Market sentiment
The recent sharp swings in crypto prices underscore how the market’s infrastructure is still evolving and its impact on volatility. Sentiment is currently very fragile, with investors anchoring themselves to the traditional four-year Bitcoin cycle, in which Bitcoin’s price historically follows a recurring pattern of ‘boom and bust’. We’ve seen over the past couple of weeks BTC ETFs experiencing significant outflows, while Ethereum and XRP products have attracted notable inflows. This trend points to a rotation in risk appetite, rather than a mass exit from the asset class.
Policy and market structure
Structural forces continue to steer institutional appetite for digital assets. Sentiment toward the recently announced collaboration between the SEC and CFTC on ‘Project Crypto’, aiming to unify US regulation, was muted compared to the enthusiasm compared to recent policy milestones like the GENIUS Act. This reaction reflects already fragile market sentiment, combined with concerns that the initiative risks a complex, dual-layered regulatory framework that could stifle growth.
Turning to the UK and Europe, we’re seeing cleaner digital asset frameworks being established, as regulatory alignment reduces uncertainty and enables greater institutional participation. Looking at the UK specifically, the HM Treasury’s DIGIT (Digital Gilt Instrument) programme, which will issue short-dated native gilts on blockchain infrastructure, marks a meaningful step towards modernising capital markets and is drawing significant interest as engagement shifts from exploratory to operational.
Progressive policies and greater conviction from policymakers outside of the US raise the question of whether USD-backed stablecoins will remain the dominant use case, or whether other stablecoins will be able to capture market share.
