Bitcoin and Ethereum bounced hard earlier in the week — then gave some of it back into Friday as a broader risk-off tone crept back into markets.
The pullback wasn’t driven by crypto-specific drama. It reflected a familiar pattern: macro nerves rise or tech stocks soften (this week it was due to Nvidia earnings), and digital assets react. That sensitivity to liquidity conditions hasn’t gone away.
But even with Friday’s slide, majors are holding weekly gains and ultimately this week reinforced a key dynamic of this cycle: any weakness continues to attract buyers more often than it cascades into sustained breakdowns.
Here are five things we learned.
1. Bitcoin Was Oversold
Bitcoin came into the week stretched — deeply so.
At one point, it was trading at one of its most oversold levels relative to gold in recent history. Momentum was washed out. Sentiment had turned cautious following a sharp pullback.
That combination rarely persists for long in a constructive backdrop.
When spot ETF flows turned positive again, the bounce was swift. It wasn’t euphoric. It was mechanical. Shorts covered. Leverage reset.
Friday’s risk-off move doesn’t invalidate that dynamic — it simply reminds us that macro still sets the boundaries.
In bull phases, oversold conditions tend to be opportunities, not warnings. When leverage clears and real demand returns, downside compresses quickly.
Next week, Michael will take a closer look at just how much momentum may be building beneath the surface.
2. ETF Flows Are Returning
One of the most important structural shifts in this cycle remains the ETF complex around Bitcoin. This week, Bitcoin ETFs post highest net inflows in three weeks, attracting more than $506 million.
When ETF flows are positive, supply tightens. When supply tightens, volatility skews upward. When flows stall, momentum cools.
They are now one of the cleanest proxies for marginal institutional demand. Weakness accompanied by positive inflows is structurally bullish.
This week, inflows resumed.
That matters more than short-term chart patterns.
3. Stablecoin Market Is Rapidly Expanding
This week, stablecoin issuer Circle released huge earnings on the back of the stablecoin boom.
- USDC circulation hit $75.3B, up 72% year-over-year, nearly double their own 40% guidance
- Transaction volume reached $11.9T, up 247%
- Revenue and reserve income came in at $770M, up 77%
- Adjusted EBITDA up 412%
Stablecoin expansion typically signals fresh capital entering the ecosystem or sidelined capital preparing to deploy. In previous cycles, sustained growth here preceded broader altcoin strength.
But it’s important to remain sober here and keep a balanced portfolio – more on altcoins below.
4. Vitalik is Rethinking the Layer-2 Vision for ETH
A Forbes analysis explores a key tension for Ethereum: it is growing operationally, yet ETH’s price has been falling sharply.
Year-to-date, ETH has significantly underperformed, despite rising network activity.
Why?
First, obviously, macro conditions have weighed on all risk assets. A strong dollar, tighter monetary expectations, and broad crypto liquidations have pressured both ETH and Bitcoin. Ethereum’s drawdown is partly cyclical.
Second, Ethereum’s own scaling success has changed its token economics. Much of the activity has migrated to Layer-2 networks, which reduce congestion and fees on the main chain. While this improves user experience, it also lowers fee burn on Ethereum’s base layer, weakening the deflationary pressure that previously supported ETH’s price.
Third, staking yields around 3.5–4% are not especially compelling in a higher-rate environment, limiting institutional demand. Spot ETH ETFs have seen net outflows after initial interest, signaling cooling investor appetite.
Ethereum remains active and technologically dominant, but markets are reassessing how much economic activity ultimately accrues to the ETH token itself.
ETH developers have a track record of solving these bottlenecks.
The 2025 upgrades — Pectra and Fusaka — have increased validator flexibility, and doubled the default gas limit to roughly 60 million. Daily transaction counts have pushed to new highs, yet average fees remain relatively contained. In prior cycles, similar activity would have triggered sharp fee spikes.
Vitalik Buterin this week suggested that the original Layer-2 vision “no longer makes sense” and may require a new path forward.
Nevertheless, the long term outlook for ETH is massively bullish. Any entry under $2,300 is a good opportunity.
ETH continues to scale and will attract a huge amount of institutional funding over the next year.
5. Altcoins Are Lagging Still
This is not a uniform market.
We’re seeing capital concentrate into higher-quality assets while weaker narrative-driven tokens lag.
Some protocols with real revenue are outperforming. Others are drifting. Some are really suffering, including many of the smaller altcoins that we have had in the CTA portfolio for some time.
ATOM. Worldcoin. UMA.
All of these have cratered, and while we still expect them to recover, and this is certainly not a time to divest, the importance of a significant portion of your portfolio in ETH and BTC, long term, is abundantly clear.
We need to focus on assets with durable demand drivers that attract a broad church of investors – from retail to institutional – and the time for altcoins will come again, later in the cycle.
The Future of Identity
Speaking of ETH, yesterday we posted a deep dive on a major application of blockchain technology that is a real boon for ETH.
You can read it here: The Big Idea: The Future Of Identity Is Being Built Right Now
The EU is experimenting with Digital Identity Wallets, with blockchain-based verification built on open standards that align with Ethereum’s architecture.
Estonia’s e-Residency programme has explored Ethereum-based smart contracts for notary and authentication services.
This is the pattern we keep seeing, whether we’re looking at supply chains, gaming, or identity.
Ethereum is the infrastructure layer and the best crypto investment to own, while the market rediscovers its mojo.
That’s all for this week.
Michael will be back next week with his latest views on the market and what to do next.
Have a good weekend,
Crypto Traders’ Academy team
