Wintermute Market Outlook: Capital inflow stagnates, market enters a stage of stock game.

Original source: Wintermute

Compiled by: Azuma (@azuma_eth), Odaily Planet Daily (@OdailyChina)

Summary Conclusion

1. Liquidity dominates the cycles of the cryptocurrency market, while the inflow of funds from stablecoins, ETFs, and DAT (Digital Asset Treasury) is slowing down.

2. Global liquidity remains abundant, but the high SOFR rates have kept funds in short-term Treasury bills (T-bills) rather than flowing into the crypto market.

3. The cryptocurrency market is currently in a stage of “self-sustaining” — funds are operating in internal circulation until new external capital re-enters.

The dominant role of liquidity

Liquidity often dominates the cyclical rotation of the cryptocurrency market. In the long term, adoption may determine the narrative of the cryptocurrency industry, but it is the direction of capital flow that truly drives price changes.

In the past few months, the momentum of this capital inflow has clearly slowed down. The capital flow into the ecosystem through three main channels - stablecoins, ETFs, and Digital Asset Trusts (DAT) - has weakened simultaneously, which has caused the cryptocurrency market to shift from an expansion phase to a phase supported by existing capital.

While the adoption of technology is important, liquidity is the key factor that truly drives the cyclical rotation of the market. This is not only a matter of market depth but also a matter of the availability of funds. When global money supply expands or real interest rates decline, excess liquidity will inevitably seek risk assets, and historically, crypto assets have been one of the biggest beneficiaries of this, especially during the 2021 cycle.

In previous cycles, liquidity mainly entered digital assets through the issuance of stablecoins, which is the core entry point for fiat currency. As the market has matured, three main liquidity funnels have gradually formed, determining the path for new capital to enter the crypto market:

Digital Asset Treasuries (DATs): Tokenized funds and yield structures that connect traditional assets with on-chain liquidity.

Stablecoin: An on-chain form of fiat currency liquidity, serving as the foundational collateral for leverage and trading activities.

ETF: Provides a channel for traditional financial institutions and passive funds to gain exposure to BTC and ETH.

Combining the assets under management (AUM) of the ETF, the net asset value (NAV) of DAT, and the number of issued stablecoins can serve as a reasonable indicator for measuring the total capital inflow into digital assets.

The chart below shows the changes in these components over the past 18 months. The bottom graph indicates that this change in total amount is highly correlated with the overall market value of digital assets—when capital inflow accelerates, prices tend to rise accordingly.

Which path has seen a slowdown in inflows?

A key piece of information reflected in the chart is that the inflow momentum of DAT and ETF has significantly weakened. These two pathways had strong performance in the fourth quarter of 2024 and the first quarter of 2025, and briefly rebounded in early summer, but since then, the momentum has gradually dissipated. Liquidity (M2) is no longer flowing into the crypto ecosystem as naturally as it did at the beginning of the year. Since early 2024, the total scale of DAT and ETF has grown from about $40 billion to $270 billion, while the supply of stablecoins has doubled from about $140 billion to $290 billion. This shows structural growth but also a clear “platform period.”

It is important to observe the slowing pace of different paths, as each path reflects different sources of liquidity: stablecoins reflect the inherent risk appetite of the crypto market; DAT embodies the institutional demand for yield-bearing assets; and ETFs map the allocation trends of traditional financial capital. The simultaneous slowdown of all three indicates that new capital deployment is generally decelerating, rather than merely rotating between products.

Stock game market

Liquidity has not disappeared; it is just circulating within the system rather than continuously expanding.

From a broader macro perspective, the overall economic liquidity (M2) outside the crypto market has not stagnated. Although the high SOFR rates will constrain liquidity in the short term — making cash yields more attractive and keeping funds in the treasury market — the world is still in a loose cycle, and the United States' quantitative tightening (QT) has officially ended. The structural background remains supportive, but currently, liquidity is flowing more into other forms of risk expression, such as the stock market.

Due to the decrease in external capital inflows, market dynamics have become closed off. Funds are more often rotating between major coins and altcoin sectors, leading to an internal game (PVP) situation. This explains why rebound markets are always short-lived and why market breadth continues to narrow even when the total asset management scale remains stable. Currently, the surge in market volatility is mainly due to a chain reaction of liquidations rather than being driven by sustained trends.

Looking ahead, if any liquidity path experiences a substantial recovery — whether it’s the reissuance of stablecoins, renewed enthusiasm for ETFs, or a rebound in DAT scale — it will signify that macro liquidity is flowing back into the digital asset space.

Before that, the crypto market will still be in the “self-sustaining” phase, with funds circulating internally rather than growing through compound interest.