Crypto Market Review for Q2: Market Trends, Sector Rotation, and Fee Trends

Author: Tanay Ved, Senior Research Analyst at Coin Metrics; Compiled by Shaw, Jinse Finance

Key Takeaways:

• Driven by shifting interest rate expectations, continued outflows from Bitcoin ETFs, and a massive rotation of capital into AI stocks, Bitcoin gave back all its April gains and ended Q2 down by approximately 11% overall.

• The three core liquidity channels—ETFs, Strategy, and stablecoins—weakened in sync in Q2. Even spot Bitcoin ETFs alone recorded net outflows of $4.08 billion.

• Total long liquidations for Bitcoin and Ethereum this quarter reached $8.35 billion, triggering large-scale deleveraging across the market. Entering Q3, although market liquidity shrank somewhat, overall stability improved.

Market Overview and Price Performance

At the start of 2026 Q2, digital assets once rallied strongly. After a weak first quarter, Bitcoin rebounded across the board in April, rising alongside U.S. stocks; prices surged to about $82,000. At that time, concerns about geopolitical conflicts briefly eased, and institutional demand showed signs of recovery. However, this upswing did not last.

The market reversal was driven by a threefold overlap of factors: The U.S.-Iran diplomatic situation swung repeatedly, with Brent crude oil prices surging to $126.41 and staying elevated; the Federal Reserve’s monetary policy expectations turned hawkish; and massive capital rotated into the AI stocks sector, where earnings growth momentum looked steady.

Source: Talos State of the Market Dashboard

Before mid-May, crypto assets generally moved in step with U.S. stocks overall, and both Bitcoin and Ethereum rose by about 20% since the beginning of April. But by late May, their paths diverged: crypto began to pull back while U.S. stocks remained resilient. By the end of the quarter, the S&P 500 and Nasdaq 100 had risen by approximately 16% and 28%, respectively; Bitcoin fell by about 10%, Ethereum dropped by about 20%, and SOL declined by about 13%.

Source: Talos State of the Market Dashboard

Bitcoin’s current price is hovering near $60,000, down about 52% from its all-time high of $126,000 set at the end of 2025. Altcoins have followed broadly similar trends, with only a small number of tokens recording gains. Year to date, among the top 20 crypto assets by market cap, Hyperliquid (token HYPE) is the only standout, up 142%, with momentum driven by a surge in on-chain demand for perpetual trading in stocks and commodities.

Capital Flows

As the market weakened this quarter, the simultaneous shrinkage of the three core demand channels further intensified the downturn: spot Bitcoin ETFs, coin-holding treasury-style companies such as MicroStrategy, and total stablecoin supply all deteriorated.

Spot Bitcoin ETFs

Spot Bitcoin ETFs began April on a positive note, with sustained net inflows. On April 20, a daily net inflow peak of $474 million was recorded; afterward, the flow direction fully reversed. During the remainder of the quarter, net outflows dominated. In Q2, over the 53 trading days, there were outflows in 53 trading days and net inflows in only 30 trading days. Across all tracked issuing institutions for the quarter, total net outflows amounted to $4.08 billion, with the outflow scale in June accounting for the vast majority—$3.84 billion.

Source: Talos State of the Market Dashboard

Digital Asset Treasury (Strategy)

Strategy’s pace of Bitcoin accumulation slowed significantly in this quarter. The company’s issuance of preferred stock STRC, originally designed to trade near $100, fell to an all-time low around $74; at the same time, the adjusted net asset value (NAV) premium fell back to 1x, directly weighing on the funding channel that its bitcoin hoarding relied on. The company’s sale of 32 Bitcoin in early June caught the market off guard, shattering the long-held “never sell” consensus. In response, Strategy launched a new digital credit capital framework: raising the STRC dividend rate to 12%, obtaining approval to sell up to $1.25 billion worth of Bitcoin, and setting up a $2.55 billion cash reserve to cover about 17 months of dividend settlement obligations.

