Where has all the money gone?
The S&P 500 hit new all-time highs last week, and the Nasdaq completed a nearly seven-week winning streak. The 30-year US Treasury yield surged to 5.12%, the highest since 2007. SpaceX's Pre-IPO contracts on Hyperliquid saw $40 million in turnover on the first day.
Money is pouring in everywhere—except into crypto. BTC, which had just climbed above $82,000 on May 14th, has since tumbled below $77,000 in recent days. ETH fared no better, dropping nearly 10% over the week from the $2,300 range down to $2,110. Solana completely erased its recent gains, falling from a high near $100 back to $84. It seems nothing in the major crypto space is holding strong, except for HYPE.
Why is crypto, as a risk asset, falling behind alone?
30-Year Bond Yields Hit Nearly 20-Year High
The bond market is once again becoming the gravitational center for global capital.
The yield on the 30-year US Treasury bond has reached its highest level since June 2007, rising from 4.63% at the end of February to 5.12%. Meanwhile, the 10-year yield touched 4.6%, and the two-year yield climbed to 4.08%.
It's not just the United States. In a report on Sunday, May 17th, Apollo Global Management chief economist Torsten Slok stated that the yields on government bonds with maturities of 10 years or longer across G7 nations have collectively reached their highest levels since 2004, all approaching 5%.
Government fiscal deficits are expanding worldwide, necessitating more borrowing and bond issuance. The US fiscal deficit remains around 6% of GDP. Rising borrowing costs make it harder for governments to spend their way out of crises, precisely at a time when many countries face crises due to war.
In a report on May 18th, Deutsche Bank's Jim Reid noted that bond issues are likely to be on the agenda for the two-day G7 finance ministers' meeting opening that day in Paris. However, the structural problems in the bond market cannot be solved by any single ministerial meeting.
At a time of heightened geopolitical tension, global capital favors assets with more certain returns.
The outflow data from Bitcoin ETFs also corroborates this point.
According to SoSoValue data, Bitcoin spot ETFs saw a net outflow of $1.039 billion for the week of May 11th to May 15th, ending six consecutive weeks of net inflows. This was also the largest weekly outflow since the end of January.
Drilling down to specific products, ARKB had a weekly net outflow of $324 million, and IBIT saw a net outflow of $317 million, with both leading products bleeding simultaneously. The intraday data paints an even sharper picture. There was a net outflow of $233 million on May 12th, a single-day withdrawal of $635 million on May 13th, and on Friday, May 15th, the 11 Bitcoin ETFs collectively experienced another outflow of $290 million. This indicates institutional funds are exiting in an orderly fashion.
Comparing with data from previous weeks highlights the force of this reversal. The week of April 17th saw nearly $1 billion in net inflows, the week of April 24th had $824 million in net inflows, and the week of May 8th still recorded $623 million in net inflows. The funding situation reversed from "sustained inflows" to "a $1 billion weekly outflow" within a single week.
Concurrently, Ethereum ETFs also saw a net outflow of $255 million, marking five consecutive days of negative outflows. The funding landscape for the entire crypto ETF asset class collectively turned downward in mid-May.
As the bond market's attractiveness grows, crypto's relative appeal naturally diminishes passively.
$4 Trillion in IPOs: How Can Crypto Compete?
Bonds are siphoning off funds with little risk appetite. IPOs are capturing risk capital, which constitutes the most direct liquidity drain for crypto.
There are $4 trillion worth of IPOs queued up for 2026, waiting to compete for capital. This is a figure substantial enough to reshape the map of global capital allocation.
SpaceX has become the next concentrated market focus. In this environment, Pre-IPO and new listing strategies offer an attraction that bonds cannot provide—non-linear wealth effects.
Meanwhile, the AI narrative remains the dominant theme of 2026. In a report on May 15th, Evercore analysts pointed out that US economic data shows demand remains strong, especially with a surge in AI-related capital expenditures. The flip side of this AI capital spending boom is the life-changing wealth effects created by AI leaders in the secondary market.
The return efficiency of names like Nvidia and Cerebras makes any crypto narrative seem less appealing by comparison.
More glaringly, even on-chain activity is helping traditional markets pull in money.
On the night SpaceX debuted on Trade.xyz, the Pre-IPO contracts on Hyperliquid saw $40 million in turnover on the first day. The HIP-3 platform is using perpetuals to facilitate price discovery for traditional stocks. Hyperliquid itself rose 10% to $45 for the week, becoming the only major crypto asset to buck the downtrend. Related reading: The Biggest Winner of the SpaceX IPO Might Be Trade.xyz.
