Summary

• The market situation clearly reversed last week. The U.S. April CPI exceeded expectations, the U.S.-China talks lacked substantial breakthroughs, and the situation in the Strait of Hormuz escalated again, collectively driving U.S. bond yields up and risk assets to adjust; the S&P and Dow Jones, after reaching historical highs, significantly retreated on Friday, as the market began to reassess the policy path of the Walsh era Fed.

• BTC ETF saw a net outflow of approximately $996 million in a single week, while ETH ETF had a net outflow of about $255 million, both showing a significant weakening compared to the previous week, as institutional funds shifted towards defense; however, the overall AUM of BTC and ETH ETFs remained at historical highs.

• TradFi on-chain and CEX derivatives trading continued to be dominated by safe-haven assets like gold, with the U.S. CPI exceeding expectations and geopolitical risks driving increased trading volume in gold-related perpetual contracts; meanwhile, trading related to stocks and tech stocks rebounded, enhancing macro-driven characteristics.

• On-chain liquidity continued to concentrate in leading DEXs like PancakeSwap and Raydium, while deep liquidity and stablecoin swap protocols saw a significant decrease in volume; the stablecoin market leaned towards compliant, payment, and bank channel attributes with stronger U.S. dollar assets.

• Aave's mainnet lending and LST sectors retracted, with ETH and Solana's leveraged demand cooling simultaneously; meanwhile, new chains like Plasma and MegaETH continued to absorb structural capital migration.

• The derivatives market entered a deleveraging phase. BTC funding rates turned negative, open interest (OI) continued to decline, the proportion of Puts transactions and the 25D Skew negative value expanded simultaneously, and DVOL's central tendency oscillated upward, indicating a clear increase in market pricing for downside risks and volatility.

• Gate's institutional spot market share increased against the trend, growing by 10% month-on-month; the total leverage lending scale grew by 10% week-on-week; Spot SBE is expected to launch in June, and the order cancellation time for key exchanges in CrossEx decreased from 16.6ms to 1.5ms, improving efficiency by 91%.

1. Market Focus Interpretation

In the past week, the market situation sharply reversed, with stronger-than-expected inflation data and increased policy uncertainty posing challenges to the rise of risk assets. On Thursday, U.S. stocks reached historical highs, with the S&P 500 index closing above 7,500 points for the first time, and the Dow Jones index returning to the 50,000-point mark; however, it significantly retreated on Friday as the market reassessed the inflation and policy environment. First, the April CPI data released on Tuesday was stronger than expected, with the overall inflation rate rising 3.8% year-on-year, higher than the market's general expectation of 3.7% and a month-on-month increase of 0.6%. Second, the U.S.-China bilateral talks on Wednesday and Thursday did not achieve substantial policy breakthroughs. Third, geopolitical tensions escalated again, with military conflicts erupting in the Strait of Hormuz on Friday, heightening concerns about the potential deterioration of the situation.

The interest rate market reacted strongly to this. Due to significant adjustments in federal funds futures prices, the market expects tighter policies, with the 10-year U.S. Treasury yield rising 28 basis points this week to 4.58%, the highest level since September 2025. The USD/JPY exchange rate continued to rise due to the strengthening dollar. The market lowered expectations for easing and began to digest the possibility of further tightening policies. The Powell era officially ended last Friday, with Jerome Powell's term as Fed Chair concluding on May 15, and Kevin Walsh being sworn in as his successor over the weekend. Walsh will preside over the FOMC meeting from June 16 to 17, where updated economic forecasts and revised dot plots will be released, providing the market with its first formal understanding of the policy outlook under Walsh's leadership.

2. Liquidity Analysis

2.1 BTC ETF Scale Continues to Expand

Last week, the BTC ETF market showed a clear trend of capital outflow. At the beginning of the week, on May 11, there was still a net inflow of about $27.2 million, but market sentiment quickly weakened thereafter. On May 12 and May 13, there were large net outflows of approximately $233.2 million and $630.4 million, respectively, indicating that institutional funds began to concentrate on withdrawing from risk assets. Overall, last week, Bitcoin ETF saw a cumulative net outflow of about $995.5 million, nearing the $1 billion mark. Compared to the previous week (from May 4 to May 8) with a net inflow of about $623 million, market risk appetite clearly reversed, with institutional investors generally leaning towards profit-taking and temporary risk aversion.

