Welcome to the State of Crypto Weekly, an investor-focused newsletter from 21shares that dives into the key trends shaping the digital asset landscape.

In the early hours of Saturday, the United States and Israel commenced military actions against Iran, which have subsequently intensified into an ongoing conflict involving several nations across the Middle East. Our deepest condolences and thoughts are with the affected families, and we sincerely hope for a swift de-escalation and peaceful resolution.

This newsletter proceeds to analyze the implications of these events for Bitcoin and the broader cryptocurrency market.

• Our February observations: The dual themes of risk repricing and capital selectivity.

• Crypto fundamentals and economic silver linings to watch in the coming months

• Off the Block podcast: Scaling payments and the agentic economy

OUR FEBRUARY OBSERVATIONS

The dual themes of risk repricing and capital selectivity

Crypto again acted as a liquidity shock absorber. Its 24/7 nature meant risk-off positioning is expressed immediately. This dynamic triggered a sharp but constructive deleveraging:

• $1.4 billion in futures long liquidations, roughly double those of shorts, as downside spot moves cascaded through derivatives markets.

• Futures open interest fell by $5 billion, compressing back toward pre-ETF-launch levels.

• Current open interest sits near $27 billion, down materially from October highs above $65 billion.

While this amplified short-term price moves, it reflects a positioning cleanse rather than fundamental stress. Excess leverage accumulated earlier in the cycle has been cleared, reducing market crowding and lowering downside fragility heading into the next phase.

Bitcoin is trading near cycle lows with evidence of buying bitcoin at a discount from long-term investors. Price is hovering around the aggregated investor cost basis and the 200-week moving average, a region where bitcoin has historically traded less than 5% of the time. Past interactions with this zone have consistently preceded strong multi-year advances, as structure resets and longer-term capital re-enter.

With leverage reduced, derivatives markets cleaner, and long-term holders intact, current levels increasingly represent an attractive accumulation zone, even if near-term volatility persists.

CRYPTO FUNDAMENTALS AND ECONOMIC SILVER LININGS

There may be light at the end of this tunnel

While sentiment has been reset to levels last seen in the deepest parts of the 2022 bear market, three key observations—a reset of speculative positioning, the sticky nature of institutional capital, and the widening value gap versus gold—indicate that fundamentals remain robust and positioned for a potential upside resolution once macroeconomic uncertainty abates.

SCALING PAYMENTS AND THE AGENTIC ECONOMY

With Adeniyi Abiodun, co-founder of Mysten Labs.

The early promise of crypto is now maturing, shifting focus from speculative hype to building the robust, scalable infrastructure necessary for real-world adoption. This transition is crucial for enabling the next era of digital commerce driven by the agentic economy.

In the 11th episode of Off the Block, we dive deep into this transformation with Adeniyi Abiodun, co-founder of Mysten Labs. We explore how his experience leading R&D for Meta’s Libra project shaped Sui’s first-principles approach to solving the fundamental problems of scaling blockchain for global commerce, and how Sui is positioning itself to be the essential backbone for this new autonomous world of agentic payments.

WORDS OF WISDOM

”Financial access and understanding aren’t just for insiders. You don’t need a specific pedigree or network. Knowledge and opportunity are available to anyone willing to learn, ask questions, and engage. Breaking down these barriers is how we build a stronger, more inclusive industry.”

• Audrey Belloff, Global Head of Communications at 21shares

IN CASE YOU MISSED IT

21shares in the world

• A macro take on the Middle East conflict: Our Head of Macro, Stephen Coltman, spoke to the Wall Street Journal about what the war in the Middle East might mean for bitcoin prices in the near future.

• Bitcoin’s rollercoaster: Global Head of Business Development Federico Brokate joined Remy Blaire of FintechTV to discuss the recent price fluctuations of Bitcoin.

• US inflation picked up in December: Our Head of Macro was quoted in Barron’s to comment on December’s PCE data.

• Crypto social isn’t dead: Our research analyst, Darius Moukhtarzade, CDAA®, shared his thoughts with CoinDesk on the state of decentralized social networks and how this market correction is shaking up the segment.

• Crypto scams are getting smarter: In just one week, Darius encountered three separate scam attempts. The last one was the most advanced he’s ever seen.

Connect with us today

If you have any questions or want to discuss a product in detail, please visit our website at www.21shares.com

Research Newsletter

Each week the 21Shares Research team will publish our data-driven insights into the crypto asset world through this newsletter. Please direct any comments, questions, and words of feedback to research@21shares.com

Disclaimer

The information provided does not constitute a prospectus or other offering material and does not contain or constitute an offer to sell or a solicitation of any offer to buy securities in any jurisdiction. Some of the information published herein may contain forward-looking statements. Readers are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties and that actual results may differ materially from those in the forward-looking statements as a result of various factors. The information contained herein may not be considered as economic, legal, tax or other advice and users are cautioned to base investment decisions or other decisions solely on the content hereof.