Wintermute Names Two Conditions for a Crypto Market Recovery

Market maker Wintermute said in its October 13 weekly update that crypto has lost its main support — fresh money coming in — and named two conditions for a durable recovery: long-dated US Treasury yields need to ease and settle, and spot crypto ETFs need to return to net inflows. Over the week BTC fell 3.2% and ETH 7%, while the S&P 500 set a record.

The details

According to the update's author, a Wintermute OTC trader, equities shrugged off the hawkish Fed minutes because of earnings: third-quarter earnings growth for the S&P 500 is estimated near 29% year on year, which is paying for a 10-year yield of 5.24%. "Crypto has no earnings to do that," the firm wrote, so at these yields it rises only while new money keeps arriving. When flows turned, there was nothing underneath.

The update's numbers for the week: US spot BTC ETFs saw $679M of outflows, the largest weekly total since late June, and ETH ETFs lost $542M. CoinGlass data cited by Wintermute shows $1.19B of liquidations in 24 hours around Thursday's low, about $1.06B of it longs. BTC dipped to roughly $80,400 and recovered to the mid-$83,000s by Monday. Bitcoin dominance rose toward 59.5%: only 11 of the 66 altcoins worth more than $1B finished the week green, with a median drop of 3.7%. The latest daily ETF flows are in our October 12 story.

The Fed minutes showed most officials expect another hike by year-end, with no mention of cuts. Wintermute says markets price about a 20% chance of a hike as early as late October, so it does not expect yields to ease before the US midterm elections on November 3.

What it means for the market

Until both conditions are met, Wintermute sees BTC as the "high-beta, negative-skew expression of the equity market" and says it would not chase lower-quality altcoins on anything that resembles a rally. Its long-term view stays constructive: attention to Bitcoin is below trend, and the firm still calls the current cycle early. It would turn cautious if the 30-year Treasury yield breaks above 5.64%, the level it hit on September 30.

The next marker is September's US CPI on Wednesday, October 14, which will show whether energy inflation is spreading into core prices. Live market numbers and today's forecast are in the daily brief, funding and positioning in the Market pulse.