Market update - February 27th, 2026

Febrility still reigns, but the bottom may be near

Last week was another period of consolidation across digital asset markets, though the tone beneath the surface remained weak. Bitcoin has been broadly range bound between $67,000 and $70,000 since early February, and most major assets finished marginally lower. HYPE continues to stand out on a year to date basis, despite a 1.9% decline last week.

The dominant headwind remains whale distribution. Since October 2025, we estimate roughly $30 billion in net outflows from large holders. Whales now account for 64% of exchange deposits, the highest ratio since 2015. That is a meaningful supply overhang and has clearly weighed on both price action and sentiment.

The macro backdrop has not helped. The appointment of Kevin Warsh as Federal Reserve Chair, alongside more hawkish rhetoric, has reduced expectations of near term policy easing. The January FOMC minutes reinforced that while labour market conditions have stabilised, inflation remains sticky enough to constrain further cuts. Several participants explicitly cautioned that easing policy in the face of elevated inflation could undermine credibility around the 2% target. Futures markets now price the probability of a June rate cut below 50%, pushed lower by a stronger than expected consumer confidence print. Renewed geopolitical uncertainty, including fresh Iran strike threats, has further dampened risk appetite.

ETFs: five consecutive weeks of outflows

Positioning has adjusted materially. Basis traders have largely unwound, and futures open interest has fallen to around $7.6 billion, close to its lowest level since the ETF launched in early 2024. Spot Bitcoin and Ethereum ETFs, previously a steady source of marginal demand, have seen five consecutive weeks of outflows totalling $4.3 billion. That magnitude is comparable to peak outflow periods observed during prior corrective phases.

Despite the prevailing downtrend, there are growing signs that we may be moving toward a cyclical floor. Bitcoin’s RSI¹ recently touched 16, a level that historically signals extreme oversold conditions. MVRV² valuations are now close to one standard deviation around realised value, which has typically marked the latter stages of corrections rather than their beginning. ETF flows are also approaching capitulation territory, and this week has brought a more constructive early signal, with roughly $1 billion of inflows so far, suggesting sentiment may be stabilising.

Leverage appears to have largely reset. Leverage ratios have compressed from 33% in October 2025 to 25% today, back near their long term average. While at similar points in prior cycles, whale selling has tended to moderate, suggesting the onslaught of outflows will ease in the coming few months.

Our base case remains for continued consolidation in the near term, with a modest downside bias. That said, with leverage flushed, sentiment depressed, and valuation metrics normalising, the ingredients for a durable bottom are steadily falling into place. Each passing week likely brings the market incrementally closer to the foundations of the next expansion phase.

¹Relative Strength Index: a technical indicator signalling when an asset is overbought or oversold. 

²Market Valued to Realised Valued: a measure to value a digital asset based on its historical transaction activity