Changing Tides

Key Takeaways

• BTC had its best week since March 2023. BTC rose 23.6% to $77.7K and ETH 31.31% to $2.46K, while the S&P 500 fell 1.49% and the Nasdaq 2.26%. ZEC gained 75.60% and XRP 53.03%.
• The Treasury doubled long-end buybacks and markets read it as yield curve control. Operations go from $2B to at least $4B, effective September 9. The announcement moved prices, not the money, which has not been spent yet.
• Regulation Crypto got proposed anyway. Four days after canceling the meeting, the SEC proposed the rule without one.
• Volatility broke out. BTC DVOL went from a 12-month low of 33.91 on August 17 to 43.57, moving from the 6.8th percentile to the 57th. August 19 was the eighth-largest liquidation event on record at $2.99B.
• Open interest grew but little leverage growth. Aggregate OI rose 16.5% to $137.5B on flat coin-denominated OI, and funding sits at zero premium on both Binance and Hyperliquid. The froth is in the narrative coins.
• ETFs saw $2.6B of inflows, their best combined week since October 2025. BTC took $1.9B and ETH $692.6M, both on five straight inflow days. BTC ETFs are still net negative $2.8B for 2026.

Crypto’s Breakout Week

BTC opened Monday at $62.9K and closed Sunday at $77.7K, up 24% with a high of $79.5K. That is its largest weekly move since March 2023, when BTC gained 27%. ETH outperformed again, up 31% from $1.87K to $2.46K, its best week since May 5, 2025. Total crypto market cap closed Sunday at $2.6T against Monday's $2.2T.

Alts ran harder. ZEC gained 75% to $854, an eight-year high, and is now the twelfth-largest crypto by market value. XRP gained 53%, its biggest week since November 2024. HYPE gained 35% to an all-time high of $82.4. SOL added 28%.

Equities did not follow. The S&P 500 fell 1.5% from Monday's 7,790 open to Friday's 7,674 close. The Nasdaq fell 2.3% to 26,180. Brent gained 3.8% to $91.62 and gold gained 5.3% to $4,625. The dollar-debasement trade was working alongside crypto.

Debasement and Regulatory Tailwinds 

30-Year Buybacks

The Treasury is at least doubling the maximum size of its liquidity support buyback operations for longer-dated government bonds, covering the 10 to 30 year sectors. The cap goes from $2B to at least $4B per operation. It takes effect September 9 and runs through November 4, the next quarterly refunding. Bessent's decision comes off the back of the 30-year yield closing at 5.31% on August 17, the highest close since June 12, 2007.

Markets read it as a step toward yield curve control. The signal moved prices more than $4B in buy backs would, because it revealed the ceiling the Treasury is comfortable with. 

Regulation Crypto Proposed

Our last issue documented the canceled August 14 open meeting and the absence of a replacement date. Four days later the SEC proposed the rule anyway, without a meeting.

The three pathways are the ones we described. A startup exemption for up to $5M over four years. A fundraising exemption for up to $75M in any twelve months, in exchange for financial statements and ongoing reporting. And a conditional safe harbor that removes an asset from investment-contract treatment once the issuer has permanently stopped the managerial work it promised. The proposal also defines "qualified purchaser" in a way that preempts state registration for offerings made under the two exemptions, which removes the fifty-state blue sky problem that has killed most compliant US token distributions.

The White House Summit

Trump hosted SEC Chair Paul Atkins, CFTC Chair Michael Selig, and the CEOs of Coinbase, Ripple, Gemini, Robinhood, Polymarket, Kalshi, Nasdaq, CME and ICE on August 19. Trump said Selig is working to bring Hyperliquid onshore "in a fully compliant and legal fashion." HYPE went from roughly $62 to $72 on the day, settled at $69 to $70, and trades near $80 now. CME and ICE shares fell.

