Gate Institutional Weekly: BTC Price and OI Recover Simultaneously, LST Sector Rebounds with SOL Rally

Executive Summary

• Last week, the market briefly entered a risk-off mode due to higher-than-target CPI data and geopolitical risks in the Middle East. However, as risk assets quickly recovered, BTC, ETH, and the broader crypto market experienced a 'down-then-up' reversal. ETF fund flows showed significant improvement.

• Over the past week, the daily trading volume of Gate TradFi Perp surpassed $500 million multiple times, with a notable spike around June 11, peaking near $700 million. The proportion of stock trading volume increased significantly compared to the previous period, with technology stocks, Pre-IPOs, and popular US stocks attracting more capital participation.

• DEX trading volumes generally declined from the previous week, cooling off from highs for top protocols like Uniswap and PancakeSwap. Concurrently, the supply of major stablecoins continued to contract, indicating that the market rebound relied more on existing capital rotation, as high-exposure events had yet to bring significant new on-chain dollar inflows.

• The LST sector recovered alongside the price rebound of ETH and SOL, with SOL ecosystem staked assets showing stronger performance. The lending scale on Aave stabilized and recovered, but the growth was primarily concentrated in the Ethereum main market, with capital re-aggregating towards the core ecosystem known for better liquidity and risk control.

• Aave's borrowing rates remained low, and the funding pressure on USDC eased, indicating the market has not yet restarted large-scale leverage expansion. Meanwhile, protocol revenues generally returned to normal levels, with the short-term heat from derivatives, MEV, and on-chain transactions fading quickly.

• The derivatives market recovered in tandem with the BTC rebound, with leveraged capital re-entering and demand for downside protection cooling significantly. Options trading volume and implied volatility continued to decline, signaling a shift from the previous deleveraging and defensive posture towards a relatively stable phase characterized by 'price recovery and volatility compression.'

• Gate's institutional trading volume share increased by 7.5% month-on-month. BTC and ETH spot trading outperformed the market, with their global market share rising by 9.62% month-on-month. CrossEx trading volume grew by 22.6% week-on-week, and 37 new trading pairs were added.

1. Market Focus Analysis

The biggest macro event last week was the May CPI data released on Wednesday. The data showed CPI rose 4.2% year-over-year, and core CPI increased 2.9% YoY, accelerating for the third consecutive month, reflecting the lagged impact of higher energy prices earlier in the quarter. Following the data release, US stocks fell sharply, with the Dow Jones plunging over 950 points in a single day and the S&P 500 dropping 1.62% to 7,267 points. The Nasdaq also suffered heavy losses. On the geopolitical front, tensions in the Middle East remained high. After a temporary détente in US-Iran relations, cracks reappeared, and risk aversion initially intensified following the CPI shock before gradually subsiding as risk assets stabilized.

Entering Thursday, market sentiment rapidly recovered from extreme pessimism, triggering a vengeance rebound in risk assets. The overall crypto market trajectory was a decline followed by an upswing: BTC posted a weekly gain of about 4.2%, starting from around $63,000, dipping to a weekly low of $60,000 mid-week, and then rebounding strongly to finish above $65,000. ETH recorded a weekly gain of about 2.1%, opening high near $1,680, bottoming out at $1,604, and closing around $1,726. Altcoins generally recovered in tandem with the majors but with varying magnitudes. The total crypto market cap largely recovered after a significant mid-week contraction. The Fear & Greed Index touched the 'Extreme Fear' zone at the start of the week before gradually recovering alongside the market rebound, though it remained in a sentimentally weak territory.

On the Fed front, the policy path seems clear. The 4.2% headline inflation rate and resilient labor market data support maintaining a high-for-longer policy stance. However, Brent crude oil prices fell from around $113/barrel to $87/barrel over the past month. This significant drop in oil prices, coupled with softening core inflation data, suggests the inflationary shock from energy may be beginning to reverse. The current federal funds rate remains in the 3.50%-3.75% range, and the market's probability of the Fed holding steady at the June 16-17 FOMC meeting is near 99%. Furthermore, the market still sees a greater likelihood of further monetary policy tightening before year-end, although this expectation could change if lower energy prices translate into slower headline inflation in the coming months.

2. Liquidity Analysis

2.1 Market Confidence Rapidly Restored; BTC and ETH ETFs End Outflow Streak

Last week, Bitcoin spot ETFs experienced a structural shift from 'outflows first, recovery later.' The week started poorly, with BlackRock's IBIT posting a single-day net outflow of approximately $233 million, dragging the entire market of Bitcoin ETFs to a combined net outflow of about $91.37 million on Monday. This continued the pessimistic trend from the prior week, which saw over $1.67 billion in net outflows, as institutional capital remained cautious or reduced positions amid heightened macro uncertainty. IBIT recorded its first net inflow of the week on Wednesday, marking a clear inflection point in market sentiment. As the CPI risk was fully digested, market confidence quickly recovered. On Thursday, Bitcoin ETFs saw a combined net inflow of about $85.85 million, with none of the 12 Bitcoin ETF funds recording net outflows, ending the multi-day bleeding.

