BTC ETF Flows Turn Positive Amid Fragile Liquidity; Stablecoin Growth Remains Uneven

Weekly Market Update (Dec 15 - Dec 21, 2025)

The third week of December (Dec 15–21) is starting with stabilization in institutional flows, rather than continued outflows. The latest completed net flow data (Dec 8–12) shows BTC spot ETFs turned back to net inflows (around US$49.1M on Dec 12), signalling that the heavy redemption pressure seen earlier has eased and that institutional appetite is no longer deteriorating in a straight line.

Meanwhile, aggregate stablecoin supply, as tracked by DeFiLlama, is modestly expanding (the total stablecoins ~US$309.94B, +US$1.65B / +0.53% over 7D), indicating that stablecoin-issued liquidity is slowly rebuilding rather than remaining broadly unchanged.

At a chain-specific level, several stablecoin pools on mid-size chains continue to show reductions, consistent with localized liquidity rotations/withdrawals even as the aggregate base grows: Arbitrum -3.90% (7D) and Avalanche -18.05% (7D), while Solana +2.47% (7D) continues to gain liquidity share.

Given the improving ETF flow impulse but uneven stablecoin distribution, liquidity conditions remain fragile rather than “tight across the board”: majors are supported, but order-book depth outside liquid venues remains shallow and volatility skew remains elevated across derivatives/options. Funding remains positive (7D accumulated funding: BTC ~0.0150%, ETH ~0.0029%, SOL ~0.0294%), implying leverage is rebuilding faster than spot depth in parts of the market, which sustains a cautious stance.

With institutional behavior still selective and liquidity still patchy, crypto continues to behave more like a yield/positioning-sensitive asset than a broad speculative "new money" trade — with price action driven more by portfolio rotation and macro-driven risk repricing than uniform inflows.

Key Market Review — Flows, Positioning & Institutional Behavior

Market Breadth: Narrow, Fragile & Flow-Driven

Market conditions this week remain fragile, as liquidity across major venues remains thin, and price action is increasingly dictated by ETF flow direction and the concentration of stablecoin liquidity. The key update compared to the prior framing: the latest completed ETF week (Dec 8–12) shows stabilization, not continued heavy redemptions (BTC net flows turning positive; ETH mixed/softer).

Bitcoin's range behavior still reflects shallow depth (moves occur without panic), but the market tone is better described as controlled repositioning rather than ongoing institutional capitulation.

Source: Bitcoin and Ethereum ETF flows on Farside Investors via Defillama (latest available data as of December 15, 2025).

Likewise, ETF flows reinforce this dynamic. Bitcoin and Ethereum products are no longer in a one-way outflow regime in the latest completed week: BTC improved into net positive territory (Dec 12 +US$49.1M), while ETH flows remain mixed with pockets of inflows earlier in the week but negative on Dec 12.

In contrast, Solana continues to show relative strength on liquidity metrics, with stablecoin supply on Solana still at an all-time high level and +2.47% (7D), supporting ongoing intra-crypto rotation toward perceived momentum/catalysts.

Across institutional desks, positioning remains defensive-to-selective: liquid majors are favored, hedging remains common, and inventory risk is managed tightly given year-end liquidity conditions. Until ETF inflows persist and stablecoin liquidity broadens across chains, conviction is likely to remain measured.

ETF Flows — Rotation Still Intact, Outflows Moderating

Institutional & Treasury Positioning: Reserved, Cautious and Selective

Institutional behaviour remains cautious but no longer uniformly reduces exposure. Some allocators appear comfortable maintaining or adding liquid beta (via majors/ETFs), while many desks still prioritize capital efficiency and hedged structures given thin depth into year-end. The key macro risk in this week‘s window is U.S. CPI on December 18, which can reprice real yields and liquidity expectations quickly.

Global Stablecoins — Supply, Distribution & Liquidity Signal

Global stablecoin supply expanded modestly during the past week, with total stablecoin market capitalization rising to ~US$309.9B (US$1.6B, around 0.44% WoW). This marks a shift away from outright contraction, but the pace of growth remains slow and insufficient to signal a full liquidity cycle reversal.

Key observations:

• Net stablecoin issuance remains selective, not broad-based, suggesting liquidity is returning cautiously rather than aggressively.

