What to know:
This is an excerpt from CoinDesk newsletter ‘Daybook.’ Sign up here, if you haven’t already.
It’s getting tough for crypto bulls.
Investors are currently less interested in crypto exchange-traded products like ETFs, largely because the U.S. Treasury market suggests interest rates will stay high for an extended period.
As a crypto investor, I’m seeing some concerning trends. Last week, we saw about $1.47 billion flow *out* of digital asset investment products – meaning people were selling, not buying. This is the second week in a row of these outflows, and it’s the third biggest drop we’ve seen all year, according to CoinShares. It definitely makes you pause and think about what’s next.
Bitcoin investment funds experienced a significant drop last week, losing $1.32 billion – their biggest weekly loss this year. U.S.-listed Bitcoin ETFs alone saw $1.26 billion leave, after a $1 billion outflow the week before. Investors also reduced their holdings in ether funds, withdrawing $223 million.
Other altcoin ETFs also experienced a material moderation in flows.
According to a new report from CoinShares research head James Butterfill, digital asset outflows have reached $2.54 billion over the past two weeks. This indicates growing investor concern related to Iran, even as the CLARITY Act moves forward, according to CoinDesk.
Money started flowing out of the market as traders increasingly believed the Federal Reserve, now led by Chairman Kevin Warsh, would maintain high interest rates.
We can see where investors are focusing by looking at the Treasury market. Specifically, the gap between the yields on two-year and ten-year Treasury bonds widened by more than 0.12 percentage points last week, indicating a shift in their expectations.
Because the two-year Treasury yield reacts quickly to changes in interest rate expectations, its recent increase relative to other yields suggests that investors anticipate borrowing costs will remain high in the short term. A similar widening of the gap between five- and 30-year yields reinforces this expectation.
When interest rates go up, it often discourages investment in riskier options, particularly affecting new technologies like cryptocurrencies and assets that don’t offer a return, such as Bitcoin.
Looking at the recent capital outflows and the signals from the yield curve, I’m seeing a concerning trend for investments considered ‘risky’. It seems investors might be shifting their money into upcoming IPOs – particularly SpaceX, which is expected to be massive – and also into commodities. This rally in commodities is likely fueled by the disruptions we’re seeing in oil shipments through the Strait of Hormuz.
Key inflation numbers are coming out this week, including the core PCE report on Thursday, which the Federal Reserve closely watches. These reports could give us a better idea of where the market is headed, so pay close attention!
Today’s signal
The chart shows daily swings in the ratio between the prices in U.S. dollars of bitcoin and gold.
Since March, Bitcoin has been performing better than gold. Currently, the ratio showing this comparison is staying above a key support level, suggesting the upward trend could continue if it bounces from here.
Conversely, if the support breaks, it signals a resumption of the broader BTC bear market.
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2026-05-26 14:25