through x402 on Base and ERC-7715 session keys allowing in-wallet signing control.
• Final payment authorization remains with the traveler, meaning the protocol is autonomous in its operations but not fully hands-off for end users.
• Travala’s network covers more than 2.2 million hotels, including listings from Marriott, Hilton, and IHG, with plans to expand to flights and other travel products.
• A 10% Coinbase Wrapped BTC (cbBTC) rebate is offered on completed stays booked through the AI agents, adding a financial incentive for developers and travelers.

Autonomy in practice: what changes for travelers and builders

Travala frames the MCP as a meaningful step toward an autonomous travel economy, while still preserving user control. CEO Juan Otero described the launch as “the death of the checkout button,” framing it as a move from a static checkout experience to an ongoing, agent-led shopping process. Even as AI agents search and propose options, the traveler retains final signing authority within their wallet, meaning the AI merely initiates payment requests that require human approval before funds move.

The protocol uses ERC-7715 session keys to manage interactions. This design allows an AI agent to request payment while the traveler’s wallet holds the ultimate signing power. In practice, this supports a continuous conversational thread—an AI agent can carry context across searches, bookings, and cancellations in a single chat, reducing repetitive prompts and friction in the booking flow.

Connecting inventory with agent-enabled commerce

Travala says its MCP taps into a catalog of over 2.2 million hotels, with listings sourced through prominent aggregator partners and major brands, including Marriott, Hilton, and IHG. The company highlighted that the integration could eventually extend beyond hotel stays to other travel products, such as flights. The broader vision includes leveraging Travala’s AVA loyalty token to support future MCP use cases, potentially tying loyalty rewards to AI-driven booking workflows.

External developers can adopt Travala’s MCP via Claude Desktop, enabling other travel agents to embed the same AI-enabled checkout flow. While automation advances, the model preserves a human-in-the-loop approach to payments, providing a security and control layer that may appeal to users wary of fully autonomous transactions.

Context within the evolving AI-payments landscape

Travala’s announcement arrives amid a growing wave of AI-driven payments infrastructure within the crypto ecosystem. Industry coverage has noted a surge in agentic payments on Base, with x402-linked wallets reportedly surpassing 100 million transactions. The broader ecosystem includes solutions from Fireblocks, MoonPay, Exodus, and Oobit, all aiming to enable AI agents to spend stablecoins and other digital assets without manual intervention at every step.

Chainalysis has documented the rising use of agentic payments on Base, a trend that has supported broader experimentation with programmable payments in AI workflows. The combination of a stablecoin (USDC), a scalable L2 network (Base), and an open toolset (Model Context Protocol and ERC-7715 session keys) creates a cohesive environment for automated travel payments that still respects user consent and control.

Strategic implications for the travel-tech and crypto sectors

Travala’s MCP signals a shift from purely crypto-enabled checkout to AI-assisted, programmatic booking workflows. For investors and developers, it highlights a frictionless, low-cost payment layer that could accelerate adoption of AI agents in live commerce. The integration with major hotel brands underscores the potential for large-scale inventory to be accessible through AI channels, potentially expanding the use cases for stablecoins in consumer travel.

From a strategic perspective, the combination of gasless payments, near-instant settlement, and predictable fees could incentivize larger, more complex bookings to move through AI agents. Yet the model’s reliance on traveler approval means risk controls remain in place, reducing the likelihood of unauthorized charges and aligning with user-centric security expectations. This hybrid approach—automated negotiation and human oversight—may become a template for other sectors exploring agentic commerce.

Broader adoption and next steps

Travala has signaled that the MCP will evolve beyond hotels, with flights and other travel products on the roadmap. The venture also points to potential expansions of the AVA loyalty program, potentially integrating reward mechanics with AI-driven booking journeys. As more developers adopt the framework, the breadth and depth of AI-empowered travel options could grow, drawing in users who value speed, transparency, and control in their online travel experiences.

Observers will want to monitor how adoption scales among developers and whether the autonomous capabilities can mature to reduce the amount of human intervention required for routine bookings. The interplay between user trust, safety measures, and AI efficiency will shape how quickly and widely agentic travel becomes mainstream.

