🔽 BTC and ETH ETFs saw outflows while altcoin ETFs gained; Trump directed the government and Fed to modernize digital asset regulations and TradFi integration

Quick Take

• Investors rotated into specific altcoin ETFs as BTC and ETH ETFs experienced significant outflows.
• U.S. spot BTC ETFs saw a net outflow of US$1.2 billion last week, compared to a $1 billion outflow the week prior. Spot ETH ETFs saw a net outflow of $216 million in the same period, compared to a $255 million outflow the week prior.
• The U.S. stock market showed resilience last week, with the S&P 500 achieving its eighth consecutive winning week—the longest since late 2023. Despite early geopolitical concerns, dip-buyers emerged midweek as oil prices eased and Middle East diplomatic hopes grew. This momentum drove the Dow Jones Industrial Average to new all-time high.
• • Market indices reached new heights last week: the Dow Jones rose 2.1% to a record 50,579.70, the S&P 500 gained 0.9% to 7,473.47, and the Nasdaq climbed 0.5% to 26,343.97.
  • Key market drivers: U.S.-Iran diplomatic progress eased anxiety, while WTI crude fell 8.4% to $96.6, lowering inflation fears as 10-year yields soften to 4.57%. Strong Q1 earnings from firms like Ross Stores and Zoom supported dip-buying. Despite a 4-year high in S&P Manufacturing PMI, the University of Michigan Consumer Sentiment Index fell to 44.8 due to rising costs.
  • Sector and Style Dynamics: Defensive sectors led, with Utilities and Healthcare up over 3%, while Consumer Defensives and Communication Services lagged. Market breadth improved as mid and small-caps outperformed large-caps. While the Semiconductor Index hit record highs, capital also flowed into value sectors as investors prepared for sustained high yields.

Research Dashboard

According to our research dashboard, the price, volume and volatility indices dropped -2.19%, -12.75% and -23.81%, respectively, last week.

Most tokens in the index saw a downtrend. BTC and ETH prices decreased by -0.6% and -1.4%, respectively. Hyperliquid (HYPE), Zcash (ZEC) and Ondo (ONDO) led the price, volume and volatility spike. HYPE soared on excitement over its $1.16B buyback fund (99% of trading fees go to the Assistance Fund for HYPE buying, excluding builder fees) and Hyperliquid ETF inflows.

Chart of the Week

Recent data indicates a significant shift in investor sentiment, characterized by capital rotation from Bitcoin and Ethereum into select altcoin ETFs. Bitcoin ETFs experienced substantial withdrawals totaling approximately $2.3 billion, while Ethereum products saw outflows of $471 million between 11 May and 22 May. Conversely, investors directed capital toward XRP, SOL, and HYPE, with total inflows reaching $231 million during the same period.

Increasing market decoupling allows altcoin performance to diverge from Bitcoin, driven by project-specific developments such as Hyperliquid. Significant Bitcoin ETF outflows and options market pricing suggest that traders are actively hedging, viewing recent declines as more than routine pullbacks.

Weekly Performance

Most top-cap tokens had mixed performance last week, with NEAR leading the surge, while BCH leading the plunge.

NEAR’s surge aligned with the AI sector’s broad increase last week. Additionally, its price action was bolstered by project developments and endorsements from key opinion leaders (KOLs).

AI led the market capitalization (MC) spike, driven by the Near protocol, while Memes underperformed.

Notable Updates

News Highlights

Regulation

• President Donald Trump signed an executive order directing the federal government and the Federal Reserve to review and update regulatory frameworks regarding digital assets and their integration into traditional financial systems. The order aims to streamline regulatory processes, reduce barriers to entry for fintech firms, and encourage collaboration between these firms and federally regulated financial institutions.
• The U.S. Commodity Futures Trading Commission (CFTC) approved updated crypto derivatives rules focused on modernizing oversight structures, clarifying off-exchange retail leveraged commodities trading, expanding permissible tokenized collateral models, and seeking to bring novel derivatives products onshore.
• The U.S. Securities and Exchange Commission (SEC) postponed the release of a proposal intended to create an “innovation exemption” for trading tokenized stocks, following feedback from industry stakeholders. Originally expected to be unveiled in late May 2026, the delay allows time to address concerns regarding the implementation of rules, particularly those raised by stock exchange officials.
• Minnesota Governor Tim Walz signed House File 3709 into law authorizing state-based banks and credit unions to offer virtual currency custody services in a nonfiduciary capacity starting August 1, 2026, implying a regulatory shift toward keeping digital asset infrastructure within localized, regulated frameworks rather than forcing residents to rely on offshore providers.

Investment Instruments

• Nasdaq secured accelerated approval from the SEC to list cash-settled, European-style Bitcoin index options under the ticker QBTC, though trading cannot officially commence until the CFTC grants concurrent exemptive relief due to Bitcoin's legal status as a commodity.

Others

• A security exploit of Polymarket resulting from a compromised internal top-up wallet's private key drained over $520,000 from a platform-linked UMA oracle adapter contract, though core smart contract architecture, market resolutions, and user assets remained safe.

Catalyst Calendar

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