LMAX Digital volumes were strong again on Wednesday. Total volume came in at $1.2 billion.

Breaking it down per coin, bitcoin volume came in at $1.1 billion. Ether volume came in at $65 million.

Looking at average position size over the past 30 days, we’re seeing average bitcoin position size at $7,821 and average position size for ether at $3,300.

Volatility has stabilized in recent weeks. We’re looking at average daily ranges in bitcoin and ether of $2,147 and $95 respectively.

The latest setbacks in digital assets come on the heels of a hotter-than-expected round of US inflation data, which has reignited concerns about higher interest rates and the associated pressure on risk-sensitive assets.

While the initial reaction has been negative, there are several encouraging takeaways that leave us feeling considerably more constructive about the outlook than the latest price action might suggest.

For starters, digital assets have already demonstrated an increasing ability to stand on their own two feet, supported by a value proposition that extends well beyond their traditional classification as risk-correlated assets.

Indeed, there is a compelling argument that Bitcoin itself should attract greater demand in an environment of persistent inflation, given its scarcity, decentralized nature, and potential appeal as a long-term store of value. While this narrative may not always dominate short-term price action, it remains an important consideration when assessing the broader investment case.

Another particularly interesting development has been the reaction in the US Dollar. Despite an initial surge following the inflation release, the greenback has since come under selling pressure. This suggests investors may be reluctant to price in a materially more aggressive Fed tightening path, reinforcing our view that much of the hawkishness has already been absorbed by markets.

Adding to this more encouraging picture has been the pullback in oil prices over the past several hours, which should help alleviate some of the renewed concerns around inflationary pressures. Taken together, these developments suggest the macro backdrop may be considerably less threatening than the initial reaction to the inflation data would imply. If this interpretation holds, reduced support for the Dollar and a potential shift in yield differentials could ultimately provide a meaningful tailwind for digital assets.

It’s also worth considering that the intensity of the latest decline may have been amplified by the liquidation of excessively leveraged positions.

While these episodes can produce uncomfortable short-term volatility, the removal of speculative excess is often a healthy development, allowing markets to reset and establish a more sustainable foundation for the next leg higher.

Ultimately, the broader picture remains unchanged, and our outlook continues to be highly constructive. The fundamental investment case remains intact, the macro backdrop may be less threatening than the initial market reaction implies, and the clearing of excessive leverage could leave the market in a stronger position.

We continue to expect setbacks to attract meaningful demand, with the potential for a sequence of higher lows to pave the way for a renewed recovery into year-end.