Additional reporting on related developments in AI-driven payments and agent-based commerce continues to emerge, with industry outlets highlighting parallel efforts to streamline settlement and reduce operational frictions across platforms.

As the ecosystem evolves, Travala’s MCP could become a test case for how autonomous financial workflows interact with real-world consumer purchases, potentially setting a benchmark for the next wave of AI-enabled travel experiences.

Travala was founded in 2017 and currently accepts more than 100 cryptocurrencies alongside fiat currencies, positioning itself as a bridge between traditional travel booking and crypto-enabled commerce.

Readers should watch for updates on the MCP’s expansion into flights and other travel categories, as well as any regulatory or security considerations that emerge as AI agents gain more autonomy in payment workflows.

South Korean police have reportedly launched the country’s first illegal gambling probe into local Polymarket users, widening regulatory scrutiny of the decentralized prediction market.

The investigation is led by Gangwon Provincial Police and was requested by the National Police Agency, according to ChosunBiz. 

Users may face fines of up to 10 million won ($6,500) under Article 246 of the Criminal Act covering gambling and habitual gambling. Under current law, Sports Toto is the state-authorized sports betting platform, while unauthorized online betting can be prosecuted under South Korean gambling laws.

The reported probe adds to a broader global crackdown on prediction markets, with several jurisdictions blocking or restricting access to Polymarket. Some countries have completely blocked or prohibited Polymarket, including Singapore, Poland, Portugal, Hungary, Ukraine, Brazil and Indonesia. Polymarket remains accessible in South Korea.

The news comes after President Lee Jae-myung’s ruling Democratic Party swept most major local elections held on Wednesday, while conservative Oh Se-hoon won another term as mayor of Seoul, Reuters reported.

Prediction market on whether Lee Jae-myung would be out as president of South Korea in 2026. Source: Polymarket.com

One Polymarket contract on whether Lee Jae-myung would be out as president saw nearly $54,000 in total trading volume, data shows.

Related: Polymarket users cry foul after Strategy sale market resolves to ‘no’

Political betting faces growing scrutiny

The latest probe adds to the growing regulatory scrutiny of political betting on Polymarket.

In January, US lawmakers proposed legislation aimed at restricting political prediction market trading by government officials after a Polymarket user netted over $400,000 on a contract related to the removal of then-Venezuelan President Nicolás Maduro, fueling insider trading concerns.

In May, the chair of the US House of Representatives’ Oversight and Government Reform Committee sent letters to the CEOs of Kalshi and Polymarket, questioning their response to the insider trading allegations on the platforms.

In response to the growing scrutiny, Polymarket said it was weighing the implementation of a mandatory identity verification system more in line with global Know Your Customer (KYC) verification standards, Cointelegraph reported on May 27.

Polymarket list of geoblocked countries and regions. Source: Polymarket.com

Polymarket said it was entirely geoblocked in 35 regions at the time of writing.

Magazine: Polymarket seeks Japan entry, Harvard dumps entire ETH position: Hodler’s Digest, May 17 – 23

Bitcoin (BTC) is heading for its worst weekly performance since November 2022, down around 15% week-to-date as of Friday.

BTC/USD weekly chart Source: TradingView

BTC was trading near $62,500 after briefly dropping toward $61,000 earlier in the session. The roughly $1,500 rebound showed bulls are still trying to defend the psychologically important $60,000 support level.

How low can Bitcoin go if it breaks below $60,000?

Key takeaways:

• Bitcoin is testing its 200-week SMA near $61,800, a level that has historically acted as major cycle support.
• Analyst says $55,000 may be Bitcoin’s worst-case downside if the 200-week SMA continues to hold.

Bitcoin to $55,000 is the worst-case scenario: Analyst

Bitcoin may print a brief wick below $60,000 before finding stronger demand, according to analyst Radz.

In a Friday post, he said $55,000 could mark the “worst” downside scenario for Bitcoin, citing the 200-week simple moving average (200-day SMA, pink) as the core reason behind his bullish outlook.

BTC/USD weekly chart. Source: BarChart/TradingView

That level has historically acted as one of Bitcoin’s strongest long-term support zones. Previous retests of the 200-week moving average in 2019, 2020, 2022 and 2023 either marked major cycle lows that preceded strong recovery phases.