In the short term, this is not exactly good news for crypto-native assets.
On-chain liquidity is being directed to price discovery for traditional stock targets like SpaceX, rather than flowing back to Bitcoin, ETH, or Solana. Even Hyperliquid's gains are not fundamentally driven by crypto narratives, but rather by the dividends of traditional asset narratives.
Warsh Takes Over, But Rate Cuts May Be Off the Table
While the bond and IPO markets are draining liquidity from the crypto space, looking at the Federal Reserve, the anticipated new liquidity injection might not materialize either.
Powell's term ended on May 15th. Warsh was confirmed by the Senate as the new Federal Reserve Chair last week and is currently awaiting formal appointment committee approval from the President and completion of asset clearance to comply with ethics regulations.
And even before officially taking the oath, Warsh already faces some tough problems.
Trump nominated Warsh partly because he hoped Warsh would be more cooperative than Powell with the White House's cost-cutting agenda. Treasury Secretary Bessent has consistently included lowering the government's borrowing costs as a core part of the White House's cost-cutting promises over the past few months. He laid it out clearly in his speech at the New York Fed last autumn: lowering government borrowing costs means lower corporate borrowing costs, lower mortgage rates, lower car loan payments—improving affordability for all Americans.
But as mentioned earlier, today's reality is that the bond market has pushed five-year inflation expectations to 2.7%, the highest since 2023. Yardeni Research directly pointed out in a report on May 17th that a two-year Treasury yield of 4.08% is the market using price to signal to the Fed that the current target range of 3.50%-3.75% is set too low.
By Warsh's own logic, he should continue raising rates, or at least not cut them. But the White House, especially Trump himself, has made its political desire for rate cuts almost public.
On the other hand, those who heard Warsh's pre-confirmation hearing remarks know he spent considerable time discussing AI. He believes AI will boost productivity, suppress inflation, and thus supports rate cuts. The problem is, short-term data shows no signs of this happening.
The view of José Torres, a senior economist at Interactive Brokers, already represents a large segment of opinion. In a report on May 15th, he wrote the assessment that, due to lack of progress in geopolitical conflicts, the market has abandoned bets on room for further rate hikes.
If Warsh chooses to succumb to Trump's political pressure and forces a rate cut, the bond market will respond with even higher long-end yields, making all duration-sensitive assets even more uncomfortable. If Warsh chooses a hawkish stance, then rate cut expectations for this year are directly off the table, and the market's bets on liquidity easing all need to be repriced.
This means the bets placed over the past few months on Warsh cutting rates upon taking office may be completely overturned.
HYPE Leads Crypto Gains
After October 10th, the recovery period following the crypto market's deleveraging should have been fueled by the return of new capital.
With $4 trillion in IPOs queued for 2026 and AI names continuing to generate wealth effects, the appeal of altcoin trades is being persistently diluted in this environment. Even Bitcoin, the most institutionally-favored crypto asset, is beginning to cede ground to traditional markets. The $1 billion weekly outflow from ETFs is the most direct evidence.
High bond yields, Bitcoin ETF outflows. The recovery period is being drawn out indefinitely, and crypto consistently fails to catch up with the overall upward pace of risk assets.
However, it's worth noting that some differentiation trends are already emerging within the broader crypto market.
Hyperliquid rose 15% weekly to $48, with a year-to-date gain of 69%, precisely riding on the Pre-IPO price discovery narrative enabled by HIP-3. Assets that can tell new stories and capture entry points into traditional markets are still rising, while assets relying purely on beta are being compressed in pricing. Even Bitcoin has to take a back seat.
Zooming out to view the broader financial market reveals three forces simultaneously draining liquidity from the crypto space over the past few weeks. The bond market is pulling risk-averse money back with 5% yields, IPOs are capturing incremental risk budgets with a $4 trillion queue, and the new Fed Chair Warsh, upon taking office, may be unable to deliver on this year's rate cut expectations.
However, there are still potential catalysts for Bitcoin's next phase.
The upside catalyst is the enactment of the CLARITY Act in August. This is the biggest policy tailwind window for crypto this year, and increased regulatory certainty could directly release some pent-up institutional demand.
The downside risk is that before this catalyst materializes, we may need to retest the $70,000 level. If the current $77,000 level fails to hold, the next effective support is likely around $70,000.