Stablecoins as Cash Equivalents

On August 18 the FASB proposed an update that would let companies book stablecoins as cash equivalents. A stablecoin qualifies if the holder has an on-demand contractual redemption right, if that redemption is directly with the issuer for a known cash amount, and if the issuer holds segregated reserves of at least 1:1 in short-term, highly liquid assets. A corporate treasurer holding USDC currently notes it as under “other assets”. Under this proposal it sits next to T-bills and commercial paper. Comments close November 19. This opens the door to corporate treasury adoption of stablecoins at scale.

Grayscale's Latest ETF

Grayscale filed to convert its Zcash trust into an ETF on NYSE Arca, with a 2.5% sponsor fee, Coinbase Custody as custodian and BNY Mellon as transfer agent. TThe SEC has not declared the registration effective. A DCG subsidiary is in non-binding talks to contribute roughly 200,000 ZEC, worth about $110M, in exchange for shares.

ZEC finished the week up 75% at an eight-year high. At $2.2B of 24-hour volume, it is the most traded perp on Binance futures outside BTC and ETH.

Volatility, Positioning and Leverage

Volatility Metrics

We have called compressed volatility unsustainable for five straight issues. BTC DVOL went from a low of 33.91 on August 17, its 12-month low, to 43.57 now. It’s IV went from 6.8th percentile to the 57th percentile. ETH DVOL went from 46.19 to 59.85 with a high of 60.49, still only the 36th percentile, so ETH vol has more room to run. The VIX went from 14.25 to 15.13, up 6%. Crypto’s volatility is back.

Liquidations and OI

The Treasury buyback announcement on August 19 triggered the eighth-largest liquidation event on record at $2.99B, of which $2.7B were shorts. It is the largest since October 11, 2025, when $19.16B was wiped out.

Aggregate crypto futures OI is $137.5B against $118B last week, up 16.5% and the highest since January 20. Leverage did not drive it. Coin-denominated OI barely moved in either BTC or ETH, so the increase is mark-to-market on price. Funding on Hyperliquid on both majors remains low at 11% annualized. The froth is confined to narrative coins, with annualized funding of 21.7% on HYPE, 58.4% on ZEC, 65.4% on LIT and 44.3% on PUMP. Coinglass's aggregate 24-hour long/short sits at 50.2% / 49.8%, with liquidations normalizing back down to $300M. 

The data indicates a short squeeze plus spot absorption rather than a leveraged long build. The market structure is healthy. There is no leverage-driven cascade waiting to unwind. The risk now is that the spot bid stops.

Massive ETF Flows 

BTC and ETH ETFs saw $2.6B of inflows last week, their best combined week in 45 weeks.

BTC: $1.9B is the best week since October 6, 2025. August 20's $606.3M was the biggest single day since May 1, 2026, which had $629.8M. Cumulative flows since launch stand at $53.8B.

ETH: $692.6M is the best week since September 29, 2025. August 20 at $219.5M was the largest single day of 2026 and the biggest since October 28, 2025. Cumulative flows are $12.15B.

Since June, ETH has held up better than BTC on the downside, a pattern we have tracked since late July. This week ETH captured 36% of BTC's dollar flow while carrying roughly 19% of BTC's market cap, so it outperformed on the upside too. BTC ETFs are still net negative $2.8B for 2026 year to date and ETH ETFs negative $193M. Last week cut BTC's year-to-date outflows by 40% and ETH's by 78%.

Key Events for the Week Ahead

Tuesday, August 25

• US: Conference Board consumer confidence for August. 
• US: New home sales, Richmond Fed manufacturing.

Wednesday, August 26

• US: Core PCE for July, 8:30am ET. Consensus is +0.2% m/m with the annual rate unchanged at 3.3%.
• US: Q2 GDP second estimate, July durable goods.
• Nvidia earnings.

Thursday, August 27

• US: Jackson Hole. 
• US: Initial claims, wholesale inventories.
• China: July industrial profits.

Friday, August 28

• US: Preliminary annual benchmark revision to nonfarm payrolls. 
• US: Michigan final August sentiment and inflation expectations, 10am ET. 
• Japan: Tokyo CPI for August and July unemployment. 
• Deribit monthly expiry