The ETH ETF market also faced pressure. In the past week, the ETH ETF recorded net outflows for several consecutive trading days, with a weekly cumulative net outflow of about $255.2 million, in stark contrast to the previous week's net inflow of about $70.49 million. This indicates that, under the backdrop of macro uncertainty and increased market volatility, ETH assets were also affected by capital reduction, and overall sentiment was weaker than previously expected by the market.

• Overall AUM: As of May 14, the cumulative net inflow of BTC ETF had reached approximately $58.63 billion, with an asset management scale (AUM) of about $107.75 billion; the cumulative net inflow of ETH ETF was about $11.9 billion, with an AUM of about $13.45 billion. Despite short-term capital flow fluctuations, the overall scale of ETFs remained at historical highs, indicating that institutional allocation demand had not fundamentally reversed.

• Institutional Trends: Last week, capital differentiation characteristics were evident. In the BTC ETF sector, BlackRock's IBIT saw a net outflow of about $317.1 million, while Morgan Stanley's MSBT recorded a net inflow of about $39.1 million against the trend, reflecting that some institutions are still conducting structural reallocation and low-position allocation. In the ETH ETF sector, BlackRock's ETHB achieved a slight net inflow, while ETHA experienced a significant outflow, indicating that the market shows clear differentiation in liquidity, fee structures, and long-term allocation value for different products.

2.2 TradFi Liquidity

• TradFi Perp DEX: In the past week, the trading structure of TradFi assets on Perp DEX continued to show a pattern of "commodity dominance, index assistance, and stock rebound." In terms of trading volume, commodities still occupy an absolute core position, maintaining an overall share of approximately 45% to 65% during the week. Although this is a slight decline from the peak period in March-April, it remains the primary source of liquidity for on-chain TradFi derivatives trading. Among them, gold-related assets remain the trading core, reflecting the market's continued preference for safe-haven assets and macro trading themes amid repeated inflation, rising geopolitical risks, and fluctuations in U.S. interest rate expectations. Meanwhile, the proportion of stock assets significantly rebounded in the past week, rising from previously below 10% to nearly 30%, indicating that as U.S. stock volatility expanded again, on-chain users' demand for tech stocks, U.S. stock indices, and AI-related trading warmed up. Currently, the user structure of on-chain TradFi Perp still primarily consists of crypto-native traders with a preference for high volatility and high leverage, rather than a comprehensive migration of traditional macro funds.

• TradFi Perp CEX: In the past week, the overall trading activity in the CEX TradFi perpetual contract market remained high, but structurally showed a clear characteristic of "precious metals dominance, stock assistance, and low activity in other sectors." From the daily trading volume distribution of TradFi Perp, gold and other metals still occupy an absolute core position, with the trading volume on most trading days maintaining in the range of $300 million to $700 million, and during certain high-volatility periods even exceeding $1 billion. Among them, a peak of over $1.5 billion was observed in mid to late March, while last week's overall trading volume, although lower than the previous extreme high, was still significantly higher than early February levels, indicating that demand for safe-haven and macro trading remains strong. In terms of rhythm, the trading volume in the second week of May showed a significant increase again, especially under the backdrop of the U.S. CPI exceeding expectations, escalating geopolitical risks in the Middle East, and fluctuations in U.S. interest rate expectations, with gold-related perpetual contracts becoming the primary trading direction for funds. Meanwhile, trading in stock assets also rebounded, reflecting short-term trading demand driven by fluctuations in U.S. stock indices and tech stocks. Overall, the current CEX TradFi Perp market has gradually shifted from purely crypto Beta trading to a stronger macro-driven and cross-asset allocation logic.

• CEX TradFi Asset Count: In the past week, the number of TradFi asset categories on CEX further expanded, with the total number of TradFi assets (counting only TradFi and CFD sectors, excluding perpetual contracts) among three mainstream CEXs increasing from 1,107 to 1,174, a month-on-month growth of 6.10%. Among them, the growth in stock categories was the most significant, increasing from 748 to 809, a month-on-month growth of 8.20%; Gate had the highest growth rate among the three CEXs, with stock TradFi increasing by 62, a growth rate of 16.71%.

