Latest developments: Balchunas argued investors are overreacting to recent Bitcoin ETF redemptions.

• Speaking with CoinDesk’s Jennifer Sanasie and Dave Lavalle on Public Keys, Balchunas said roughly $3 billion in outflows from a market with about $100 billion in assets is “totally meaningless” compared with normal ETF flow patterns.
• He compared Bitcoin ETF flows to major S&P 500 funds, which regularly experience inflows and outflows without signaling a fundamental shift in investor sentiment.
• Despite a roughly 50% Bitcoin drawdown, cumulative net flows since spot Bitcoin ETFs launched remain near record levels, which Balchunas described as unusually resilient for a volatile asset class.

What this means: Balchunas sees long-term demand holding up better than many expected.

• He said cumulative net flows peaked around $63 billion and remain near $57 billion, a sign that investors have largely stayed invested through market volatility.
• Balchunas called the launch of spot Bitcoin ETFs the most successful ETF rollout on record, citing the speed with which products like BlackRock’s IBIT accumulated assets.
• He added that ETF share counts have continued to grow even as Bitcoin’s price declined, suggesting ongoing adoption rather than investor flight.

The context: Wall Street firms continue expanding crypto offerings despite recent market weakness.

• Balchunas pointed to Morgan Stanley’s involvement in the space and said Goldman Sachs and BlackRock are developing additional Bitcoin-related products.
• He argued that institutional interest remains strong and should continue supporting demand for crypto investment vehicles.
• At the same time, he warned the industry against relying solely on the narrative that more institutional investors are coming.

Reading between the lines: Balchunas wants the industry to refocus on Bitcoin’s core value proposition.

• He said Bitcoin’s appeal as a hedge against currency debasement should remain central to the investment case.
• The ETF story has become so dominant that it risks overshadowing broader discussions about Bitcoin’s technology and monetary characteristics, he said.
• “The ETFs became such a big story they almost overtook the narrative,” Balchunas said.

Worth watching: Balchunas identified Hyperliquid as crypto’s latest breakout story.

• He said newly launched Hyperliquid-linked ETFs have seen strong trading activity and performance, bucking the pattern of many recent crypto ETF launches.
• Balchunas praised Hyperliquid’s token economics, particularly its buyback model that links platform activity more directly to token-holder benefits.
• He described Hyperliquid as evidence that crypto innovation continues beyond Bitcoin and ETF adoption.

The infrastructure supporting global computing is undergoing a massive shift. True computing power no longer belongs to isolated corporate data centers, but to open, global networks.

Speaking at the Proof of Talk summit in Paris, Bittensor co-founder and Crucible Labs partner Ala Shaabana highlighted the staggering math behind decentralized networks. To show the audience what distributed computing can do, he stacked the Bitcoin network up against traditional enterprise setups.

“We all know that Bitcoin really dwarfs the top 100 supercomputers,” Shaabana said. “Does anybody know, in comparison, what the hash rate is? It’s over 600,000 times the power of really what these supercomputers can do. And that’s just, really, it’s Bitcoin.”

To understand Shaabana’s comment, it helps to know what Bittensor actually is.

It is a Layer 1 protocol built on the same codebase philosophy as Bitcoin: a hard cap of 21 million tokens, halvings hardcoded into predetermined blocks, with no pre-mine, and no venture capital. Bittensor is a decentralized network that replaces Bitcoin’s hash-puzzle mining with running and validating artificial intelligence.

The same incentive architecture that turned Bitcoin into a computing force 600,000 times more powerful than the world’s top supercomputers is redirected by Bittensor toward AI, organized across 128 specialized problem-solving networks called subnets. Each subnet defines its own goal, and miners compete for TAO token rewards by meeting it, meaning the network’s intelligence is shaped entirely by what it chooses to reward. That design principle, borrowed directly from Bitcoin’s playbook, is the foundation of everything Shaabana argues below.

Shift in long-term bull case

Shaabana’s core logic is simple: if coordination and code could create the world’s most powerful financial computing engine, the exact same blueprint can be applied to AI. By breaking a network down into 128 individual problem-solving neighborhoods or subnets, developers can source global hardware and intelligence without a central tech monopoly.

The trick to making a distributed system work relies entirely on the incentive design. “Show me the subnet, and I’ll tell you what the miners are optimizing for,” Shaabens said, adapting a famous market quote. If you reward participants for raw compute speed, they optimize for speed. If you reward them for data storage, they optimize for storage.

