Wintermute: Lower Leverage And Spot Market Strength Signal Potential Consolidation
In Brief
Reduced leverage, negative funding rates, and resilient spot market activity suggest the crypto market has reset and is now better positioned to consolidate.
Algorithmic trading firm Wintermute released its latest cryptocurrency market update, noting a sharp decline in risk appetite this week as AI-driven equity momentum finally subsided. Although Nvidia delivered another strong earnings beat, the resulting rally was short-lived as the market sold into the bounce. This behavior indicated a shift in investor strategy, with strength used to reduce risk, suggesting that the AI trade is losing incremental buyers. As US tech stocks rolled over, the pressure extended into cryptocurrency sector, driving the total market capitalization below $3 trillion for the first time since April.
Macro indicators contributed to market fragility. US nonfarm payrolls came in at +119,000, while unemployment rose to 4.4%, and December rate-cut probabilities declined toward roughly 30%. In Japan, bear-steepening in government bonds and yen weakness raised concerns about its capacity to continue absorbing US Treasuries. Europe and Asia showed similar softness, with China experiencing AI-related profit-taking and renewed property market pressure. In the UK, inflation eased amid already thin liquidity heading into the US Thanksgiving period. As a result, cryptocurrency was the worst-performing major asset class for the third consecutive week, with broad selling and long unwinds pushing altcoins to the bottom of the performance rankings.
Despite macro weakness, the internal structure of the cryptocurrecny market shows signs of improvement. For the first time since late October, when Bitcoin traded near $115,000, funding rates have turned negative and remained so for the longest stretch since October 26th. Leverage has been leaning to the downside, while flows have rotated back to spot trading, where volumes have remained relatively strong despite the shortened holiday week. This combination suggests that the market has undergone a full reset and may be better positioned for stabilization once macro pressures ease.
Among the top 100 tokens, correlation is heavily concentrated in the top 10, which also experienced the worst performance, indicating that the largest assets are trading as a single macro-sensitive bloc. Conversely, tokens ranked 50-100 show milder drawdowns and early signs of decoupling, reacting more to specific catalysts. Narrow narratives, including agents, privacy, and Decentralized Physical Infrastructure Network (DePIN), continue to produce short bursts of outperformance even as the broader market softens. Meanwhile, Bitcoin volatility continues to rise, with 7-day realized volatility approaching 50.
Sector performance was broadly weak, with higher-beta areas hardest hit. Layer 2 solutions declined 14.9%, gaming tokens fell 12.0%, DePIN dropped 11.4%, and AI-focused tokens were down 10.5%. Mid- and small-cap assets also underperformed, while core Layer 1s lost 7.0% and the GMCI-30 index declined 7.2%, showing relatively better resilience. The overall move was indiscriminate, reflecting widespread macro-driven risk reduction across all sectors.
Wintermute Sees Healthier Crypto Market Structure Amid Deleveraging And Spot Market Resilience
Analysts noted that while digital assets have faced pressure from macro-driven market adjustments—first as the AI-driven rally stalled, and then as the Federal Reserve reset expectations—the internal structure of the cryptocurrency market now appears considerably healthier. Major assets are demonstrating stronger relative performance, sentiment has largely reset, and the previous leverage overhang has mostly cleared. Total perpetual open interest has declined from approximately $230 billion in early October to around $135 billion today, primarily due to long-tail deleveraging and the retreat of systematic flows. This shift has redirected activity toward spot markets, where depth and liquidity have remained relatively resilient despite the reduced trading volumes typical of a holiday-shortened week.
This is large because when leverage is lower and spot markets carry the majority of trading flow, recoveries tend to be more orderly compared to the mechanically driven squeezes observed earlier in the year. Negative funding rates and net-short perpetual positions further reduce the risk of additional forced liquidations, providing the market with more flexibility if macroeconomic conditions stabilize. The upcoming sessions are expected to influence market dynamics as the year concludes, but after weeks of macro-driven selling pressure, the environment is now conducive to consolidation.
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About The Author
Alisa, a dedicated journalist at the MPost, specializes in cryptocurrency, zero-knowledge proofs, investments, and the expansive realm of Web3. With a keen eye for emerging trends and technologies, she delivers comprehensive coverage to inform and engage readers in the ever-evolving landscape of digital finance.
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Alisa, a dedicated journalist at the MPost, specializes in cryptocurrency, zero-knowledge proofs, investments, and the expansive realm of Web3. With a keen eye for emerging trends and technologies, she delivers comprehensive coverage to inform and engage readers in the ever-evolving landscape of digital finance.
