June 2026 Market Commentary

This commentary was written by Jianing Wu, with contributions from Su Lee.

Markets Sweat as Summer Heats Up

Unlike May's clean divergence, when U.S. equities pressed to record highs even as crypto sold off, June brought both asset classes under pressure. Equities absorbed two sequential shocks: a round trip in the Iran war premium and a gradual questioning of the AI valuation and capital-expenditure cycle. Yet despite the S&P’s retreat, equities still closed their strongest quarter since 2020.

Crypto enjoyed no such offset. BTC extended May's decline, falling 20.14% on the month as the institutional demand that had dominated since late 2024 went absent; ETH fared worse, sliding 21.77%, and the broad market measured by the Bloomberg Galaxy Crypto Index (BGCI) fell roughly 20%.

Early in the month, Israeli and U.S. strikes on Iran briefly drove oil higher as markets priced in supply disruption through the Strait of Hormuz. That geopolitical premium faded quickly, as a Memorandum of Understanding at Versailles and a subsequent 60-day roadmap agreed upon in Switzerland reduced fears of a broader regional conflict. However, despite the mid-month agreement, fighting flared again, leaving a fragile stand-down.

Meanwhile, inflation remained sticky: headline CPI rose to 4.2% year-over-year and the European Central Bank delivered its first interest-rate hike since 2023 while the Federal Reserve held rates steady but adopted a more hawkish tone, pushing U.S. Treasury yields to their highest levels since early 2025 and leading traders to begin pricing a September hike.

The month's second test came from the AI trade. Investors increasingly questioned whether AI-related valuations had run ahead of fundamentals after another quarter of massive hyperscaler capital spending. Micron's earnings, widely viewed as a bellwether for AI infrastructure demand, ultimately reinforced the view that memory demand remained exceptionally strong. Rather than broad de-risking, market leadership rotated away from the most crowded mega-cap technology names during the last week of June, and on the month’s final Friday software outperformed chipmakers by the most in five years.

BTC entered June in the low $70,000s and tumbled to $59,360 in the first week on a cluster of catalysts: Strategy's first disclosed sale since December 2022, a ~$739m Mt. Gox transfer, and an ETF outflow streak. BTC reclaimed roughly $66,500 mid-month as the Iran truce firmed and spot ETF flows briefly turned positive. However, that stability did not hold. BTC slipped from near $65,000 to fresh lows around $58,000 into month-end, clinging to $60,000 as the quarter closed.

The weakness was, once again, a story of flows. U.S. spot bitcoin ETFs recorded their worst month since their 2024 launch, shedding roughly $4.5 billion on net, with outflows running seven consecutive sessions into June’s final week. Strategy, whose accumulation had underpinned the corporate-treasury thesis, introduced a Digital Credit Capital Framework on June 29, signaling it may sell more bitcoin as part of a broader turnaround. With both the ETF bid and the Strategy bid in retreat, the absence of institutional conviction dragged crypto prices down.

On the policy front, the calendar worked against crypto's marquee legislation. Galaxy Research lowered its estimate that the CLARITY Act becomes law in 2026 to even odds, down from 60% at the start of the month, as competition for Senate floor time and the looming August recess narrowed the runway. Separately, President Trump signed two executive orders on quantum computing, one of which frames post-quantum cryptographic migration as a national-security countdown, a longer-dated but material consideration for the encryption underpinning Bitcoin.

Tokenization, which we covered at length last month, kept advancing on a different axis: where May's activity built the settlement and issuance rails, June pushed the assets riding them up the risk curve. New York Life announced a high-yield corporate bond strategy onchain through Centrifuge. Janus Henderson routed AAA-rated CLOs into Ethena's USDe reserves, carrying tokenization into credit. Coinbase unveiled 1:1-backed tokenized equities. Citi planned to issue receipts tied to private-company shares. The SEC's proposed rescission of Regulation NMS Rules 611 and 610(e) is poised to remove the barrier to offering tokenized U.S. equities trading in DeFi. Beneath the assets, the settlement dollar itself turned contested, as a consortium including Visa, Mastercard, BlackRock, and Coinbase unveiled the OUSD stablecoin to compete with the incumbent stablecoin giants Circle and Tether. Meanwhile, JPMorgan, Citi, and peer banks proposed a shared tokenized-deposit network to keep settlement money inside the regulated banking perimeter.

