Key takeaways:
Bitcoin reached a new all-time high of $126,200, backed by a record $5.67 billion ETP inflows.
Fiscal and geopolitical uncertainty have revived the “debasement trade” narrative.
Institutional inflows dominate while retail participation continues to decline.
Bitcoin (BTC) stormed to a new all-time high of $126,200 on Monday, following one of the strongest weeks on record for digital assets as global crypto exchange-traded products (ETPs) logged $5.67 billion in net inflows, the largest ever weekly haul. The surge reflected the return of investor conviction, fuelled by renewed faith in the “debasement trade” as fiscal and geopolitical risks mount.
As noted in Bitwise’s weekly crypto market compass report, the current crypto rally highlights how weakening fiat confidence and rising macroeconomic uncertainty are driving a structural demand for store-of-value assets, such as Bitcoin and gold.
Director and Head of Research André Dragosch, Senior Research Associate Max Shannon, and Research Analyst Ayush Tripathi highlighted that the US Dollar Index (DXY) has fallen 10% year-to-date, while gold has surged 50%, outpacing Bitcoin’s 27% gain over the same period. Yet, many investors now view BTC as a digital hedge offering greater asymmetric upside in the race against currency debasement.
According to Bitwise, spot Bitcoin exchange-traded funds (ETFs) led inflows with $3.49 billion, followed by Ethereum’s $1.49 billion, and $685 million into ex-Ethereum altcoin products. US spot ETFs dominated activity, with BlackRock’s iShares Bitcoin Trust (IBIT) and Bitwise’s BITB attracting the bulk of new allocations.
Meanwhile, onchain data cited in the report revealed over 49,000 BTC withdrawn from exchanges by whale entities, while positive spot buying and moderate leverage suggest a sustainable, rather than euphoric, advance.
With Q4 historically bullish and liquidity tailwinds gathering, Dragosch and the Bitwise team concluded,
“Investors positioned on either side of the store-of-value debate could ultimately converge toward the same outcome, renewed capital inflows into digital assets.”
Related: Bitcoin trader calls $124K ‘pivotal’ as BTC retraces from new all-time high
Fiscal fragility fuels long-term Bitcoin upside
Bitcoin advocate Paul Tudor Jones echoed a growing view that the US fiscal landscape is now the key macro driver for risk assets. With the federal deficit swelling and annual interest costs set to exceed $1 trillion, markets are increasingly pricing in sustained monetary easing, which is historically a tailwind for BTC.
Cointelegraph reported that as foreign holders retreat from US Treasurys and the dollar weakens, capital rotation toward “hard assets” like Bitcoin could accelerate. Tudor’s comparison to the late-1990s bull cycle, noting that while valuations may be stretched, the absence of euphoria and ongoing institutional inflows suggest the rally has room to run.
In essence, fiscal fragility, dovish policy expectations, and diminishing real yields are converging to create an environment ripe for Bitcoin’s structural growth. However, not all onchain signals align with this narrative.
Bitcoin researcher Axel Adler Jr. pointed out that small transaction activity, typically driven by retail traders, has been steadily declining since spring 2024, even as Bitcoin’s price has climbed to new highs.
This divergence between price rise and waning retail participation suggested that the current advance may be disproportionately institution-led, hinting at retail fatigue beneath the surface of Bitcoin’s bullish momentum.
Related: US Bitcoin ETFs post 2nd-highest inflows since launch on crypto rally
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.
