Author: Tanay Ved, senior researcher at Coin Metrics; Compiler: Shaw, Golden Finance

Summary of key points:

• Affected by multiple factors such as the shift in interest rate expectations, the continued outflow of Bitcoin ETF funds, and the large-scale rotation of funds into AI stocks, Bitcoin gave up all its gains in April, and the overall decline in the second quarter was about 11%.

• The three core liquidity channels of ETF, Strategy and Stablecoin simultaneously weakened in the second quarter, with spot Bitcoin ETF alone recording a net outflow of US$4.08 billion.

• This quarter, the total number of long positions in Bitcoin and Ethereum reached US$8.35 billion, and the market was deleveraging on a large scale; after entering the third quarter, although market liquidity has shrunk, the overall stability has improved.

Market overview and market performance

At the beginning of the second quarter of 2026, digital assets experienced strong gains. The market was sluggish in the first quarter. After entering April, Bitcoin experienced a comprehensive rebound. Along with the rise in U.S. stocks, the price soared to about US$82,000. At that time, concerns about geopolitical conflicts temporarily eased, and institutional capital demand rebounded. But the rally failed to last.

The market reversal was driven by the superposition of three factors: The diplomatic situation between the United States and Iran fluctuated repeatedly, and Brent crude oil prices soared to US$126.41, with oil prices continuing to rise; the Federal Reserve’s monetary policy expectations turned hawkish; funds were rotated on a large scale to the AI stock track with solid profit growth momentum.

Source: Talos State of the Market Dashboard

Before mid-May, crypto assets were in sync with the overall trend of U.S. stocks, with Bitcoin and Ethereum both rising by about 20% since the beginning of April. However, at the end of May, the trends of the two diverged: cryptocurrencies began to correct, but U.S. stocks remained strong. At the end of this quarter, the S&P 500 Index and the Nasdaq 100 Index increased by approximately 16% and 28% respectively; Bitcoin fell by approximately 10%, Ethereum fell by approximately 20%, and SOL fell by approximately 13%.

Source: Talos State of the Market Dashboard

Bitcoin’s current price hovers around $60,000, down about 52% from its all-time high of $126,000 in late 2025. The market trends of altcoins were similar, with only a few currencies recording gains. Since the beginning of this year, among the top 20 crypto assets by market capitalization, Hyperliquid (token HYPE) is the only one that has performed well, with an increase of 142%. The rising momentum comes from the surge in demand for on-chain stocks and commodity perpetual contract transactions.

Fund flow

The market has weakened this quarter, and the simultaneous shrinkage of the three core demand channels has further aggravated the decline: currency-holding treasury enterprises such as spot Bitcoin ETF and MicroStrategy, and the total supply of stablecoins have all deteriorated.

Spot Bitcoin ETF

April spot Bitcoin ETF got off to a good start, with continued net inflows of funds. A peak single-day net inflow of $474 million was recorded on April 20, after which capital flows completely reversed. In the remainder of this quarter, capital outflows were dominated by net outflows. In the second quarter, there were a total of 53 trading days with capital outflows and only 30 trading days with net inflows. All issuers tracked this quarter had a total net outflow of US$4.08 billion, of which June’s outflow accounted for the majority, reaching US$3.84 billion.

Source: Talos State of the Market Dashboard

Digital Asset Treasury (Strategy)

Strategy’s Bitcoin accumulation pace slowed significantly this quarter. STRC, the preferred stock issued by the company and originally designed to trade close to US$100, fell to a record low of around US$74. At the same time, the company's revised net asset value premium fell back to 1 times, directly dragging down the financing channels that its currency hoarding relies on. In early June, the company's operation of selling 32 Bitcoins caught the market off guard, completely shaking the market's long-held consensus of "never selling coins." To this end, Strategy launched a new digital credit capital framework: it raised the STRC dividend rate to 12%, was approved to sell up to $1.25 billion worth of Bitcoin, and established a cash reserve of $2.55 billion to cover approximately 17 months of dividend payment obligations.

Stablecoin

The overall market value of stablecoins shrank by approximately US$4.2 billion in the second quarter, taking away a large amount of reserve funds that support on-chain transactions and market liquidity. Among them, USDT increased slightly by US$1.8 billion, and Circle (USDC) lost US$3.4 billion; market risk aversion increased, investor demand for interest-bearing stablecoin strategies declined, and the size of USDe issued by Ethena shrank by US$1.4 billion.

The three core demand channels weakened simultaneously, and the market liquidity environment in the third quarter tightened significantly compared with the start of the second quarter. Whether funds will flow back into crypto assets or continue to pour into AI stocks remains a core variable that needs to be continuously tracked.

Exchange trading data and derivatives markets

The total spot trading volume of major exchanges fell 28% month-on-month to US$2.32 trillion, continuing the shrinking trend that began in January. Futures trading performance was relatively resilient, reaching US$12.32 trillion, down only 11.6% month-on-month; However, the spot/futures trading ratio narrowed from 0.23 times to 0.19 times, indicating that market funds are increasingly shifting to derivatives positions and the demand for spot currency purchases has weakened.

Hyperliquid performed particularly well, with its futures trading volume market share rising to approximately 4.5%, and on-chain perpetual contracts continuing to seize the market share of centralized exchanges.

Source: Talos State of the Market Dashboard

Open interest peaked on the eve of the May crash, with open interest at $49.2 billion for Bitcoin and $27.2 billion for Ethereum. Now they have fallen back to US$33.5 billion and US$16.2 billion respectively, down 32% and 40% respectively from their high points. The total amount of long positions liquidated in Bitcoin and Ethereum in the second quarter was US$8.35 billion. More than half of the liquidated positions occurred from May 25 to June 7; highly leveraged long positions were liquidated in batches in a self-reinforcing downward cycle. Entering the third quarter, the overall leverage level of the market has dropped significantly.