001 ETF Flows Signal Waning Institutional Conviction

One of the main institutional sentiment indicators is U.S. spot crypto ETF flows. Following heavy outflows in May, flows deteriorated further in June. In particular, U.S. BTC spot ETFs recorded their largest monthly net outflow since launching in January 2024, driven by significant redemptions at both the beginning and end of the month. The month also marked the seventh consecutive week of net outflows, which is the longest streak on record. U.S. ETH spot ETFs followed a similar pattern, recording top five monthly outflows since launch in July 2024.

The huge outflows reflect an absence of institutional dip-buying, in contrast to previous market pullbacks when lower prices were often met with renewed ETF inflows as investors took advantage of attractive entry points. In June, however, institutions continued withdrawing capital even as prices stabilized, suggesting allocators remain cautious amid macro uncertainty and the rotation of capital from crypto to AI. On top of that, we are also seeing older coins begin to move to different addresses, potentially signaling renewed selling pressure. While the amount distributed is not yet significant when compared with historical norms, it bears watching as additional supply could weigh on prices if the trend accelerates.

Beyond BTC and ETH, altcoin ETF inflows have remained resilient. Solana ETFs recorded their first month of net outflows since launch, albeit a modest $1.7 million, while products tied to Hyperliquid's HYPE and XRP continued attracting positive inflows. HYPE has been one of the strongest ETF success stories of the year, consistently generating positive inflows despite weakness across the broader crypto market. XRP has likewise continued to attract capital, although approximately 84% of inflows have come from retail investors and its price moved in the opposite direction, having dropped more than 55% from its January high. Investors appear to be concentrating capital around differentiated investment theses supported by strong protocol fundamentals such as revenue generation, while reducing broad-based exposure to more mature assets such as BTC and ETH.

The shift is significant because spot ETFs have been one of crypto's largest structural sources of demand since their launch in 2024. Persistent outflows suggest that one of the market's most reliable buyers has stepped back, leaving BTC and ETH increasingly dependent on other sources of demand to absorb supply. That dynamic has become particularly relevant as another major institutional narrative, the digital asset treasury (DAT) trade, has also come under pressure.

002 Strategy’s Flywheel Faces Strain

Strategy, the largest corporate holder of BTC and the archetype for the DAT model, has long been viewed as a structural source of demand through its ability to repeatedly raise capital and acquire additional BTC. As BTC’s price dropped 54% from its all-time high, Strategy’s bitcoin flywheel has come under strain and investors become increasingly concerned over a potential downward spiral.

Investor concerns surfaced following Strategy's late-May sale of 32 BTC. Although the sale represented only a tiny fraction of its holdings, it challenged the perception that Strategy would remain a perpetual buyer under all market conditions. It also renewed scrutiny of the company's preferred equity program, STRC, and whether a prolonged decline in BTC prices could pressure Strategy's ability to honor its growing preferred dividend obligations. Importantly, Strategy does not necessarily need to sell BTC to support STRC. The company retains several financing levers, including raising the dividend yield on future preferred issuances to attract capital, issuing additional common equity through its at-the-market (ATM) program when market conditions permit, utilizing its growing cash reserves, or refinancing through new capital raises. However, while these tools can provide liquidity and reduce the need for near-term BTC sales, they do not address the underlying concern: a prolonged period of weaker BTC prices would erode cash coverage while fixed financing obligations continue to grow. As financial flexibility diminishes and raising capital becomes more expensive, investors worry Strategy could eventually be forced to monetize portions of its BTC holdings to replenish U.S. dollar reserves or meet capital obligations, dumping BTC supply on an already weak market and reinforcing downward price pressure.