In February 2026, Bitcoin rose by over 37% after testing the 200-week SMA as support too. This week is BTC’s second attempt this year to hold above the pink line, as it treads around $62,000.

Bitcoin bear flag warns of deeper correction toward $50,000

A maturing bear flag on Bitcoin’s chart suggests the correction may extend well below the $55,000 area.

As of Friday, BTC had broken below the flag’s lower trend line, with rising trading volume showing stronger conviction behind the move. In technical analysis, a bear flag forms when the price consolidates higher inside a narrow channel after a sharp decline, before resuming the prior downtrend.

The measured target is calculated by subtracting the height of the preceding decline from the breakdown point. In Bitcoin’s case, that projects a downside target near the $50,000–$51,000 support zone.

That area also aligns with previous horizontal support, making it the next major level to watch if BTC fails to reclaim the flag’s lower trend line over the next few days.

Bitcoin onchain data points to $50,000–$54,000 target

Bitcoin’s onchain data points to a similar target as the bear flag setup.

Glassnode’s MVRV pricing bands show BTC’s realized price (purple) near $53,740. In simple terms, realized price is the average price at which the Bitcoin supply last moved onchain. In the past, this level acted like a major support level during correction cycles.

BTC MVRV extreme deviation pricing bands. Source: Glassnode

The same chart also shows another key support level (blue) near $50,560, where Bitcoin would look much cheaper based on onchain valuation.

Related: Bitcoin fell 21% after Strategy’s debt buyback news: Is Terra Luna-style doom loop next?

Together, these levels create a support zone between roughly $50,000 and $54,000. That lines up closely with the bear flag target near $50,000 to $51,000.

Bitcoin cup-and-handle breakdown risks drop toward $33,000

Bitcoin’s weekly chart is showing another bearish setup: a possible cup-and-handle breakdown.

The pattern shows BTC forming a rounded top, followed by a smaller rebound attempt inside the handle. Bitcoin price is now weakening near the lower end of that handle, close to the 200-week SMA and the $60,000 support level.

BTC/USD weekly chart. Source: TradingView

If Bitcoin breaks below this area decisively, the downside target from the pattern sits near $33,000.

Some of the largest US banks are reportedly planning to launch a tokenized deposit network in the first half of 2027 in response to growing competition from blockchain companies expanding into traditional finance. 

The network will be operated by The Clearing House, the bank-owned payments operator, and will connect traditional payment rails with digital asset infrastructure for 24/7 settlement, CEO David Watson told The Wall Street Journal.

The Clearing House is co-owned by some of the largest US banks, including JPMorgan Chase, Bank of America, Citibank, Barclays, BNY and Wells Fargo, among others, according to its website.

The plan shows how banks are trying to keep deposits inside regulated banking channels while offering some of the speed and programmability that have made stablecoins attractive for settlement and treasury use.

Cointelegraph reached out to The Clearing House for comment but had not received a response by publication.

US banks have pushed back against US crypto market legislation, which could allow stablecoin issuers to pay users yield on their holdings, similar to interest on traditional bank deposits.

The report comes after JPMorgan CEO Jamie Dimon said that the banking industry would continue to “fight” against the current version of the Digital Asset Market Clarity Act (CLARITY) and said that crypto companies that want to offer yield-bearing products should apply for banking charters, Cointelegraph reported in late May.

The comments followed a May committee vote to advance the CLARITY Act in the Senate Banking Committee, but the bill still needs to pass through both chambers of Congress before going to US President Donald Trump.

The Clearing House, owner banks. Source: TheClearingHouse.org

The plan shows that banking giants are “reacting to where value is already moving,” Carl Grimstad, CEO of digital asset infrastructure provider Lydian, said, adding:

“This announcement shows that 24/7 programmable settlement is becoming increasingly important.”

While banks have experimented with tokenization in controlled environments, public blockchain networks have settled value at a global scale, said Grimstad, adding that the real question is how value will move across an “increasingly fragmented mix of bank ledgers, public chains and digital assets.”

Related: US financial markets ‘poised to move on-chain’ amid DTCC tokenization greenlight 

Wall Street participants accelerate tokenization initiatives

Other Wall Street banks are also accelerating tokenization initiatives.

