In a new market note, crypto market-maker Wintermute says global liquidity is expanding even as major central banks move toward rate cuts — but most fresh capital is flowing into equities and AI themes rather than crypto. Stablecoin supply is the only major crypto-related pool still growing, the firm said, arguing that the traditional “four-year cycle” framing is outdated and that liquidity dynamics are now the dominant price driver.
Nut-graf – Wintermute’s analysis — circulated to institutional clients and picked up in trade press — finds market structure broadly healthy (leverage largely cleared and volatility contained), but warns a meaningful crypto rally will likely require renewed inflows via spot crypto ETFs or tokenized-asset trading (DAT) channels. In short: conditions are necessary but not sufficient; capital allocation matters.
What Wintermute says (key takeaways)
- Liquidity is abundant but misallocated. Central-bank easing and broader liquidity expansion have created pools of capital, yet Wintermute notes those pools are being deployed into equities and AI-related strategies rather than crypto, limiting upside for on-chain assets.
- Stablecoin supply is one of the few crypto tailwinds. While ETF and DAT flows have stalled, stablecoin issuance continues to climb — representing the main growing pool of crypto-native liquidity.
- Four-year cycle narratives are losing explanatory power. The firm argues the old bitcoin-halving / four-year cycle story is less useful today; liquidity and allocation choices by large pools of capital explain price moves better than calendar cycles.
- Market structure is healthier than headline price action suggests. Wintermute finds leverage largely flushed from the system, funding premia reduced and derivatives positioning cleaner, which limits extreme volatility risk for now.
- A real bull leg depends on ETF / DAT inflows. The firm highlights that a sustained rally will need fresh, durable flows into regulated spot ETFs or into tokenized-asset trading (DAT) channels — not merely short-term momentum or retail momentum.
Why this analysis matters
- Shifts the debate from crypto-centric storytelling to macro allocation: If liquidity is the proximate driver, then macro events (rate cuts, liquidity injections) and cross-asset flows become as important as network fundamentals. That reframes how traders and portfolio managers should model downside risk and upside opportunity.
- Explains muted price reaction despite easier monetary policy: Traditionally, rate cuts have powered risk-asset rallies; Wintermute’s point is that where the new liquidity goes (tech, AI, equities) determines crypto’s fate — hence easier monetary policy alone doesn’t guarantee a crypto rally.
- Highlights the central role of institutional channels: ETF and DAT flows are singled out as the mechanisms most likely to deliver sustained, large-scale capital into crypto markets — the thing markets currently lack.
Risks and caveats
- Liquidity can rotate quickly. If macro headlines or policy shifts change investor preferences, liquidity that once favoured equities/AI could rotate into crypto — in which case Wintermute’s view would flip to a more bullish near-term stance.
- Stablecoin growth is not the same as demand for risky crypto: Stablecoin issuance may support on-chain activity, but it does not automatically translate to buying pressure for BTC/ETH. Some stablecoins are used for payments, arbitrage, or protocol-level functions rather than long-term investment.
- Model risk for cycle versus liquidity explanations: Historical cycles remain useful heuristics for many investors; replacing them with a liquidity-first model may work in the current regime but is not guaranteed in all macro environments.
What to watch next
- ETF inflows / outflows: Daily and weekly spot-ETF flows remain the most immediate indicator of whether institutional capital is returning. A sustained positive run in ETF creations would validate Wintermute’s thesis about the importance of allocation flows.
- DAT / tokenized asset volume: Upticks in institutional DAT trading or large tokenized-asset allocations would be a second confirming signal.
- Central-bank communications and rate moves: Any change in the Fed’s or other central banks’ rate-cut timelines will influence where liquidity goes next — into equities, alternatives, or crypto.
- Stablecoin issuance metrics and on-chain flows: Continued growth in stablecoin supply combined with movement into BTC/ETH treasuries or ETFs would be an early sign of rotation.
Bottom line
Wintermute’s note reframes the 2025 market debate: it’s not whether a calendar-based “four-year cycle” is due, but whether newly abundant liquidity is allocated to crypto. For now, that capital is largely chasing equities and AI — leaving crypto waiting for a renewed institutional channel (spot ETFs or DATs) to re-ignite a durable rally. Market structure looks healthier than prices imply, but the next leg up depends on where big pools of capital choose to sit.
TUGOLC07