• TradFi Order Book Depth: We selected XAUT, which has the highest trading volume in TradFi, to analyze its order book depth (Delta). Last week, the liquidity of the XAUT order book showed a clear characteristic of "safe-haven funds flowing in and then weakening." From May 6 to May 12, the XAUT price maintained a high level around $4,700, often accompanied by large positive Delta inflows, especially around May 12, when there was a net liquidity increase close to $2.8 million, indicating that the market concentrated funds into gold-related assets for safe-haven allocation amid the backdrop of the U.S. CPI exceeding expectations and rising geopolitical risks in the Middle East. However, after May 13, the market structure clearly reversed, with the order book continuously showing large negative Delta, with single outflows exceeding $2 million, and the XAUT price also simultaneously fell below $4,650, retreating to the $4,520-$4,550 range, reflecting that previous safe-haven funds began to take profits. Notably, from May 15 to May 17, although prices continued to weaken, the order book showed continuous accumulation of moderate positive Delta, indicating that some funds began to attempt to accumulate at lower levels, and the market did not enter a phase of unilateral liquidity withdrawal. Overall, the current XAUT appears to be in a "high-level rebalancing after the cooling of safe-haven sentiment" phase, with short-term trends still highly dependent on macro variables such as expectations for Fed rate cuts, the U.S. interest rate path, and the situation in the Strait of Hormuz.

3. On-chain Data Insights

3.1 Leading DEX Volume Concentrated in PancakeSwap, but Vertical Protocol Differentiation Intensifies

PancakeSwap rebounded about 12% from last week, with BNB chain-side spot traffic being the main battlefield for institutions and retail investors. Uniswap fell about 7% from last week. Aerodrome on Base grew about +3% week-on-week. Solana's activity remained, with a structure leaning towards high transaction counts and moderate dollar trading volumes, where Raydium grew about $1.26 billion from last week, while Meteora remained basically flat. The high transaction count on-chain indicates that meme and routing-type trading have not completely fizzled out. Vertical DEX protocols like Fluid and Curve, which focus on deep liquidity and stablecoin swaps, saw a significant decrease in volume this week.

3.2 Compliance and Payment-oriented Stablecoins Relatively Dominant, Synthetic Dollar Variants Volatility Increased

Under the dominance of USDT and USDC, the second tier of stablecoins such as PYUSD, RLUSD, EURC, and USDG, which are closer to payment, custody compliance, and bank channels, have outperformed older on-chain dollar stablecoins like DAI in terms of growth rate. USDe expanded significantly this week, reflecting the arbitrage and staking demand for yield-bearing and synthetic dollars in a volatile market, especially for cross-network layouts. Additionally, with the implementation of the GENIUS Act, institutional capital expenditure on stablecoin infrastructure has accelerated significantly. Institutions like Bitwise have publicly stated that GENIUS reduces regulatory uncertainty for stablecoins and tokenized projects, and subsequent market structure legislation like the Clarity Act is a growth variable.

3.3 LST Overall Sector Retracted, Solana-related Assets Declined More Deeply

Lido, Rocket Pool, StakeWise, and other LST protocols on the ETH side recorded mid-to-high single-digit to about 10% TVL retraction, reflecting that staking certificates shrank in tandem with ETH during beta downturns. On the Solana side, high-elasticity LSTs like jupSOL and Sanctum saw deeper declines, as funds prioritized reducing high-volatility staking exposure when risk appetite fell. Overall, LSTs remain a slow variable tool for long-term allocation of ETH/SOL, but the past week was not a full sector deleveraging; Ethereum leaders, due to their scale and liquidity, still slightly outperformed smaller LSTs in terms of retraction magnitude.

3.4 Aave Mainnet Lending Continues to Contract, Plasma / MegaETH Absorbing Structural Migration

The Ethereum main market remains the absolute core but has contracted for the second consecutive week, indicating that after the rsETH-related risk events in April, institutions and whales remain conservative in the mainnet collateral market. Meanwhile, old L2 mainstays like Arbitrum and Ink have also weakened. The relative bright spot is Plasma and MegaETH. Funds continue to migrate towards new chain incentives and closed-loop collateral scenarios. This aligns with Aave's risk team's recent direction of raising caps on new assets, shifting the growth engine from mainnet leverage expansion to stablecoins and new chains with clearer regulatory attributes.