On March 24, the New York Stock Exchange (NYSE) partnered with tokenization platform Securitize to develop blockchain-based trading infrastructure for Wall Street by enabling the minting of tokenized shares of stocks and exchange-traded funds (ETFs).

Days earlier, on March 18, the US Securities and Exchange Commission (SEC) gave the regulatory green light to Nasdaq’s pilot proposal to support the trading of tokenized versions of high-volume stocks and securities.  

Earlier in January, the NYSE’s parent company, the Intercontinental Exchange (ICE), shared plans for a tokenized securities venue designed for 24/7 trading, instant settlement, stablecoin-based funding and onchain settlement.  

Over in Asia, South Korea’s Ministry of Economy and Finance announced a pilot project that will use tokenized deposits to execute government operational spending, with a full rollout set for the fourth quarter of 2026, Cointelegraph reported on April 16. 

Magazine: Can Robinhood or Kraken’s tokenized stocks ever be truly decentralized? 

Kraken has opened access to the upcoming SpaceX IPO through tokenized shares across more than 110 markets, bringing a traditionally exclusive Wall Street process to retail investors.

According to an announcement from Kraken, SpaceX will become the first company offered through its new xStocks IPO Access program, a service that lets eligible retail investors apply for IPO allocations using tokenized equity instruments rather than traditional brokerage channels.

Users must hold a verified Kraken account through the exchange’s mobile application and submit an IPO access request before shares become available.

Kraken said the service is currently accessible across the European Economic Area and more than 110 international markets, while users in the United States, Canada, Australia, and the United Kingdom remain excluded because of regulatory restrictions.

Investors who receive allocations will be issued SPCXx, a tokenized representation of SpaceX equity backed one-for-one by underlying shares. According to Kraken, those tokens will be tradable around the clock on Kraken and other platforms participating in the xStocks network.

The launch places Kraken in direct competition with a long-standing Wall Street practice in which IPO allocations are typically reserved for institutional investors and wealthy clients.

Earlier this week, Kraken-affiliated Payward Services said customers of Kraken and selected xStocks Alliance members would be able to register interest in upcoming U.S.-listed IPOs before companies begin trading publicly.

According to Payward Services, successful applicants will receive tokenized shares at the IPO offering price on listing day, with the underlying stock held by a regulated custodian. The company said the structure is intended to provide retail investors with access that has historically been difficult to obtain through conventional public offering processes.

SpaceX listing attracts strong demand

Bloomberg reported that SpaceX is expected to begin trading publicly on June 12 and is seeking to raise approximately $75 billion at a valuation exceeding $1.8 trillion. According to Bloomberg, investor demand has already surpassed the number of shares available.

If completed at that scale, Bloomberg said the transaction would become the largest IPO on record, surpassing the $29.4 billion listing completed by Saudi Aramco in 2019.

Much of the company’s valuation has been linked to the growth of Starlink, its satellite internet business. At the same time, SpaceX continues to invest heavily in launch services, spacecraft development, and other capital-intensive operations that could influence how public market investors assess the company after trading begins.

AI infrastructure contracts add another growth driver

Beyond its aerospace operations, SpaceX has expanded into AI infrastructure services through large compute agreements with technology companies.

According to a recent regulatory filing, Google has agreed to pay SpaceX $920 million per month from October 2026 through June 2029 for access to roughly 110,000 NVIDIA GPUs, CPUs, memory, and related equipment.

Google said the arrangement will help meet stronger-than-expected demand for its Gemini Enterprise products while additional internal capacity is developed.

Shortly before that agreement, SpaceX disclosed a separate deal with Anthropic. Under that contract, Anthropic agreed to pay $1.25 billion per month through 2029 for compute capacity from the Colossus 1 data center near Memphis, Tennessee.

The SpaceX offering also arrives as Kraken continues expanding beyond cryptocurrency trading. In late 2025, the exchange acquired xStocks operator Backed Finance and later announced plans to introduce regulated Bitcoin perpetual futures in the United States using infrastructure obtained through its acquisition of Bitnomial.

