Gate Institutional Weekly: BTC ETF Weekly Inflow Nears $1 Billion; Aave Hit by KelpDAO Incident

Summary

• Over the past week, the market has trended upward amid easing geopolitical tensions and stable liquidity expectations. A sharp drop in oil prices, a decline in the VIX, and a weakening US dollar collectively drove a recovery in risk appetite, leading to a rebound in crypto assets and a return to an upward trajectory.

• Fund flows showed significant improvement, with both BTC and ETH ETFs recording robust net inflows. Institutional capital refocused on top-tier products, with allocations favoring low-fee, high-liquidity assets.

• Trading activity was characterized by "energy dominance with divergent on-chain activity." On the TradFi side, commodities like crude oil maintained a high share, while DEX trading volume rebounded notably.

• Stablecoin and DeFi internal structures are rebalancing, with capital retreating from yield-bearing and protocol-backed stablecoins, while LST protocols saw capital inflows.

• Security incidents triggered chain reactions, leading to deleveraging and soaring interest rates on lending protocols like Aave.

• The derivatives market maintained a pattern of "crowded shorts but rising prices." Negative funding rates coupled with price increases created a divergence, accumulating short-squeeze momentum.

1. Market Focus Analysis

The global cryptocurrency market exhibited a volatile trend amidst a complex mix of macroeconomic signals. Trade war tensions eased on Friday, but attempts were made to reverse the stance on Saturday. Iranian Foreign Minister Araghchi announced that the Strait of Hormuz was "fully open" to all merchant ships during the ceasefire between Israel and Lebanon. Trump quickly confirmed that the strait was "fully open and ready for passage." Riding on market optimism for a Middle East peace deal, oil prices plunged 10%. The crypto market rebounded, and ETFs continued to see net inflows. US stocks rallied from lows to record highs, with the S&P 500 rising 11% over 11 trading days from its March 30 low, hitting a fresh all-time high of $7,162 last Friday. The VIX index collapsed to 17.48, its lowest level since late February, indicating the market has substantially repriced war risk. The 10-year Treasury yield closed around 4.28%, down from the April high of 4.44%. The US dollar index fell below 98 for the first time since January.

According to the International Monetary Fund's (IMF) World Economic Outlook released on April 16, 2026, global growth forecasts were cut to 3.1% due to ongoing conflicts in the Middle East and spillover effects from geopolitical risks, a backdrop that weakened overall liquidity expectations for risk assets. The Fed's stance remains the core market driver. The market has largely priced in the Fed holding rates steady at its April 29 meeting, with a 98% probability. Furthermore, the confirmation hearing for Fed chair nominee Warsh is scheduled for April 21, and his hawkish or dovish policy leanings will directly impact market liquidity in the coming weeks.

2. Liquidity Analysis

2.1 BTC ETFs Record Largest Positive Week in Months

BTC ETF intraday trends last week showed violent swings, with strong net inflows on April 14 and 15, reaching $411.4M and $186.1M, respectively. On April 17, amid a mix of risk-off and bottom-fishing sentiment, a massive single-day net inflow of $663.9M was recorded. BTC ETFs saw a weekly net inflow of approximately $996.4M, while Ethereum ETFs recorded a weekly net inflow of $275.8M. On a comparative basis, last week's BTC ETF flow situation showed a significant improvement over the previous week, marking the largest positive week since mid-January. Overall sentiment oscillated rapidly between risk-off and bottom-fishing, with bulls ultimately dominating.

Products with Highest BTC ETF Net Flows:

1. IBIT (BlackRock) - Weekly Net Inflow: $906.0M

2. ARKB (Ark & 21Shares) - Weekly Net Inflow: $98.5M

Products with Highest ETH ETF Net Flows:

1. FETH (Fidelity) - Weekly Net Inflow: $126.0M

2. ETHA (BlackRock) - Weekly Net Inflow: $99.2M

Institutional capital showed a clear trend of concentration last week. BlackRock's IBIT remained the dominant capital magnet, pulling in $906.0M in a single week, with its cumulative net inflow approaching $64.63B. In contrast, Fidelity's FBTC experienced a net outflow of $104.0M, highlighting capital competition between different institutional products. On the Ethereum side, Fidelity's FETH performed strongly, leading with a net inflow of $126.0M, while Grayscale's ETHE continued to face a net outflow pressure of $16.67M. This divergence suggests that institutional investors are increasingly prioritizing fee structures and liquidity depth when selecting products.

The total Assets Under Management (AUM) for Bitcoin ETFs has now decisively broken through the $101.45B mark, with ETF net assets representing 6.55% of Bitcoin's total market cap. For Ethereum spot ETFs, the total net asset value reached $14.26B, with ETF net assets accounting for 4.87% of Ethereum's total market cap.