3.5 Aave Core Borrowing Rates Return to Normal, WETH Leverage Decline Most Obvious

Stablecoin borrowing costs have returned to the mid-single digits, reflecting eased liquidity tensions and the waning of liquidation waves. WETH saw the largest decline, indicating a rapid drop in ETH leverage demand and a mutual confirmation of the decline in mainnet lending stock. Market behavior has shifted from seizing liquidity and maintaining positions to selectively borrowing stablecoins. The stablecoin side still has structured arbitrage, cross-border dollar demand, and new chain incentive mining support; on the ETH side, there is active deleveraging. This also explains why protocol layers are more willing to raise limits on compliant stablecoins and new chain dollars rather than simply stimulating WETH circular lending.

3.6 Stablecoin Issuance is a Stabilizer, Hyperliquid Expands Event Contract Trading

Tether and Circle contribute the most stable cash flow, consistent with the dominant pattern of existing dollar coins. Circle is strengthening vertical integration of issuers, settlement chains, and agent payments through Arc financing + Agent Stack. Hyperliquid's revenue slightly decreased month-on-month, but its absolute value remains in the top tier of on-chain derivatives, and it continues to expand product lines like Bitcoin outcome markets, with the market still paying for a comprehensive financial stack of perpetual + prediction/outcome markets + validators/reserve narratives. Aave's revenue significantly dropped compared to last week, coinciding with the contraction of lending stock and normalization of rates, indicating a decline in risk premiums, but active borrowers have also decreased.

4. Derivatives Tracking

4.1 BTC Funding Rate Turns Negative, OI Decline Indicates Increased Leverage Liquidation Pressure

From May 11 to May 17, BTC prices overall showed a pattern of rising and then falling. At the beginning of the week, prices remained around 81K, and from May 11 to May 13, funding rates were often in a slightly positive range, indicating that short-term bullish sentiment still persisted. However, the price failed to continue breaking through the highs, quickly weakened after May 14, and fell back to around 77K on May 17, as the market shifted from high-level fluctuations to a retraction adjustment.

In terms of OI, there was an overall downward trend this week. Around May 11, OI remained around 26.8B, briefly rising above 27B on May 14, but then quickly declining, falling back to around 25.5B by the weekend. The price drop combined with the OI decline indicates that this round of decline is more accompanied by the liquidation of leveraged positions rather than a simple accumulation of new shorts.

The funding rate structure also underwent significant changes. At the beginning of the week, funding rates were slightly positive, reflecting that the market still had a chasing sentiment; however, as prices weakened, funding rates turned negative again from May 14 to May 17, indicating that short-term sentiment quickly shifted to defense, with shorts or hedging demand rising again. Overall, this week, the BTC derivatives market shifted from the previous high-level short squeeze structure to a "price retraction + OI contraction + funding rate turning negative" deleveraging state. If OI continues to decline subsequently, it indicates that the market is still clearing; if prices stabilize while OI rises again, attention should be paid to the formation of a new directional position.

4.2 Calls and Puts Transactions Relatively Balanced, Term Distribution Shows Strong Monthly Protection Demand

From the structure of Calls and Puts, the contracts expiring on May 29 show relatively balanced transactions between calls and puts, indicating that there is still significant divergence in the market regarding the direction at the end of the month; while for contracts expiring on June 26, Puts transactions significantly exceeded Calls, showing that mid-term protection demand has clearly increased. Among the near-term contracts, those expiring on May 18, May 19, and May 22 also exhibited a slight predominance of Puts over Calls, reflecting that after the price retraction, the short-term market is more inclined to increase downside protection or hedge exposure.

The current options term structure indicates that the market is not unilaterally chasing upward but is placing more emphasis on risk management after high-level retractions. Monthly contracts remain the main trading vehicle, with Puts transactions concentrated in contracts for late June, indicating that investors have raised pricing for mid-term volatility and downside risks.