Bitcoin (BTC) has fulfilled two of three key conditions to spark the next BTC price “rally,” new analysis says.

Key points:

• Bitcoin whales on Hyperliquid and Bitfinex are already pointing to the beginning of a BTC price uptrend, according to the latest findings.
• Bitcoin markets now need demand to return in the form of the Coinbase and Kimchi Premium.
• Other preconditions for a bear market bottom are also in the process of forming.

Bitcoin price comeback hinges on US, Korea demand

Bitcoin whale traders are laying the foundations for BTC price relief, even as BTC/USD plumbs four-month lows.

In an X post on Friday, trader CW confirmed that Bitcoin whales on both Hyperliquid and Bitfinex are signaling a market rebound.

BTC/USD long positions on Bitfinex. Source: CW/X

CW notes that Hyperliquid whales have adopted a “bullish stance” on the market, while on Bitfinex, long positions have tailed off. The latter is a classic sign that an uptrend is due next.

“What remains is for the Kimchi Premium and Coinbase Premium to turn positive,” he commented.

The Coinbase Premium is the difference in price between Coinbase’s and Binance’s BTC/USDT pairs and has been mostly negative in 2026.

Bitcoin Coinbase Premium Index. Source: CryptoQuant

A negative premium reflects weak US demand, while the Kimchi Premium monitors the South Korean exchange sector.

Once demand returns across the board, Bitcoin has a better chance of reentering a sustainable uptrend.

CW acknowledged that the Kimchi Premium has already “decreased significantly” versus earlier in the week.

Bitcoin starts its latest “bottoming out” phase

As Cointelegraph reported, consensus overall favors a macro bottoming phase playing out for BTC/USD next.

Related: Trump says Iran will ‘work out well’: Five things to know in Bitcoin this week

The week has seen the pair touch a key bear-market trend line in the form of its 200-week simple moving average (SMA) — another essential ingredient in a bottom formation.

“Bitcoin has only just started deviating below the 200-week SMA,”  trader and analyst Rekt Capital emphasized to X followers on Friday.

“The significance of this is that historical Bear Market Bottoming out formations have started to develop via such deviations.”

BTC/USD one-week chart with 200SMA. Source: Rekt Capital/X

Earlier, trader Leviathan described BTC price action as copying the 2022 bear market “almost perfectly.”

Ether (ETH) slid to a 13-month low near $1,540 on Friday as risk-off sentiment seeped through crypto markets. The move came amid a cascade of derivative-driven liquidity drains and fresh security worries that have kept bulls on the back foot even as ETH trades well below its late-2025 highs. In parallel, a critical vulnerability in Zcash’s shielded pool—exposed by AI-driven tooling—fed fears of broader contagion across blockchains and DeFi protocols.

On the macro side, derivatives data painted a decidedly bearish picture. Futures markets showed negative funding rates, signaling higher demand for short exposure, while a wave of leveraged longs was liquidated, eroding any quick relief rally. The market backdrop was underscored by a sharp pullback in ETH’s real-use case metrics, with Ethereum’s Total Value Locked (TVL) signaling a pullback in DeFi activity and wallet flows remaining strained.

Key takeaways

• Ether derivatives tilt bearishly as cascading liquidations erase attempts at relief, with leveraged longs cut by over $1.28 billion across a five‑day window.
• Negative annualized funding rates for ETH perpetual futures indicate continued appetite for short bets, reinforcing a risk-off posture among traders.
• Demand for downside protection spikes in options, with Deribit ETH put-to-call premium reaching multi‑week highs, signaling growing hedging interest amid uncertain momentum.
• Ethereum’s on-chain activity frays as TVL sinks to the weakest level since February 2024, with notable DApps posting multi‑tens of percent contractions in user and capital inflows.
• A AI‑driven discovery of a Zcash vulnerability stokes fears of systemic risk, as investors question whether other networks could harbor similar blind spots.

Derivatives signal a risk-off regime for ETH

Market data show a clear tilt toward selling pressure in ether derivatives. The perpetual futures market turned negative on Friday, reflecting a thinning of upside conviction and a shift toward hedges or outright shorts. This dynamic is particularly concerning for bulls, given that ETH had already traded about 67% below its all‑time high from August 2025.

