Market update from K33 Research, with this intro: The crypto market kicked off August with a sharp downturn, driven by renewed U.S. reciprocal tariffs and weak labor data
In the latest Ahead of the Kurve from K33, these are the main points
The crypto market kicked off August with a sharp downturn, driven by renewed U.S. reciprocal tariffs and weak labor data. Bitcoin fell 3.2% after briefly retesting its May highs, while Ethereum showed greater volatility and slightly underperformed. Despite the selloff, the release of the U.S. Digital Asset working group's report signaled a bullish long-term stance, advocating for crypto innovation and regulatory clarity, reinforcing momentum from the GENIUS and CLARITY Acts. However, the looming impact of tariffs has traders adopting cautious strategies, reflected in declining BTC futures premiums.
CME traders remain cautious, with sentiment worsening during Bitcoin’s recent Thursday–Sunday sell-off. Notional open interest dropped below 140k BTC, nearing early May lows, driven by reduced exposure from active participants and a significant pullback in VolatilityShares’ BITX ETF, now at its lowest exposure since April. This decline in long directional interest has pushed BTC futures premiums to two-month lows, with 1-month annualized premiums hitting 4.5% on Friday. The term structure reinforces this defensive stance, as next-month premiums fell below 0.6%, reflecting reluctance to build long positions amid seasonally weak market conditions.BTC perpetual open interest remains elevated near 300,000 BTC, despite a 11,000 BTC drop and a shift in funding rates from neutral to negative. The high OI, alongside rising long-side aggression since July, raises the risk of long liquidations with leverage near annual highs.In options, the put demand stays strong, with 1-month skews at 3-month highs and 6-month skews hitting 2-year highs, hinting some traders may view the recent regulatory report as a market top. However, 6-month skews still slightly favor calls, indicating a balanced medium-term outlook
Bitcoin reversed sharply to $112K last week after hovering near its all-time high of $120K, with the decline closely aligning with broader market sell-offs triggered by renewed U.S. tariffs and weak labor data, rather than a "sell-the-news" reaction to the Working Group’s report, which omitted key details on the Strategic Bitcoin Reserve.Despite the pullback, BTC's recovery marked a clean retest of its May 22 ATH, maintaining a bullish structure and consolidating within the $112K–$116K range, even as derivatives markets show increased hedging activity.
On August 1, U.S. BTC spot ETFs saw their second-largest daily outflow ever at $812.3 million, with 7,137 BTC withdrawn, marking the fifth-largest net BTC outflow on record. While notable, such large outflows have occurred multiple times over the past 20 months and do not reliably predict future price movements. Historical data shows that BTC’s performance following major outflow days is mixed, with median returns staying largely flat, indicating that large outflows like Friday’s are not strong indicators of trend reversals.