BlackRock's IBIT currently leads the market by a wide margin with an AUM exceeding $70 billion. Fidelity's FBTC ranks second with an AUM of approximately $17.7 billion. Together, they command over 90% of the Bitcoin spot ETF market. For the week overall, Bitcoin ETF fund flows demonstrated resilience after the negative shock, with some institutional buying interest evident near price lows. Whether this will translate into a trend of sustained net inflows remains to be seen and requires further data tracking.

Ethereum spot ETFs significantly outperformed their Bitcoin counterparts last week. Against the backdrop of large net outflows from BTC ETFs, ETH ETFs actually recorded net inflows first, exhibiting a 'seesaw effect.' On Monday, Ethereum spot ETFs had a combined net inflow of about $82.37 million, led by Fidelity's FETH with ~$28.57 million, while BlackRock's new staking-enabled product, ETHB, attracted approximately $26.96 million. Analysts suggest the near-correspondence between Bitcoin ETF outflows and Ethereum ETF inflows on that day reflects institutional portfolio rebalancing among major crypto assets, rather than a signal of a full-scale capital exodus.

For the entire week, Ethereum ETF flows maintained a positive trajectory. The total AUM of Ethereum spot ETFs currently stands at approximately $21.5 billion. Institutional interest in Ethereum appears to be warming, particularly for new products offering staking yields, which are seeing positive momentum. This might indicate a re-evaluation of the Ethereum ecosystem's value.

2.2 TradFi Liquidity

• TradFi Perp DEX: Over the past week, the trading structure of TradFi Perp DEX experienced notable shifts. The share of commodities continued to decline, while the share of stocks and indices/ETFs increased significantly. Since mid-May, the commodities sector share has gradually fallen from a high of nearly 70% to around 25%-35%, whereas the stock sector share rapidly recovered to about 30%, and the index/ETF share rose to approximately 35%-40%, becoming the primary source of incremental volume recently. This shift is closely linked to the recent market environment. On one hand, safe-haven trading spurred by Middle East tensions pushed gold and other commodity prices to highs, after which they entered a consolidation phase, cooling marginal trading activity. On the other hand, the anticipated SpaceX IPO and the sustained activity in AI and chip-related tech sectors attracted capital back to US stocks and related index products. For TradFi Perp platforms, user demand is expanding from pure gold trading to a more diverse set of asset classes, including stocks, ETFs, and Pre-IPOs.

• Gate TradFi Perp Volume: Over the past week, Gate TradFi Perp trading volume remained robust overall, with daily turnover exceeding $500 million multiple times. Around June 11, volume notably spiked, peaking near $700 million. In terms of asset structure, precious metals still dominated, with gold-related products contributing the vast majority of volume. However, the share of stock trading increased compared to the previous period, indicating users are increasingly participating in technology stocks, Pre-IPOs, and popular US stock trading. Notably, amidst a generally cautious capital environment in the broader crypto market, TradFi Perp trading activity did not decline simultaneously, suggesting some speculative capital is rotating from native crypto assets towards traditional finance instruments like gold, stocks, and indices.

• Gate TradFi US Stock Asset Count: Gate officially launched its US stock trading service on June 2. Leveraging advantages such as real underlying asset support, direct trading with USDT, no overnight holding fees, and high liquidity, the service has garnered continuous market attention and steady volume growth since its launch. Currently, Gate supports 7 major asset classes: ADRC, Stocks, ETFs, ETNs, ETSs, ETVs, and PFDs, and is continuously expanding its product coverage. In terms of asset count, the total number of tradable instruments has doubled since launch. The stock category has seen the most significant growth, with its share of total assets rising from roughly 70% at launch to 85%, further diversifying user investment choices. Looking ahead, Gate will continue to drive access to more markets, global liquidity integration, and cross-market trading capabilities, steadily expanding its diversified asset coverage and reinforcing its strategic positioning as a global asset trading and market access platform.

• TradFi Order Book Depth (Delta): We selected XAUT, the TradFi asset with the highest trading volume, to analyze its order book depth (Delta). Last week, XAUT order book liquidity exhibited a 'weak first, strong later' characteristic. During June 10-12, influenced by escalating Middle East tensions and rising risk aversion, order book depth contracted significantly. Delta repeatedly dropped below -$1 million, indicating clear order cancellations and liquidity stress. As the gold price stabilized and rebounded around $4,050, liquidity quickly recovered after June 13. On June 14, a positive Delta peak exceeding $2 million was observed, with a large number of orders re-entering the market. Overall, XAUT's depth has significantly improved, with enhanced liquidity provision offering solid market support for gold prices to sustain at high levels.

