In Q3 2025, the digital asset market is shaped by the tug-of-war between macroeconomic forces and capital flows. BTC and ETH prices are being shaped by everything from inflation and rate policy to huge capital inflows and short-term profit-taking, all while risk-off signals flash from the derivatives market.
Macro Environment: A Tug-of-War Between Easing Hopes and Economic Headwinds
Recent U.S. inflation data has been a key macro driver. July’s CPI held steady at 2.7% YoY, just under the 2.8% expectation, while Core CPI came in at 3.1% YoY with +0.3% monthly momentum. These figures show that price pressures are moderating, a trend that has bolstered market bets that the Fed may begin cutting rates as soon as September. Futures markets are now pricing in a probability of over 80% for a rate cut. Adding to this tailwind, global liquidity is expanding. A composite Global M2 Liquidity Index is up 5% since April and has a 0.9 correlation with Bitcoin’s price. This accommodative liquidity provides a supportive macro undercurrent for risk assets in the medium term.
On the other hand, some data has injected caution. The July PPI jumped 0.9% MoM, far hotter than the 0.2% expectation and marking a sharp acceleration from the prior month. On a YoY basis, PPI rose 3.3%, while Core PPI also overshot forecasts, underscoring persistent wholesale inflation pressures. This upside surprise re-ignited concerns that the Fed may keep rates “higher for longer.” That view was further reinforced by resilient labor market data, with initial jobless claims at just 224K.
Fund Flows: Institutional Buying Intersecting with Profit-Taking
The dynamics of market fund flows have been a key factor underpinning the rally in digital assets. According to CoinShares data, digital asset investment products recorded an all-time high weekly inflow of $4.39 billion in mid-July, pushing total assets-under-management to a historic $220 billion. Notably, Ethereum has been in the spotlight, with its funds seeing a record $2.12 billion inflow in recent months, bringing 2025 year-to-date inflows to $6.2 billion—already exceeding the entire 2024 total.
These robust flows are driven not only by accommodative expectations but also by regulatory and institutional catalysts. U.S. President Trump’s executive order allowing 401(k) retirement plans to invest in digital assets has potentially opened the door to an $8.7 trillion pool of capital. Wall Street giants like BlackRock are actively increasing their exposure; its iShares Bitcoin Trust (IBIT) has already reached $10 billion AUM. Furthermore, spot ETH ETFs stole the show, with eight consecutive days of net inflows in early August, including a single-day haul of over $1 billion, which helped propel ETH price to a yearly high. This structural demand is also evidenced by the rapid growth of public companies holding BTC, with Japan’s Metaplanet’s one-time purchase of 775 BTC serving as a classic case study.
That said, there have been some signs of short-term profit-taking after the strong rally. Since mid-August, ETH ETF products have seen net outflows of approximately $197 million, and BTC has experienced a minor pullback. Nevertheless, large-scale stablecoin inflows into exchanges (with a single-day inflow of up to $1.8 billion) indicate that institutions and “whales” are still positioning themselves on dips. Overall, the market fund flow narrative remains one of “new capital continuously entering the market.”
Derivatives Market: Short Positioning vs. Long-Term Bullish Bias
The options and futures markets reveal a complex mix of investor sentiment. BTC’s 30-day implied volatility has risen to 35%, significantly higher than its realized volatility of 25%, indicating that investors are willing to pay a premium to hedge against future risk. The options 25-delta skew has likewise surged to +11%, with heavy buying of downside protection, which reflects concerns about a short-term correction.
ETH’s sentiment has been more volatile. In early August, fueled by ETF optimism, short-term options showed a strong bullish skew, with the risk reversal metric quickly flipping from -11% to a positive +4.8%. However, as prices quickly retreated, short-term sentiment turned put-biased again, reflecting the withdrawal of speculative buyers. The longer-dated bullish skew, however, remains intact, suggesting that investors’ confidence in ETH’s long-term prospects is unwavering.
On the futures front, BTC perpetual swap funding briefly turned negative after hitting a high, signaling a cooling of long-side enthusiasm. Yet, the 3-month futures annualized basis still holds in the 6%–7% range. ETH even saw its futures term structure go into backwardation at one point, indicating powerful momentum-chasing. The overall picture is “short-term cautious, long-term optimistic”: there is strong near-term demand for hedging, but long-term bullish sentiment persists.
On-chain Data: Continued Inflows of Long-Term Capital
On-chain metrics show that crypto supply is concentrating in the hands of long-term holders. Over 92% of newly mined BTC has been absorbed by wallets that have held for over 155 days, while the BTC balance on exchanges has dropped to 2.903 million coins, or 14.6% of the supply—a multi-year low. In other words, the supply available for trading and selling has shrunk, which reduces sell pressure.
On-chain activity for ETH has also hit new highs, with daily transaction counts surpassing 1.5 million and active addresses approaching 600,000. Importantly, gas fees remain at moderate levels, suggesting that the heightened activity stems from steady, organic demand rather than speculative mania. The acceleration of institutional inflows has pushed Ethereum’s Total Value Locked (TVL) to $97 billion, the highest level since 2021. The combination of ETH’s low-inflation (or even deflationary) supply mechanism and continuous capital inflows has significantly improved its supply and demand dynamics.
Stablecoin flows have also provided important sentiment signals. In August, prior to BTC’s run to $124k, exchanges recorded massive stablecoin inflows, which served as a key precursor to the price surge. This logic has been validated once again, and suggests that monitoring stablecoin movements can continue to provide a forward-looking indicator for the market.
Investment Strategy: Smoothing Returns with Structured Products
Given the interplay of macro factors, fund flows, derivatives, and on-chain data, BTC and ETH are likely to stay in a broad trading range. Rather than fixating on a single directional bet, investors can use structured products to build resilient portfolios aligned with their market view and risk tolerance. Matrixport offers a range of tools，including Accumulators, Decumulators, and daily Dual-Currency products to help investors balance offense and defense across market conditions.
In a market defined by both volatility and opportunity, the smart money uses the right tools to get ahead. With crypto assets now in a period of high-level consolidation, investors must find a balance between risk and reward. Structured products offer a robust way to hedge volatility and boost capital efficiency.
For Matrixport clients, these aren’t just one-off bets but flexible modules that can be combined. By strategically pairing different products, investors can capture upside momentum during a rally and earn yield in a sideways market，building a balanced portfolio that is ready for anything.
As always, risk management is crucial. Control your exposure, define your goals, and follow expert advice to keep returns and security equally in focus.
Author：Daniel YU, Head of Asset Management（The author’s opinions are his own.）