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Crypto’s capital base is rotating from balance sheets that buy and hold toward wrappers and derivatives that can exit in a day, leaving the market healthier on paper yet more exposed to the next reversal.
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In Today’s Email:
**What Matters:Crypto Inflows Shift Toward ETFs 👀Product of the Week:Papertrade Brings 1000x Perps to Hyperliquid 🔎Charts:**Crypto ETFs Bleed $1.25B 📊
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WHAT MATTERS
**State of play: **JPMorgan estimates $50B has flowed into crypto this year at a $66B annualized pace, roughly half of last year’s, but the real story is a handoff from corporate treasury buying to ETF and futures demand heading into Q4.
ETF flows turned positive for the year after heavy May and June outflows, yet remain negative since the Oct. 10, 2025 downturn.
CME bitcoin positioning has topped its prior peak and ether sits near its October 2025 high, as trend-following funds rebuild longs.
Offshore perpetual futures leverage has eased from its post-correction peak but remains above historical averages.
Listed miners drove most of the roughly $1.8B in net selling, offloading coins to fund AI infrastructure.
Treasury companies are shifting funding from debt to preferred shares, raising their ongoing interest and dividend burdens.
Why it matters: ETF and futures money is faster and more reversible than treasury buying, so Q4 momentum rests on a far less sticky base.
**Our take: **Record CME positioning and returning trend-followers signal momentum chasing rather than conviction, making this a sentiment recovery more than a capital one.
For builders and investors: With VC concentrating in fewer, larger rounds and debt favoring cash-flowing infrastructure, early-stage founders should expect a harder raise.
PRODUCT OF THE WEEK
Papertrade is a fair-launched perpetuals exchange on Hyperliquid offering 1000x leverage, and its design makes the LP an explicit bet against its own users, growing only as traders lose and rewarding those who keep trading while it is underwater.
Trades are synthetic swaps priced at Hyperliquid’s BBO mid through HyperEVM precompiles, so no perp contracts actually change hands on Hyperliquid.
That structure removes funding costs, spreads, and slippage, with position size limited only by per-instrument open interest caps.
When the LP is insolvent, winners’ payouts enter a debt queue repaid automatically from future user losses.
PAPER, the LP fee-claim token, mints only from realised losses with no team, VC, or airdrop allocation, and is non-transferable at launch.
Stakers earn USDC from 1% of realised PnL plus all LP gains above $5M, while the protocol’s only fee is a haircut on profitable closes.
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CHARTS OF THE WEEK
**State of play: **US spot bitcoin, ether, and Solana ETFs lost about $1.25B last week, a synchronized pullback that undercuts the Q4 flow-momentum narrative and shows how quickly ETF demand reverses once rotation stalls.
Ether ETFs shed $542.1M, their worst week since January, stretching a nine-day outflow streak to $697.2M.
BlackRock’s ETHA drove 88% of ether outflows, including $201.9M on the day its 1-for-3 reverse share split took effect.
Solana funds lost $24.8M, ending a record 14-week inflow run just two weeks after drawing a record $188.2M.
Bitwise’s BSOL accounted for 84% of Solana outflows, with only Morgan Stanley’s MSOL and Invesco’s QSOL posting inflows.
Bitcoin ETFs lost $681.1M, snapping a three-week inflow run and cutting 2026 net inflows to $494.1M.
**Our Take: **Solana’s record inflow streak ending in a record outflow suggests altcoin ETF demand was momentum rather than allocation, and the first real pullback is exposing how thin that base is.
State of play: Ledger is investigating suspected wallet drains tied to CryptoBilis, its official reseller in Indonesia, Malaysia, and the Philippines, a reminder that hardware wallets are only as trustworthy as the supply chain that delivers them.
Onchain researchers estimate unconfirmed losses of $72M to more than $86M across Bitcoin, Ethereum, and Tron, with the number of affected wallets still unknown.
Ledger has asked CryptoBilis to pause all sales and shipments while the cause of the losses remains under investigation.
Buyers from the past 90 days are advised not to set up their devices, or to move assets to a new signer with a fresh seed if already in use.
Former Mt. Gox CEO Mark Karpeles asked affected users to send circuit board photos to check whether their devices had been tampered with.
Changpeng Zhao said early evidence points to a supply chain attack involving a single vendor selling fake or tampered devices.
Our take: CZ’s “self-custody comes with extra responsibilities” misses the point, since buyers did everything right by using an official reseller, making this a failure of Ledger’s distribution vetting rather than user diligence.
QUICK BITES
Kalshiis investigatingbets on Trump’s press secretary pick.President Trumpdeclares‘energy ceasefire’ between Russia and Ukraine.Robinhood Chain slowdownspreadsfrom fees to trading as txs fall 40%+.IMFfindsdemand for tokenized stocks, says the market is still volatile, illiquid.Ledgerinvestigatespotential tampering after reports of $86M in crypto stolen.Ether ETFsextendoutflow streak to 9 days as SOL funds snap record inflow run.
NOTEWORTHY READS & MEME
RWA Foundation’s𝕏readon The RWA Ecosystem.Paul Klay’s𝕏readon why crypto VCs are going bankrupt.Yishi’s𝕏readon The Last Centimeter of Hardware Wallets.
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Disclaimer: All the information presented in this publication and its affiliates is strictly for educational purposes only. It should not be construed or taken as financial, legal, investment, or any other form of advice.
