📢 February Signals 📢

🗒️ Market update

February 2026: Relief Rally in Sight?

Macro: The Fed’s Quiet U-Turn

If you’ve been watching the charts and wondering why BTC hasn’t caught a stronger bid despite what feels like improving conditions, the answer may lie in Washington, and it’s actually more bullish than the price action suggests.

The Global Liquidity Index chart this month tells a striking story. After a prolonged period of quantitative tightening that saw the Fed’s Treasury securities holdings grind from ~$4.44T in mid-2024 down to a trough of around $4.19T by late 2025, something notable happened in January 2026: the Fed’s balance sheet turned sharply higher, jumping back toward $4.32T. That’s over $130 billion re-entering the system in a matter of weeks.

Historically, expansions in the Fed’s balance sheet have been among the most reliable leading indicators for crypto bull runs. The lag is typically 3–6 months. We’re now sitting in that lag window. The macro tailwind is building quietly beneath the surface.

BTC: Five Down Months and What History Tells Us

BTC is about to close five consecutive months of negative returns. That is an exceptionally rare occurrence in Bitcoin’s history. When you look back across the full price history, sustained drawdowns of this length at current market structure, have almost universally resolved with at minimum a relief rally.

The Glassnode supply chart is telling here. The percentage of BTC supply currently in profit has now hit supply in loss, seen in prior bear markets (2015, 2018–19 & 2022). This is bear market consolidation territory. Asymmetrically this is the time to stack, another leg down is still possible. This is not just some interesting confluence it is sentiment and holder behaviour in data form

Jane Street, Terra, and the AP issue

The biggest story in crypto this month that isn’t getting nearly enough mainstream coverage is the growing scrutiny around Jane Street’s role as an Authorised Participant in spot Bitcoin ETFs, and the ghost of Terra-LUNA hovering over the conversation.

To understand the concern, you need to understand what an AP actually does. In a traditional ETF structure, Authorised Participants are the institutional plumbing, they create and redeem ETF shares in-kind by delivering the underlying asset, keeping the ETF price tethered to NAV. It’s a critical, necessary function. Jane Street is a dominant AP across both traditional and crypto ETFs.

The administrator for the bankrupt Terraform Labs, filed a lawsuit on February 23, 2026, in the U.S. District Court, against Jane Street Group LLC. The complaint alleges that Jane Street used material non-public information, obtained partly through a former Terraform intern, to front-run trades and profit from undisclosed liquidity moves by Terraform Labs, notably a large UST withdrawal on May 7, 2022, which allegedly accelerated the collapse of TerraUSD (UST) and Luna, erasing over $40 billion in value. A wallet linked to Jane Street reportedly withdrew around $85 million in UST shortly after Terraform’s action.

With Jane Street under pressure the whole AP activity is now under scrutiny. APs operate under regulatory exemptions that allow them to meet ETF demand without mechanically forcing immediate spot Bitcoin purchases, creating a “grey window” where ETF share creation and spot market transactions are not tightly linked in time. The practical consequence, is that ETF AUM can balloon without forcing exchange buys, muting rallies that retail investors would otherwise expect. And when those futures hedges are unwound, the reverse is equally sharp. The behaviour is legal but a bit shady as APs currently wield hedge-fund-like incentives and tools with considerably less accountability, which are exacerbated by the volatility of BTC.

Adding fuel to the fire: Jane Street reportedly deleted a series of posts on X discussing their ETF activity, drawing immediate accusations of selective disclosure.

Clarity Act Update: Legislative Momentum Builds

As of late February 2026, the latest developments include renewed urgency: the White House has hosted multiple meetings between crypto firms and banks to broker a compromise (e.g., distinguishing “idle yield” from transaction-based incentives), with a reported March 1 deadline for resolution; Senate Democrats have reopened talks; and market odds of passage in 2026 hover around 75% on platforms like Kalshi.

A recent OCC proposal, to implement GENIUS Act rules has sparked controversy by potentially limiting rewards, which could indirectly ease or complicate Clarity Act negotiations. No final vote has occurred, but optimism persists for spring 2026 progress ahead of midterms, with Treasury Secretary Scott Bessent and others pushing for enactment to position the U.S. as a crypto innovation hub.

TradFi Goes On-Chain: BlackRock, Apollo, and the DeFi Pivot

Perhaps the most structurally significant development of the month is not price, it’s the news that BlackRock and Apollo have both taken positions in governance tokens of on-chain lending protocols, specifically Uniswap (UNI) and Morpho.

Let that land for a moment. The world’s largest asset manager and one of private credit’s most dominant platforms are now holders of DeFi governance tokens. This is not a marketing exercise. When firms of this scale acquire governance tokens, they are acquiring influence over protocol parameters, fee structures, risk frameworks, asset whitelisting, that will govern trillions in on-chain activity if these protocols reach their potential.

Institutions are not waiting for regulatory clarity to be perfect before positioning. They are starting now, Clarity is coming, in the protocols they believe will form the financial infrastructure of the next decade. For anyone still asking whether DeFi is a legitimate asset class, BlackRock just answered that question.

On-Chain Activity: Price down, Usage up

While crypto prices have spent the last five months grinding lower, one chart should give bears serious pause: on-chain transaction volumes are not just recovering, they are at all-time highs. Solana is the standout, surging to over 150 million daily transactions at its recent peak, dwarfing every other chain on the chart by an order of magnitude. DeFi activity, Stablecoins minting, tokenised stocks. This is exactly the kind of ground-level adoption signal that precedes price discovery, not follows it. When usage and price diverge this sharply, history suggests it is price that corrects, not usage. Solana’s network is being used more than ever. The market will recognise this soon.

If you’d like to learn more about the MTC Digital Asset Fund or the MTC Bitcoin and Gold Fund, reach out to myself or the team. The asymmetric opportunity gets stronger every day.

🗓️ Key dates to watch

• 3 Mar – ISM PMI
• 6 Mar – Non farm payrolls
• 11 Mar – Inflation data
• 18 Mar  – FOMC meets

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📩 Interested in learning more? Visit www.merkle.com.au or reply to this email to book a call.