In the backdrop, roughly $1.28 billion in highly leveraged long positions were liquidated over five days, dimming prospects for a swift bounce. While price action remains volatile, the combination of losses and negative funding metrics underscores a fragile balance for those seeking risk-on momentum in ETH.

The derivatives picture is complemented by a rising demand for downside hedges in the options market. Data show the ETH put-to-call premium on Deribit climbing to roughly 3.7x on Friday, with the metric lingering at elevated levels since early in the week. This pattern points to a crowded hedging psyche among market participants and suggests that casual bidders may remain reluctant to chase rallies in the near term.

ETHTVL and DeFi activity: a pullback across the ecosystem

The retreat in on-chain activity is visible in Ethereum’s ecosystem metrics. DefiLlama data indicate Ethereum’s network TVL has slid to its lowest level since February 2024, a development that cynically reduces the available on-chain liquidity for users and dampens the revenue prospects for DApps built on the network.

Top ETH-based decentralized applications have also borne the brunt of this shift. Spark, Ether.fi, EigenCloud, and KernelDAO each reported double-digit declines in TVL, reflecting a broader correction in DeFi liquidity as funds migrate away from riskier protocols amid higher macro uncertainty.

The timing of this TVL erosion intersects with a broader narrative about security and risk in DeFi: a bug in Zcash’s shielded pool was discovered to enable unlimited minting, a finding attributed to AI-powered review tooling. While the vulnerability relates to Zcash specifically, it has intensified concerns about whether other chains harbor hidden flaws that could catalyze outflows and force risk repricing across ecosystems. The exposure was reported on a May 29 discovery using Anthropic’s Opus 4.8 AI model, amplifying market nerves about cross-chain contagion.

Beyond the immediate concern about security, April’s hack-and-exploit wave continued to color risk assessments. Across 25 protocols, hacks by KelpDAO and Drift Protocol accounted for a large share of losses—together around $573 million—illustrating how breaches have stressed a broad set of networks and liquidity pools, and implying that risk management remains a central topic for users and builders alike.

Supply dynamics and what they imply for ETH risk and recovery

On-chain supply metrics add another layer to the bear case. Glassnode data show that only about 30% of ETH supply remains profitable relative to the last time those coins moved. This kind of supply dynamic has historically preceded meaningful price action, contrasting with episodes where a larger portion of supply was profitable and markets traded in a more constructive fashion. In the current context, a limited pool of “on‑the‑move” ETH suggests fewer buyers stepping in to relieve selling pressure unless a catalyst appears.

Further complicating the outlook is the scale of unrealized losses in top ETH treasury holders. Bitmine (BMNR US), the largest ETH treasury holder, reportedly sits on an unrealized loss of about $10.5 billion, representing roughly 4.5% of the entire ETH supply. If the market continues to tighten and lenders and lenders’ risk appetites stay constrained, such concentrated exposure can amplify downside volatility during forced liquidations or correlated de-risking waves.

Taken together, these data points suggest a fragile recovery path for ETH at present. Prices could press lower toward key levels, with the psychological threshold near $1,550 providing a potential point of relief if buyers emerge. However, the confluence of weak on-chain activity, persistent derivatives headwinds, and the specter of cross-chain vulnerabilities keeps the risk skewed to the downside in the near term.

For readers tracking risk and opportunity, the next few weeks will be telling. Watch for fresh data on DeFi liquidity, any new security alerts across major networks, and whether cross-chain risk dynamics begin to stabilize as market participants reassess hedging needs and capital allocation.

Source-style data points cited include Laevitas on ETH futures funding (see https://app.laevitas.ch/assets/perpswaps/ETH/funding), DefiLlama for on-chain TVL shifts, and Glassnode’s profitability metrics (https://studio.glassnode.com/charts/supply.ProfitRelative?a=ETH&mScl=lin&resolution=24h). The Zcash vulnerability and related AI-review context were reported in coverage noting an AI-assisted discovery of a vulnerability that enabled unlimited minting, with a related Cointelegraph reference to the broader security implications of such flaws (see https://cointelegraph.com/news/zec-tanks-30-after-ai-security-review-discovers-critical-zcash-vulnerability).