Welcome to The Market Runup! Every week, we’re diving into what happened in the crypto market onchain and off-chain, as well macro developments — so you can get smarter on your Tuesdays and prepare for the week ahead.

After gaining more than 20% the previous week, Bitcoin briefly broke above $80,000 again and crossed a three-month threshold of $81,000 before cooling back toward $78,000 over the weekend. By itself, the consolidation isn't concerning, but one must take into account the changing macro environment.

July PCE inflation came in at 3.7% year-over-year. Federal Reserve Chair Kevin Warsh at the Jackson Hole economic conference to make clear that the Fed is not yet convinced inflation is returning sustainably toward 2%. Markets responded by sharply accounting for the probability of another rate hike. At the same time, geopolitical tensions around the Strait of Hormuz escalated again on Sunday, and oil jumped back toward $90 per barrel.

Now, we have Bitcoin entering September facing a very different test.

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Last week, I sat down with John D'Agostino, head of institutional strategy at Coinbase Institutional, amidst one of the most interesting times for Bitcoin this year: The cryptocurrency recently rallied more than 20% in a matter of days and returned to the $80,000 point after months of stagnating below $70,000.

For most of Bitcoin's history, investors have relied on the four-year halving cycle to understand where we are in the market. Today, the asset has spot ETFs, institutional custody, derivatives markets, corporate treasuries, and a completely different group of investors allocating capital to the asset. D’Agostino dove into whether the traditional four-year Bitcoin cycle is becoming obsolete—and what could replace it.

We also talked about who is actually driving this new wave of institutional demand. Are hedge funds trading Bitcoin? Are RIAs beginning to treat it as a permanent portfolio candidate? When does a 1%, 3% or even 5% Bitcoin allocation become normal?

Perhaps most importantly, we connected the rally back to macroeconomics. Does Bitcoin still need rate cuts? Could sovereign-debt concerns and fiscal policy become more important than the Fed funds rate? And is Bitcoin increasingly trading as part of the same global macro conversation as gold, Treasuries, currencies and equities?

The percentages and metrics are based on a 7-day timeframe, unless noted otherwise.

Perpetual Motion covers the latest in the booming perpetual futures market. This section is brought to you by Synthetix, the leading decentralized perpetual futures protocol of Ethereum Mainnet.

Bitcoin futures open interest is currently around $54 billion, making leverage one of the most important metrics to watch as we head into September. After Bitcoin rallied more than 20% the previous week, traders returned to the derivatives market, and futures activity now substantially exceeds spot trading activity across tracked venues. 

Recent CoinGlass data showed approximately $25 billion to $28 billion in 24-hour Bitcoin futures volume, compared with roughly $1.5 billion to $2 billion in tracked spot volume. That doesn't mean the rally has a weak spine, but it does mean leverage is once again playing a significant role in dictating Bitcoin's price.

We saw the risk of that positioning on Friday, when Bitcoin's pullback triggered concentrated liquidation, with leveraged longs absorbing most of the damage. There is now a fairly clear battle developing around Bitcoin's current range: A sustained move above $80K could put additional short positioning under pressure, while a break below $76K could begin forcing leveraged longs out of the market. 

With positioning elevated on both sides, relatively small changes in price can create much larger moves through liquidations and forced position closures.

Spot vs Derivatives Flows (what to watch):

Last week was about whether genuine spot demand could continue supporting Bitcoin after the leverage-driven acceleration we saw during the previous week's rally. 

U.S. spot Bitcoin ETFs recorded approximately $924.5 million, so institutional demand remained positive, but that was down roughly 52% from the $1.92 billion of inflows the previous week. Friday also broke the week's positive trend, with approximately $202 million in net outflows.

Meanwhile, Bitcoin futures open interest remained elevated at approximately $54.8 billion, showing that leverage hasn't disappeared as the asset consolidates in the upper-$70Ks. That's not necessarily bearish. Just watch if derivatives are amplifying underlying spot demand or beginning to replace it.

Cross-asset correlations (what it tells you):

Last week showed that Bitcoin is increasingly trading alongside the broader macro market, but it still isn't moving perfectly in line with equities. The S&P 500 gained roughly 0.5% and the Nasdaq gained about 0.8% during the week, while Bitcoin underwent consolidation after its previous 20%+ surge. 

Meanwhile, small caps underperformed and Treasury yields remained elevated, showing that investors were still taking risk, but becoming more selective about where they chose to bet.

Sticky inflation and a more hawkish Fed stance pushed interest rate expectations higher, while renewed geopolitical concerns pushed energy prices up. Bitcoin managed to hold most of its August gains despite those developments, which is indicative, because higher yields and tighter monetary expectations have historically been difficult conditions for crypto.

This continues to suggest Bitcoin is responding to a combination of global liquidity, real yields, the U.S. dollar, fiscal conditions and crypto-specific institutional flows. It’s still behaving like a risk asset during periods of market stress, but its recent mirroring of gold, the Treasury markets and fiscal concerns reinforces the idea that it increasingly sits at the intersection of risk assets, liquidity trades, and alternative monetary assets.

Risk appetite remains positive, but this week showed investors are becoming more selective. Bitcoin held most of its August rally, the S&P 500 and Nasdaq finished higher, and U.S. spot Bitcoin ETFs still continued attracting money.

The macro picture is less comfortable. Inflation remains elevated, expectations for tighter Fed policy went up, Treasury yields remain high, and renewed geopolitical tensions pushed oil higher. Those pressures haven't stopped investors from taking risk, but they leave less room for markets to absorb another negative macro surprise.

So our assessment this week is:

Crypto: Risk is favorable, but momentum is cooling.

Global macro: Constructive, but increasingly fragile.

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This information is for entertainment purposes only. It should not be considered financial advice, nor should it be used to make investment decisions. Cryptocurrencies are high risk and you should consult a financial professional before making any financial decisions. Make sure you do your own research.