4.3 25D Skew Rapidly Declines, Protective Demand Clearly Warms Up

From May 11 to May 17, the 25D Skew of BTC across various terms remained negative overall, with a clear decline in the latter half of the week. At the beginning of the week, the 7D Skew briefly recovered to around -1.5, with short-term protective premiums declining, indicating that the market retained some risk appetite during the high price phase. However, as BTC prices fell from around 82K, the Skew across various terms weakened rapidly. From May 16 to May 17, both 7D and 30D Skew saw significant drops, with the short-term Skew approaching -8, and the 30D Skew also falling into deep negative territory. The 60D, 90D, and 180D Skew also declined simultaneously, indicating that this round of protective demand is not solely concentrated in the short term but has spread to medium and long terms. The simultaneous weakening of Skew across different terms reflects a clear increase in market concerns about subsequent downside volatility.

Overall, the Skew structure has shifted from previous mild negative values to deep negative values, indicating that the options market is re-pricing downside risks. If BTC cannot quickly recover above 80K subsequently, protective buying may continue to support Puts premiums; however, if prices stabilize and rebound, the short-term Skew may also be the first to recover.

4.4 BTC Volatility Index Oscillates Upward, Price Retracement Drives Volatility Expectations Upward

Last week, the BTC Volatility Index (DVOL) overall showed an oscillating upward pattern. At the beginning of the week, DVOL maintained around 38, and then from May 13 to May 14, it experienced the first round of increases, reflecting that the market's pricing for price volatility began to recover. Around May 16, as BTC prices accelerated their high-level retraction, DVOL surged above 41, indicating that volatility expectations clearly warmed up during the downward process.

In terms of rhythm, this week's upward movement of DVOL is corroborated by price retraction and the decline of Skew. Prices fell from around 82K to around 77K, funding rates turned negative, and OI declined simultaneously, while the options side showed rising protective demand and increased volatility. Compared to the previous week's "high-level oscillation + volatility compression" structure, the market has entered a more typical risk re-pricing phase this week.

Overall, the current core characteristics of the BTC derivatives market are: clearing of leveraged positions, weakening funding rates, deep negative Skew, and rising DVOL central tendency. In the short term, if prices continue to break key support, volatility still has further expansion space; if prices stabilize in the 77K-80K range, volatility may enter high-level oscillation, awaiting the next directional signal.

5. Outlook for This Week

6. Gate Institutional Dynamic Update

Business Growth

• Institutional spot market share increased against the trend, growing by 10%

• Customer structure continues to optimize, with several global quantitative and asset management institutions entering the access and testing phase

Lending Business Continues to Expand

• Total leverage lending scale grew by 10% week-on-week

• The new version of the 0-interest lending plan is about to launch, further lowering the threshold and optimizing the lending experience.

Technical Infrastructure Continues to Upgrade

• Spot SBE is expected to launch in June

• Continuous optimization of contract push, market delay, and trading stability

CrossEx Accelerated Development

• The order cancellation time for key exchanges in CrossEx decreased from 16.6ms to 1.5ms, improving efficiency by 91%

• CrossEx fee upgrades, with multiple exchange fees as low as 0%

• CrossEx added a contract trading option for a mainstream exchange

Brand and Ecosystem Building

• The Amsterdam Institutional Circle event on June 2 continues to advance, with several partners promoting joint brand exposure

Data Sources:

• Investing, https://investing.com/currencies/xau-usd-historical-data

• Gate, https://www.gate.com/trade/BTC_USDT

• CMC, https://coinmarketcap.com/real-world-assets/?type=all-tokens

• Coinglass, https://www.coinglass.com/pro/depth-delta

• Dune, https://dune.com/gateresearch/gate-tradfi#weekly-volume

• Dune, https://dune.com/gateresearch/gate-institutional-weekly-report

• Bybit, https://www.bybit.com/future-activity/en/tradfi

• Bitget, https://www.bitgettradfi.com/tradfi/XAUUSD

• CryptoQuant, https://cryptoquant.com/asset/btc/chart/derivatives

• Amberdata, https://pro.amberdata.io/options/deribit/btc/current/

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Disclaimer

Investing in the cryptocurrency market involves high risks, and users are advised to conduct independent research and fully understand the nature of the assets and products they purchase before making any investment decisions. Gate is not responsible for any losses or damages resulting from such investment decisions.