By setting these programmatic goals, open networks naturally attract talent and computing power far more efficiently than standard corporations.

“The long-term bull case is no longer primarily technological,” Shaabana concluded. “It is driven by debt, liquidity, and declining trust in traditional sovereign systems. Subnets really create markets. Intelligence really is no longer locked behind issues of organization; signals will define the truth, and performance is really rewarded.”

A U.K. House of Lords committee said the Bank of England (BOE) should reconsider its proposed limits on consumer stablecoin holdings in a new report.

The cross-party Financial Services Regulation Committee of the U.K. Parliament’s second chamber also advised reconsideration of requirements for stablecoin issuers to hold at least 40% of backing assets in central bank deposits yielding no interest in its “Stablecoins: waiting for regulation” report published Wednesday.

Stablecoins are digital tokens pegged to the value of a traditional financial asset, such as a fiat currency like the U.S. dollar or the pound sterling.

As central banks and lawmakers have constructed regulatory frameworks for the use and issuance of stablecoins in recent years, the Bank of England has stood out for proposing what many industry figures deemed unnecessarily stern restrictions.

The U.K.’s central bank proposed limits of 20,000 pounds ($27,000) per coin for individuals and 10 million pounds ($13.5 million) for businesses, which some observers said risked making the country uncompetitive compared to neighboring markets which would have no such limitations.

“Given the early stage of the GBP stablecoin market, rather than pre-emptively impose holding limits, the Bank should consider monitoring the growth of the market and imposing holding limits only if the financial stability risks clearly warrant it,” the House of Lords committee said.

The report questioned the rules on backing assets, saying they “could have a significant impact on the business viability of stablecoin issuers in the U.K.”

For its part, the BOE is planning to ease the proposed restrictions, with Sarah Breeden, deputy governor for financial stability, admitting they were “overly conservative,” last month.

The BOE is “looking very hard at whether there are different ways we can manage what we think is an important risk as stablecoins come into play,” Breeden said in an interview with the Financial Times.

Key takeaways:

• Bitcoin’s sharp 8% drop triggered $1.5 billion in forced liquidations, ending a tight two-month small-cap correlation.
• Worsening market sentiment was driven by $2.1 billion in Bitcoin ETF outflows and rising fears of a Federal Reserve interest rate hike.

Bitcoin (BTC) faced a sharp 9% drop over 48 hours, hitting the $67,000 support for the first time in two months. This correction wiped out a substantial $176 billion from the total crypto market cap in just two days, triggering $1.5 billion in forced liquidations for overleveraged long positions. 

Traders remain uncertain about the drivers behind crypto’s underperformance, especially since US equities have shown notable strength.

US Russell 2000 small cap equities index (left) vs. Bitcoin/USD. Source: TradingView

The tight correlation between Bitcoin and US small-cap stocks officially broke on May 21 after a solid two-month run. Worsening market sentiment was likely fueled by $2.1 billion in net outflows from US-listed spot Bitcoin ETFs between May 12 and May 20, though derivatives data had already been hinting at a lack of institutional appetite.

Bitcoin 2-month futures basis rate. Source: Laevitas

The annualized BTC futures premium relative to spot markets has held below the neutral 4% threshold for over three months, confirming weak demand for bullish leverage. 

Strategy’s Bitcoin accumulation pause and strength in AI investments

Strategy (MSTR US), led by Michael Saylor, also sparked mixed reactions after it chose to buy back convertible debt while pausing its signature weekly Bitcoin purchases.

Source: X/bjunjo

X user ‘bjunjo’ said that Strategy entered “survival mode for their debt holders and shareholders,” putting aside the sole mission to accumulate more Bitcoin. According to the analysis, the company will do whatever it takes to meet its financial obligations, as shown by a recent BTC 32 sale. Jeff Dorman, Chief Investment Officer at Arca, called the move “a complete balance sheet mismanagement.”

Source: X/ScroogeCap

Meanwhile, X analyst ScroogeCap noted that Google’s (GOOG US) decision to raise equity rather than debt suggests that private equity is effectively dead as liquidity dries up. The analysis highlights that the Oracle (ORCL US) debt-to-equity ratio remains unusually high, while Meta (META US) might be forced to tap more capital due to “irrational spending.” 