2.2 TradFi Liquidity

Over the past week, the trading structure of TradFi Perp DEXs was clearly tilted towards crude oil products. The shares of CL and Brent remained high but slightly retreated from earlier levels, still being the dominant forces. Meanwhile, WTI saw a modest recovery, keeping the energy sector broadly strong. In precious metals, the shares of Gold and Silver recovered somewhat but remained below recent highs, indicating marginally reduced safe-haven demand. Equities and FX shares were relatively stable, presenting a market pattern of "energy-led, with balanced contributions from other assets."

Daily TradFi perpetual trading volumes on CEXs over the past week mostly ranged between $0.25 billion and $0.45 billion, a notable decline from the stage high of around $0.75 billion in early April, representing a period of consolidation following high-level volatility. Structurally, metals remained the absolute mainstay, with equities as the secondary contributor. Commodities' share has gently increased since late March, while equities and FX volumes remained relatively small. Daily volume rebounded to approximately $0.45 billion at the end of the period, suggesting that after volatility subsided, capital continued to rotate within sectors like metals, with TradFi activity gradually returning to a normal trading rhythm from the extreme volumes seen earlier.

The number of TradFi asset classes available on CEXs expanded further over the past week. The total number of TradFi asset classes (covering only the TradFi and CFD sectors, excluding perpetual contracts) across three major CEXs increased from 885 to 955, a sequential growth of 7.9%. The increase in equities was the most significant, growing from 529 to 590 stocks, a sequential increase of 11.5%. Among these, Gate's equity TradFi offerings increased by 16 stocks, a sequential growth of 6.5%.

We selected XAUT, the TradFi product with the highest trading volume, to analyze its order book depth (Delta). Over the past week, the order book for XAUT spot within a ±1% spread showed a transition from seller dominance to thickening bid depth. During the price decline and consolidation phase in the first half of the period, liquidity Delta was frequently and significantly negative, indicating a more pronounced accumulation of sell orders near the current price. As the price rebounded from around $4,640 and consolidated at higher levels in the $4,780–$4,820 range, Delta shifted to predominantly positive values, especially with near-$0.9M positive spikes near the end of the period, suggesting a relative increase in near-term bid depth.

3. On-Chain Data Insights

3.1 BNB Chain Meme Activity Surges, PancakeSwap Trading Volume Doubles

Represented by "Binance Life," the trading heat and market cap of BNB Chain Meme tokens have significantly risen. PancakeSwap's weekly trading volume surged to $21 billion, nearly doubling from the previous week and reclaiming the top spot for DEX trading volume. Concurrently, trading volumes in major DEX pools like Uniswap, Aerodrome, Curve, and Fluid also saw varying degrees of growth. Trading demand persists within Solana, with short-term speculation not retreating; rather, active Meme capital appears to be favoring the BNB Chain network, which has deeper ties with the exchange.

3.2 Stablecoin Sector Sees High-Level Volatility, Capital Exits Yield and Protocol Stablecoins

The total stablecoin supply did not contract sharply, but internal rotation was evident. Stablecoins that attracted capital through yield in the previous stage generally saw reductions this week. USDT increased by approximately $1.02 billion compared to the previous week, while USDC saw a slight decline, failing to expand alongside USDT. Possibly influenced by recent frequent security incidents, the retreat in native DeFi stablecoins was clear. USDS fell from $8.56 billion to $7.80 billion, USDe dropped from $6.70 billion to $6.41 billion, and DAI also saw a slight decrease. However, payment-grade and institutional stablecoins remained unaffected, with PYUSD and USDG both experiencing modest growth.

3.3 LSTs Not Derailed by rsETH Incident, Capital Flows to Top Protocols

Despite a security incident involving nearly $300 million in funds on the LRT protocol KelpDAO's rsETH over the weekend, the LST sector proved more resilient than expected, with most top-tier protocols moving upward. Leading LSTs on the Ethereum side, such as Lido and Rocket Pool, saw capital inflows in the hundreds of millions or tens of millions of dollars. On the Solana side, Sanctum Validator LSTs and Jupiter Staked SOL both grew, with only Jito seeing a slight pullback. This demonstrates that DeFi market participants have matured, avoiding excessive panic and instead pricing standard staking assets separately from those with cross-chain packaging or restaking leverage. The issue with KelpDAO was the risk chain of LRTs combined with cross-chain bridges (like rsETH). Traditional ETH LSTs and mainstream SOL LSTs were not collectively labeled as high-risk assets and actually benefited from capital returning.