• Chain-level divergence is widening:

• Solana stablecoin supply continued to grow (around 2–3% WoW), reinforcing its position as a relative liquidity magnet.

• Arbitrum and Avalanche experienced notable stablecoin drawdowns, reflecting capital rotation away from mid-tier ecosystems.

• USDT and USDC growth remains subdued, indicating that large institutional allocators have not yet resumed meaningful balance-sheet expansion via stablecoins.

While the global stablecoin base is no longer stagnant, the lack of strong net minting and the concentration of liquidity on a few chains indicate that crypto liquidity remains distribution-constrained. This supports a regime where capital is rotating within the ecosystem rather than entering it at scale.

DeFi Overview — TVL Dynamics & Protocol Rotation

DeFi activity this week continues to reflect a liquidity-constrained, rotation-driven environment, rather than a broad re-risking phase. While headline metrics show TVL stabilization, the underlying composition reveals that capital is concentrating into simpler, lower-risk structures, with limited appetite for leverage-dependent or complexity-heavy strategies.

TVL: Stabilization Without Expansion

Total DeFi TVL has stopped declining aggressively, but remains range-bound, with movements driven more by asset price fluctuations than by fresh capital inflows. This indicates that the recent stabilization is valuation-supported, not flow-supported. While there is no clear evidence of new balance-sheet expansion from institutions or large DeFi allocators. But the TVL elasticity remains high — meaning price moves, rather than deposits, dominate changes.

In practical terms, DeFi is holding ground, not rebuilding.

Protocol-Level Rotation: Capital Seeking Simplicity

Capital allocation patterns show clear preference for core, low-complexity protocols:

Lending & Core Infrastructure (Defensive Allocation)

1. Protocols such as Aave, Compound, and core money markets have retained liquidity share.

2. Deposits remain largely overcollateralized and conservatively structured, with minimal use of recursive leverage.

3. Borrow demand remains muted, reflecting limited directional conviction.

Liquid Staking & Restaking (Relative Resilience)

1. Lido, EigenLayer, ether.fi continue to attract flows relative to other sectors.

2. Capital is drawn by protocol-native yield (staking rewards) rather than financial engineering.

3. Restaking participation remains steady, but new inflows are incremental, not explosive.

Structured Yield & Leverage Strategies (Capital Exit)

1. More complex DeFi strategies — including structured vaults, delta-neutral farms, and synthetic leverage products — continue to see outflows or stagnation.

2. These strategies are most sensitive to tight stablecoin liquidity, higher funding costs and reduced risk tolerance.

Overall, the DeFi activity continues to reflect a liquidity-led consolidation. Stablecoin supply is modestly expanding overall (+0.44% 7D), but distribution remains uneven: Solana gains while Arbitrum and Avalanche contract, consistent with continued ecosystem rotation rather than broad-based DeFi re-risking.

Funding Rate Snapshots

Source: https://www.coinglass.com/AccumulatedFundingRate (The data is based on the last 7 days' funding rate taken snapshot on December 15, 2025)

Outlook for the Remainder of the Week (Dec 15–21)

Macro & Liquidity Drivers

• U.S. CPI (Dec 18) is the dominant macro catalyst for risk assets this week.

• With the FOMC already concluded earlier in the month, CPI-driven repricing will dictate near-term liquidity expectations.

Liquidity & Flow Watchpoints

• Persistence of ETF inflow stabilization into and after CPI.

• Acceleration (or stalling) of global stablecoin supply growth.

• Whether stablecoin expansion broadens beyond a few dominant chains.

Absent a stronger stablecoin issuance impulse, upside is likely to remain range-bound and rotation-driven rather than trend-driven.

Positioning Summary This Week

Given current conditions, institutions remain focused on:

• BTC, ETH, SOL as liquid core exposures.

• Minimizing exposure to long-tail, low-liquidity assets.

• Prioritizing liquidity management and conservative sizing into key macro events.

• Waiting for broader stablecoin expansion and sustained ETF inflows before scaling risk.

Crypto Market Watch: Key Events & Liquidity Drivers (Dec 15–21, 2025)

Source: https://www.investing.com/holiday-calendar/

Crypto-Specific Catalysts to Watch

Source: https://coinmarketcap.com/events/, coinmarketcal.com