Jim Bianco of Bianco Research reportedly said, “We have not seen the market this concentrated around a single theme in 150 years.” Additionally, JPMorgan research found that 41 AI-related stocks account for half of the S&P 500’s market value.

Related: Bitcoin gets new $50K target after BTC price crashes 6% in a day

Interest rate target probabilities for the Sept. FOMC meeting. Source: CME Group

Traders became increasingly risk-averse as the war in Iran showed no sign of imminent relief, explaining the broader sell-off across cryptocurrency markets. US government bonds are now pricing in a 23% probability of the US Federal Reserve hiking interest rates by September, up from 0% just one month prior according to the CME FedWatch Tool.

Ultimately, the cryptocurrency market crash on Tuesday reflects heavy outflows from spot Bitcoin ETFs, an extreme capital concentration in AI investments and a macroeconomic environment signaling stricter monetary policy for longer than the market had previously anticipated.

TLDR:

• Wintermute confirms long-term funds are buying BTC in OTC tranches with an 18-month price outlook.
• BTC and ETH ETFs shed nearly $2B in combined outflows over ten days, the longest streak since launch.
• Wintermute places key BTC downside support between $60,000 and $65,000 amid summer weakness.
• Crypto missed two straight weeks of the equity rally as AI earnings drove rotation into Nasdaq stocks.

Crypto market maker Wintermute reports that long-term funds have begun accumulating Bitcoin through OTC desks in tranches, even as spot prices sit near $72,000.

The firm’s June 1 market update says these buyers see current levels as attractive on an 18-month horizon. The move comes as BTC and ETH ETFs recorded nearly $2 billion in combined outflows over ten days, marking the longest redemption streak since their launch.

BTC OTC Desks Record Quiet Accumulation From Long-Duration Holders

BTC OTC activity is picking up from longer-term oriented funds, Wintermute confirmed in its weekly update. The firm stated that it is “seeing longer-term holders start to TWAP into the market through the OTC desk, with no appetite to call the exact bottom but a view that these levels look attractive on an 18-month basis.”

The move comes in tranches rather than single large orders, a method that avoids moving spot price.

Wintermute placed key downside support between $60,000 and $65,000. That range represents the floor longer-term holders appear to be referencing when sizing their positions.

The firm described the setup as “relatively weak into the summer months” but noted the underlying cycle looks more like a reset than a structural breakdown.

The OTC accumulation stands in contrast to what is happening in the ETF market. BTC spot ETFs recorded approximately $1.4 billion in outflows during the most recent week, extending the longest redemption streak since their launch.

ETH ETFs shed around $240 million over the same period. Between May 20 and May 29, combined BTC and ETH ETF outflows reached nearly $2 billion.

Strategy, the largest corporate Bitcoin holder, began selling during this window as well. That development added to bearish sentiment across crypto-native circles.

Wintermute noted that “the bid that carried BTC from $70k to $80k in April is gone,” with the marginal dollar now sitting in Nvidia, Dell, and small-cap equities instead.

Crypto Sits Out the Equity Rally as Macro Pressure Persists

Wintermute noted that crypto has now missed two consecutive weeks of the broader risk-asset rally. The firm said “the risk-on rotation went into Nasdaq and the Russell 2k” while crypto, described as “the most risk-sensitive cross-asset class, got skipped.” The S&P 500 logged its ninth straight green week, gaining 1.9%, while the Nasdaq rose 8% on the month.

The macro backdrop explains part of the divergence. April PCE printed at 3.8% headline, with core rising to 3.3%. The bond market is pricing a 35–40% probability of a rate hike before year-end.

Wintermute flagged that “it’s not unthinkable to see stagflation and double dip inflation pop up again in Q3,” particularly with AI-driven demand keeping the broader economy hot.

Equities are climbing through that backdrop on the strength of an AI earnings story. Wintermute observed that “equities aren’t rallying because the macro improved — they’re rallying because AI earnings keep printing and the market is choosing to look through everything else.” Crypto has no equivalent narrative, leaving it fully exposed to the same headwinds the equity market is bypassing.

Near-term catalysts include Wednesday’s CPI and PPI data and the Monday launch of CME Nasdaq crypto index futures.

Wintermute identified ETF flows as the key metric to watch, noting that “sustained inflows marked the institutional return in April” and that their continued absence is “what’s keeping spot heavy.”