3. On-Chain Data Insights

3.1 Market Rebound Fails to Translate into Sustained Volumes as DEX Activity Cools from Highs

This week, DEX trading volumes contracted notably compared to the previous week. Uniswap, PancakeSwap, Aerodrome, and Curve all cooled off from their highs. The turnover demand generated by the market rebound did not sustain throughout the week. PancakeSwap overtook Uniswap again, though the gap between them was not significant, with top-tier liquidity concentrated in BNB Chain and Ethereum ecosystems. DEXes on Solana like Meteora, Raydium, and Whirlpool also saw a cooldown. While PumpSwap maintained active trader numbers, capital scale did not grow in tandem, suggesting low per-trade value among retail high-frequency traders. Concurrently, speculative capital began flowing towards tech IPOs, oil prices, and on-chain equity perpetuals, indicating that traditional crypto assets are no longer the sole risk-on entry point.

3.2 Stablecoin Supply Continues to Contract; High-Exposure Events Haven't Yielded New On-Chain Dollars

This week, the supply of major stablecoins generally decreased. USDT and USDC saw slight declines, while the drops in USDS, USD1, DAI, and PYUSD were more pronounced. USDe's supply remained roughly stable. GHO bucked the trend, with Aave's native stablecoin being one of the few assets that expanded. The contraction in stablecoins corroborates the cooling DEX trading volumes, suggesting this week's market was primarily driven by existing capital rotation. Notably, World Liberty Financial's USD1 was announced as prize money for UFC event fighters, generating significant off-chain exposure. However, supply data has yet to reflect corresponding growth. The market appears to be distinguishing between brand marketing and actual settlement needs; short-term publicity is insufficient to alter existing network effects. Regulation, reserve transparency, and cross-chain liquidity remain more important criteria for institutions when choosing stablecoins.

3.3 LST Sector Enters Valuation Recovery; SOL Staked Assets Rebound Faster

This week, the LST sector reversed its synchronized decline from the previous week, with major protocols on both ETH and SOL showing recovery. Lido, Rocket Pool, and StakeWise experienced moderate repairs, with no further capital exodus from ETH staking. The SOL side demonstrated stronger elasticity, with TVL increases for Sanctum, Jito, and Jupiter Staked SOL generally outpacing their ETH counterparts; Sanctum showed the most outstanding performance. However, as TVL is denominated in USD, the rebound largely stems from the price recovery of ETH and SOL and cannot be directly equated to net staking token inflows. The impact of the KelpDAO cross-chain incident persists. Institutions have clearly stratified their risk assessment across standard LSTs, restaking wrapper assets, and cross-chain versions. This week represents valuation recovery and position replenishment, insufficient to confirm a new wave of staking capital expansion.

3.4 Aave Lending Supported by Ethereum Main Market; Multi-Chain Expansion Yet to Recover

Aave's lending scale halted its continuous contraction. The Ethereum market saw a relatively significant rebound, becoming the primary source of stabilization for the total loan book. Base, Mantle, and BNB Chain showed slight improvement, but markets like Plasma, MegaETH, Avalanche, and Ink continued to decline, with Ink's contraction being the most pronounced. The rotation of funds from newer markets back to Ethereum indicates that borrowers currently prioritize collateral depth, liquidation liquidity, and the predictability of risk parameters. The cautious sentiment following the rsETH/KelpDAO incident has not fully dissipated. The market is still observing the actual effects of WETH recovery, Emergency Guardian adjustments, and risk isolation measures. Against this backdrop, Aave V4's Hub-and-Spoke architecture becomes more practically relevant, as it can reduce the probability of risk transmitting from a single collateral type or single market to the entire protocol. Although a turning point for the lending book has appeared, it currently represents a core market repair.

3.5 Low Aave Borrowing Rates Stabilize; Tail-end Pressure on USDC Eases Further

Average borrowing rates for USDC, USDT, and WETH remained broadly stable, with USDC and WETH seeing slight declines and USDT trading in a tight range. The highest weekly rate for USDC was lower than the previous week, indicating that the short-term capital tightness triggered by extreme utilization is easing. WETH rates stayed low; the rebound in lending balances did not lead to a surge in funding costs, suggesting cautious directional leveraging in ETH. The average cost of borrowing USDC is higher than USDT, indicating that USD funding demand favors core assets with deep liquidity and high institutional acceptance. The current environment is suitable for capital turnover, carry trades, and market-neutral strategies, but there are no signs yet of borrowers competing for liquidity. The signal from interest rates is more moderate than the loan balance recovery: Aave has moved past the immediate post-incident stress phase, but a full recovery in risk appetite will take time.

3.6 Protocol Revenues Return to Normal across the Board; Impulse from Derivatives & Infrastructure Fades Quickly

This week, revenues for most top protocols were lower than the previous week, with industry profitability shifting from localized surges to a broad-based cooldown. Tether and Circle still held the top two spots, but their reserve income also declined due to interest rate and statistical period effects. The stablecoin issuers win through scale and stability. Hyperliquid Perps revenue dropped significantly from its highs last week, though it remains the highest-earning on-chain trading protocol. This is related to the cooling down of concentrated activity in stock indices, oil prices, and Pre-IPO perpetual contracts from the previous week. A