Management has sought to reassure investors. During June, Strategy continued to purchase 3,751 BTC, increased its cash reserves to approximately $1.1 billion, and announced a formal bitcoin monetization program that would allow the company to selectively sell BTC to replenish U.S. dollar reserves, fund preferred dividend payments, and finance up to $2 billion of share repurchases. The repurchase authorization gives Strategy the ability to buy back preferred securities including STRC at a discount, reducing future dividend obligations while helping stabilize its capital structure. While the company has framed these measures as prudent balance sheet management to extend its financial runway rather than a change in long-term conviction, the announcements have nevertheless reinforced investor focus on the sustainability of its financing model.

That skepticism was evident in market pricing. STRC, designed to trade near Strategy’s $100 liquidation preference, continues to trade at a meaningful discount, while the company's multiple to net asset value (mNAV) has dipped below 1 briefly. After STRC dropped to a low of $75, Strategy raised its interest rate from 11.5% to 12% and announced the bitcoin monetization program. Market reacted positively, and STRC’s price recovered to $88 as a result.

Across the broader digital asset treasury universe, companies holding BTC, ETH, SOL, HYPE, BNB, and other digital assets have all seen valuation premiums compress, with many now trading near or below the value of their underlying holdings.

Should crypto prices remain under pressure, treasury values would compress and mNAV multiples would contract. This would not only weaken one of the market's primary sources of institutional demand that helped propel many cryptocurrencies to record highs last summer, but could also increase the likelihood that some treasury companies eventually unload digital asset holdings to meet capital obligations. The prospect of structural buyers becoming incremental sellers has become an important overhang on crypto markets, with growing doubts around the durability of the digital asset treasury (DAT) model weighing on sentiment.

003 Prediction Markets

The spectacular growth of prediction market has brought up discussions around both the information value of these markets and their competitive threat to established listed operators in sporting bets.

Order-book exchanges for event-linked contracts are not new. Betfair, launched in the U.K. in 2000, pioneered the peer-to-peer exchange model and remains one of the most liquid venues globally for political and sporting event markets. Over £128 million was matched on the Betfair Exchange in 2016 over Brexit, making it one of the biggest non-sporting events “bookies” saw and an event that changed how observers gain information in real time by collecting the opinions of bettors. What has changed materially since 2024 is the emergence of U.S.-regulated exchanges, most notably Kalshi, operating under CFTC oversight as Designated Contract Markets. Offshore and onchain venues remain active as well, most notably Polymarket, whose CFTC-regulated U.S. entity has struggled to gain traction while its global platform continues to operate largely outside U.S. regulatory reach. Neither category is labeled as gambling sites as is the case for Betfair. The case for prediction markets as information sources rests on a simple fact that unlike surveys, market participants have financial skin in the game. The 2024 U.S. presidential election provided the most high-profile test of this thesis to date. While polling aggregators consistently indicated a close call between Trump and Harris, prediction markets gave Trump increasingly decisive odds in the weeks before election day. In the event, Trump won convincingly, and the markets' edge over polls in this cycle became a mainstream narrative. Although prediction markets have failed on some other events, when they aggregate more motivated participants, they tend to outperform surveys suffering from declining response rates and herding effects.

Prediction markets offer a direct, binary, real-time probability for a single event in a cleaner structure than the traditional alternatives such as a basket of relevant sectors or currency positioning for political events. Before the emergence of liquid event exchanges, institutional traders seeking to express or hedge political views typically used event-linked trade baskets: sector-weighted equity portfolios constructed around expected policy impacts (a "Trump trade" basket might overweight energy, defense and domestic banks, for instance). So for a portfolio manager wanting a clean, explicit and levered expression of a specific political outcome rather than a basket of second-order sector effects, a prediction market contract may be a more useful product.

