Digital asset market maker Keyrock says last week’s rebound in Bitcoin and other risk assets was driven primarily by easing expectations of another U.S. interest rate hike rather than a meaningful return of institutional capital.
In its latest weekly market report, “Hike Odds Fade,” the company highlights how weaker-than-expected U.S. employment data, declining volatility, and a large short squeeze combined to lift cryptocurrency markets, while cautioning that several indicators still point to a fragile recovery.
Cooling labor market eases pressure on risk assets
Markets reacted positively after U.S. June payroll growth came in well below expectations, reinforcing hopes that the Federal Reserve may be nearing the end of its tightening cycle.
The softer labor data prompted traders to reduce expectations of another rate hike later this year, supporting a recovery across both cryptocurrencies and traditional inflation hedges.
Bitcoin climbed to around $63,600, while gold also advanced as the U.S. dollar weakened. Technology stocks posted modest gains, reflecting improving risk sentiment across financial markets.
Despite the rally, Keyrock notes that long-term Treasury yields remain elevated and markets continue to price a meaningful probability of another rate increase, suggesting investors are not yet fully convinced that monetary policy has turned decisively more accommodative.
Volatility falls as short sellers unwind positions
According to the report, implied volatility declined sharply across crypto markets as investor confidence improved following the payroll release.
Bitcoin and Ethereum options volatility both moved lower, while the VIX also retreated, reversing much of the spike seen during the previous week’s selloff.
At the same time, derivatives data showed a significant build-up in open interest alongside positive funding rates, indicating that leveraged traders returned to the market as prices recovered.
More than $280 million worth of bearish crypto positions were liquidated during the rally, highlighting the role of short covering in driving recent price gains.
ETF flows continue to lag
While derivatives markets turned increasingly optimistic, institutional spot demand remained subdued.
Keyrock notes that U.S. spot Bitcoin ETFs continued to record net outflows during the week, although the pace of withdrawals slowed compared with previous weeks.
Ethereum investment products also experienced modest redemptions, while Solana funds registered small inflows. The company believes the slowdown in ETF outflows is encouraging, but says sustained inflows will likely be needed to support a longer-lasting market recovery.
Tokenized assets continue attracting capital
Beyond short-term price movements, Keyrock identifies tokenized real-world assets (RWAs) as one of the strongest structural themes in digital finance.
The report highlights Maple Finance, whose assets under management increased sharply following several strategic developments, including an on-chain credit facility with Kraken, the launch of syrupUSDG with Paxos, and its integration with Robinhood Earn.
According to Keyrock, these developments demonstrate how tokenized credit infrastructure is increasingly moving beyond crypto-native markets and into mainstream financial platforms.
Stablecoin payment infrastructure continues expanding
The report also points to rapid growth in stablecoin-powered payment cards.
Keyrock cites industry data showing that cumulative crypto card top-up volumes have surpassed $10 billion, reflecting increasing use of stablecoins across payment networks.
However, the firm notes that much of this activity is being driven by institutional settlements, treasury operations, and business-to-business transfers rather than everyday consumer spending.
While consumer adoption continues to grow, Keyrock believes the more significant development is the expanding role of stablecoins as financial infrastructure connecting traditional payment networks with blockchain-based settlement.
Keyrock’s Take
Despite the positive market performance, Keyrock believes the latest rally should be viewed primarily as a relief bounce rather than confirmation of a sustained bullish trend.
The company argues that softer macroeconomic data reduced expectations for another Federal Reserve rate hike and created favorable conditions for Bitcoin and gold to recover simultaneously. However, elevated long-term yields, continued ETF outflows, and relatively thin market liquidity suggest institutional investors have yet to return in meaningful size.
Looking ahead, Keyrock says one of the most important signals will be how interest rate expectations evolve following the Federal Reserve’s next policy meeting. In the firm’s view, a further decline in expectations for additional rate hikes could provide stronger support for digital assets, while improving ETF flows would offer clearer confirmation that institutional demand is returning.