Stablecoins

In Q2, the stablecoin market’s total capitalization shrank by approximately $4.2 billion, pulling away a large pool of standby liquidity that supported on-chain trading and market liquidity. Among them, USDT increased slightly by $1.8 billion, while Circle (USDC) saw a loss of $3.4 billion. As risk-averse sentiment rose, investors’ demand for yield-bearing stablecoin strategies declined; USDe issued by Ethena shrank by $1.4 billion.

With all three core demand channels weakening at the same time, the market liquidity environment in Q3 tightened significantly compared with the start of Q2. Whether funds would return to crypto assets or keep flowing into AI stocks remained a key variable to monitor.

Exchange Trading Data and Derivatives Market

Across major exchanges, total spot trading volume fell 28% quarter-on-quarter, reaching $2.32 trillion, continuing the contraction trend that began in January. Futures trading volume was comparatively resistant, at $12.32 trillion, down only 11.6% quarter-on-quarter; but the spot/futures trading volume ratio narrowed from 0.23x to 0.19x, indicating that more market funds shifted toward derivatives positions while spot buying demand weakened.

Hyperliquid was especially prominent. Its futures trading volume market share climbed to about 4.5%, as on-chain perpetuals continued to capture market share from centralized exchanges.

Source: Talos State of the Market Dashboard

Open interest reached its peak just before the sell-off in May, with Bitcoin open interest at $49.2 billion and Ethereum at $27.2 billion. Now both have fallen to $33.5 billion and $16.2 billion, respectively—down 32% and 40% from their highs. Total long liquidations for Bitcoin and Ethereum in Q2 amounted to $8.35 billion; more than half of these liquidations occurred between May 25 and June 7. Highly leveraged long positions were liquidated in bulk during a self-reinforcing down cycle. Entering Q3, overall market leverage has already declined significantly.

This quarter, funding rates fluctuated sharply: deep backwardation in mid-April brought annualized rates as low as -16%. As long positions continued to build up, rates turned sharply positive in May, reaching an annualized +10%. The subsequent sell-off pushed funding rates back toward neutral, and by the end of the quarter, amid cautious sentiment, rates oscillated around zero.

Market liquidity also weakened in tandem. Bitcoin’s order book depth within 2% of the mid-price fell from a peak of nearly $70 million in early May to roughly $35–40 million by the end of June, reflecting thinner order books and a significantly reduced ability to absorb sell pressure.

Source: Talos State of the Market Dashboard

Key Themes Shaping the Quarter and the Outlook

Putting aside quarter-to-quarter price movement, several structural changes have already pointed to the market’s future direction, covering various new on-chain asset categories and the underlying infrastructure supporting these assets.

Tokenized Equities: Coinbase launched a tokenized equity product fully collateralized 1:1, allowing investors to fully enjoy all statutory shareholder rights associated with the corresponding stock. As new models for tokenizing securities such as stocks continue to emerge, we have mapped out the various implementation paths for gaining stock exposure on-chain.

RWA Perpetuals See Explosive Growth; leveraging Hyperliquid’s HIP-3 perpetuals and the around-the-clock RWA perpetual products of major centralized exchanges, on-chain trading and price discovery mechanisms are no longer limited to cryptocurrencies and have expanded into stocks, stock indices, and commodities.

On-Chain Price Discovery Ahead of SpaceX’s Listing: SpaceX officially listed on Nasdaq on June 12, 2026 (Eastern Time) under the ticker SPCX. Before its IPO with a $1.7 trillion valuation was formally listed, price discovery was completed first through crypto infrastructure, providing a pre-listing price discovery channel for unlisted private companies.

Vaults and Lending Markets: On-chain vaults are becoming the core vehicle for institutional capital allocation—pooling users’ deposits and directing them into curated lending strategies on protocols such as Morpho and Aave. Traditional asset managers such as Bitwise are moving into vault strategy operations, and the supporting infrastructure is rapidly maturing.