While the information and herding narrative around prediction markets is real and powerful, it is not where these platforms currently make the most money. And that matters for investors assessing the competitive threat to listed operators in sports betting sector. Both Kalshi and Polymarket have more than 50% of the total trading volume come from sporting-related contracts.

This revenue mix places prediction markets in direct competition with incumbent listed sports betting operators, principally DraftKings (DKNG) and Flutter Entertainment (FLUT), the parent of FanDuel. Both mainly operate as traditional sportsbooks, but FLUT acquired Betfair in 2019.

Since the 2024 US election, Kalshi's private valuation has grown from an estimated ~$300 million to $22 billion at its May 2026 Series F, and Polymarket from ~$350 million to a confirmed $9 billion following ICE's October 2025 strategic investment.

Management at both DraftKings and Flutter have publicly minimized the competitive threat, with each CEO arguing that prediction market volumes draw primarily from states without legalized sportsbooks and from low-margin customers rather than cannibalizing core revenue. The equity markets have reached a different verdict. Since the November 2024 U.S. election, DKNG has declined approximately 34% and FLUT approximately 52% despite an improving fundamental backdrop, with DraftKings delivering its first full year of GAAP profitability in 2025 and Flutter reporting 17% revenue growth to $16.4 billion. The disconnect suggests the market is pricing a structural risk: not the current revenue, but the competitive moat underpinning prior valuations.

One of the oldest adages in gaming is that "the house always wins" – so the most common approach is often to own the house. That logic has rewarded early investors in both the incumbent sportsbooks, DraftKings and Flutter, and the emerging prediction market platforms, Kalshi and Polymarket. Today, however, the question is no longer whether to own the house, but which house has the stronger moat. The traditional sportsbooks rely on scale, brand recognition, and state-by-state licensing to defend their positions. Prediction markets, by contrast, operate under a fundamentally different model: peer-to-peer matching that eliminates bookmaker risk, a national CFTC regulatory framework that avoids the complexity of state-by-state licensing and punitive gaming taxes, and a single marketplace capable of pricing virtually any event, not just sports. Since the 2024 U.S. election, investors have increasingly assigned higher valuations to this new model, suggesting the market believes the next generation of "the house" may look very different from the last. It might not be a house at all.

004 Our Takeaways and Predictions

Coming into July, the equity backdrop has stabilized on the surface even as the components underneath remain unresolved. A softer-than-expected June jobs report has eased fears of further Fed tightening, sending Treasury yields lower and prompting markets to scale back expectations for a near-term rate hike. That has provided fresh support for risk assets, but with the Fed still emphasizing data dependence, each inflation and labor market release is likely to carry outsized influence over the policy outlook.

The AI trade’s positioning remains crowded, particularly in semiconductors, making a positioning-driven deleveraging event a more immediate risk than a deterioration in underlying demand. Iran has shifted from active conflict to a fragile stand-down, removing the immediate tail risk but replacing it with a slower-burning one: implementation of the ceasefire framework and progress toward a lasting nuclear agreement remain uncertain, leaving scope for geopolitical risk premiums to re-emerge with little warning. Seasonality offers little directional guidance, and with political uncertainty gradually building ahead of this year's midterm elections, we expect rotation and dispersion to dominate over a clean directional move through July.

At the time of writing, crypto has benefited from the softer rates backdrop, rebounding alongside broader risk assets as lower yields improve liquidity conditions and support investor appetite for higher-beta assets. However, the institutional retreat that defined June has not yet found a floor. BTC U.S. spot ETF continued to experience outflows, and capital continues rotating toward AI equities rather than returning to digital assets. BTC is currently trading around $62,000; if it holds that level, it could support the base case of consolidation while the market rebuilds.

Key Events to Watch:

• July 16: Hyperliquid Summit NYC

• July 29: Fed Interest Rate Decision

Key Macroeconomic Data Releases:

• July 9: Initial Jobless Claims

• July 14: CPI

• July 15: PPI

• July 16: Retail Sales

To learn more about the topics covered in this month's newsletter, contact our team or reach out to your Galaxy representative.

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