3.4 KelpDAO Event Significantly Impacts Aave, Lending Capital Withdraws from Main Markets

Aave's total loan balance saw a significant decline, ending its steady upward trend. Billions of dollars in deleveraging occurred in lending markets on core networks like Ethereum Main Market, Mantle, and Base. Over the weekend, Aave froze rsETH as collateral and implemented protective restrictions on WETH across Core, Prime, Arbitrum, Base, Mantle, and Linea. Although the Aave contract itself was not breached, and the issue originated from KelpDAO's rsETH cross-chain bridge, Aave, as the largest lending pool, bore the most direct chain reaction. Market concerns were further fueled by the potential bad debt arising from the hacker extracting hundreds of millions of dollars using rsETH as collateral. Consequently, the V4 Hub-and-Spoke risk isolation framework previously promoted by Aave Labs suddenly shifted from an architectural upgrade to a practical market need for repricing risk.

3.5 Security Incident Chain Reaction Causes Borrowing Rates to Surge Across Aave's Three Core Assets

The interest rate side captured the instantaneous tension when the incident occurred. The average variable borrowing APR for USDC jumped directly from 3.42% to 6.91%, USDT from 3.22% to 6.76%, and WETH also rose from 2.29% to 4.00%. Following the rsETH incident and the ensuing market panic, liquidity and capital rapidly withdrew from Aave. The available depth in the WETH and stablecoin pools on the main market thinned drastically, with utilization reaching 100% and liquidity nearly depleted. The Aave risk team subsequently made emergency adjustments to the interest rate models for WETH on Arbitrum, Base, Mantle, and Linea, reducing the full-utilization borrowing cost from 8.5%-10.5% down to 3%. This inversely confirmed the severity of the liquidity crunch in those pools at the time. The rate spike this week perfectly reflected the complete projection of an external black swan event penetrating through to Aave's money market rates.

3.6 Top Protocol Revenues Remain Solid, Aave Shows Clear Stress-Induced Earnings

Tether and Circle maintained their top two positions, with stablecoin issuance being the most stable source of cash flow. Revenues for Hyperliquid and Pump ran close to the highs of the previous week, indicating on-chain trading remained resilient. Aave's revenue this week reached $2.02 million, a significant increase from the prior week, but this represents stress-induced earnings following a liquidity squeeze, with limited sustainability. Protocols like Aerodrome and Titan Builder, posting weekly revenues of millions of dollars, also saw growth, indicating market capital hasn't left trading.

4. Derivatives Tracking

4.1 BTC Funding Rate Persistently Deeply Negative, Price Climbs Volatily and Hits New Stage Highs

Over the past week, the BTC funding rate remained persistently in negative territory, with multiple instances of extreme negative values (bottoming near -0.015) around mid-April. This indicates continued bearish sentiment dominance in the perpetual contract market and high short congestion. Correspondingly, after an early correction, the price gradually trended upward from around the $70K level, briefly surging towards $76K. This presents a classic divergence structure: "deeply negative funding rates but persistent price strength." This structure implies that short-sellers are paying continuous funding fees while facing upward price pressure, steadily accumulating short squeeze momentum. The price increase is driven more by spot buying or passive short covering.

In terms of rhythm, after April 10, the funding rate clearly shifted deeper into negative territory while the price accelerated upward, marking new stage highs. This suggests that during the price breakout, short-sellers did not significantly stop out; instead, they may have been adding to positions against the trend, further strengthening the potential for a squeeze. Overall, the market is currently in a state where bearish sentiment dominates derivatives positioning, but spot or structural buying provides support for a strong price. Under this high-divergence structure, if the price holds high or advances further, short covering could accelerate the move. Conversely, the sustained high negative funding rate means that leveraged shorts have built up a buffer, so any price pullback could trigger significantly amplified short-term volatility.

4.2 BTC Option Structure Rapidly Repairs, Short-Dated Elasticity Increases and Briefly Flattens

Between April 13 and April 19, implied volatility (IV) for BTC options across tenors generally trended upward, gradually repairing the previously steep contango structure. Specifically, short-to-medium-term IVs (7D, 30D, 60D) were still at stage lows (around -6 to -8 vol) around April 13 but quickly rose, collectively moving towards -3 to -4 around April 17, with significantly enhanced volatility elasticity. In contrast, long-dated IVs (90D, 180D) saw relatively limited increases, resulting in a clear "flattening" of the overall curve, reflecting a significant repricing of near-term volatility expectations by the market.

Structurally, around April 17, the short end briefly stood higher than the medium/long end, with the option structure temporarily showing signs of inversion. This reflected rapidly heating market expectations for short-term event-driven or price fluctuations. Such a sharp rise in short-dated IV typically corresponds to a phase of market acceleration or concentrated release of uncertainty, manifested on the trading level as a chase for gamma and increased demand for short-term hedging.

However, after April 18, as short-dated IV quickly retraced (7D notably pulling back), a