Andy Baehr, managing director of asset management at GSR, said the cleanest read on whether crypto’s latest rebound is real may be coming from DeFi money markets, not from price action alone. His test is simple: if USDC borrowing rates on Aave are still sitting near US Treasury yields, traders are not rushing to borrow and add leverage, which means the market is still far from a true trend reversal.
Baehr made the remarks on the July 17 episode of Bits & Bips, an interview program under Unchained. The episode was hosted by Sharplink head of research Steve Erlic and carried the title Is This Crypto Rally Real? GSR's Andy Baehr Maps the Signals to Watch. TechFlow compiled and translated the discussion. The disclosure attached to the episode said GSR is a major global crypto market maker whose revenue depends on trading volume and volatility, and that its asset management arm recently launched the Core3 ETF, or BESO, which holds BTC, ETH and SOL. The discussion focused on the broad market and did not amount to a recommendation on any single asset.
A market still stuck closer to ambivalence than conviction
Baehr, who previously led product and research at CoinDesk Indices and earlier held senior derivatives roles at Credit Suisse, BNP Paribas, Morgan Stanley and Deutsche Bank, described market conditions through a simple spectrum. On one side sits “ambivalence.” On the other is “conviction.”
His argument is that crypto remains much closer to the first end of that spectrum. The market can still produce sharp bursts that look meaningful for a moment. Perpetual futures can show a little renewed life. Then the move fades, liquidations hit, and prices slip back toward where they started. In his telling, these are one-stage rockets: they fire, but there is no second stage to keep the move going.
The opposite condition, conviction, would mean a rally can be relied on to continue and begin forming a different momentum cycle. For Baehr, that is the real question now. Is this just another temporary burst, or is the market finally starting to grow legs?
Erlic noted during the interview that Bitcoin moved from around $79,000 to above $80,000 around the spring Consensus conference, only to get sold down toward $61,000, roughly near mining production cost levels. Baehr said that washout did restore some energy, but not enough to move the market out of its broader ambivalent phase.
The market still has not found its “Fed solstice”
At the macro level, Baehr introduced what he called a “Fed solstice.” By that he meant the point at which investors broadly feel they understand where tightening ends. He said markets have not truly seen a hawkish peak since 2022, when the Federal Reserve raised rates aggressively to absorb the effects of post-pandemic fiscal stimulus and both stocks and crypto struggled because no one knew where the cycle would stop.
Until that point of collective clarity arrives, he said, it is hard to trust any rally as durable. Once the market believes it has crossed the peak and can see the slope on the other side, sentiment can change quickly. But before that, confidence stays fragile.
Erlic also asked about Kevin Warsh’s style as Fed chair, describing him as someone who does not want to provide forward guidance or dot plots and instead wants the Fed to react to incoming data while operating alongside a president who prefers lower rates. Baehr replied that Warsh does not look like a central banker trying to comfort markets. He pointed to Warsh’s inaugural statement, where independence was emphasized in bold, as evidence that he has little interest in soothing investors or giving away too much information.
That leaves the market pricing possibilities into rate futures without a stable anchor: whether action comes early or late, how much comes, and where the end point lies. For crypto, Baehr said the story ultimately comes down to inflation expectations and nominal rate expectations. In 2022, nominal rates accelerated above inflation expectations, pushing expected real rates higher, which was painful for Bitcoin. When expected real rates become easier to understand, he said, the macro backdrop for Bitcoin improves. More practically, clearer fiat funding costs also make it easier for leverage to flow back into the crypto system, and the market badly needs that leverage to revive volatility and trading energy that have been falling since last October.
CPI sparked the move, but Baehr does not think CPI alone settles the debate
Erlic said June CPI came in at 3.5% year over year, while core CPI was flat month over month for the first time in five years. He called that the most direct trigger for the latest rally. At the same time, he noted that many of the reasons behind the softer CPI print looked one-off and might not repeat next month. He also referenced Warsh’s remark in congressional testimony that “inflation is a choice,” a line Erlic took as a sign of continued hawkishness.
Baehr’s answer was that a weaker inflation print is not enough on its own to declare a durable turn. He said he has used the word “ambivalence” to describe most of the second quarter and even the tail end of the first quarter. That does not mean the market is inactive. It means it can generate credible-looking impulse rallies, sometimes with a little renewed derivatives energy, yet those bursts still fail to develop into a lasting move.
The signal he watches most closely: Aave borrowing rates
Of all the indicators he follows, Baehr placed the most emphasis on DeFi lending rates, especially USDC borrowing costs on Aave. He said those rates climbed above 20% in the period after the November presidential election last year. Now, by contrast, they are sitting close to the risk-free rate, around the same zone as SOFR and one-year US Treasury yields, or roughly 3.75% to 4.1%.
His interpretation was direct. If DeFi money markets are showing no real credit spread over the risk-free rate, then borrowers are not willing to pay a premium to add leverage. For him, that is the clearest sign of a low-energy market.
He illustrated the point with a hypothetical. If Warsh woke up one morning, had a very strong coffee and unexpectedly cut rates, asset prices would jump and Bitcoin would rise with them. Traders would then rush to Aave to borrow. Because these pools are priced by supply and demand, rates on Aave, as well as borrowing costs across Morpho vaults and pools on Gauntlet, Stakehouse, Beta and Concrete, would spike almost immediately. That kind of move would tell him the market finally had real energy again.
Leverage, in his view, is what truly pushes prices higher. It can lift prices to levels that draw in ETF flows, trigger more buying from digital asset treasury companies, and bring long-term holders back into the market. Before that happens, if DeFi rates keep hovering around the risk-free rate, the market is still low-energy.
He also explained why this is such a practical gauge. These lending models are basically straightforward supply-and-demand functions. More supply drives rates lower. Less demand does the same. When large amounts of capital arrive on these platforms saying, in effect, “give me any yield,” rates settle near the floor.
Derivatives still dominate market structure
Baehr said roughly two-thirds to three-quarters of the broader crypto market is derivatives trading, with spot accounting for only about one-quarter to one-third. That is why derivatives remain central in determining direction.
He broke last year’s “perfect rally” into three stages. First came an ETH short squeeze, driven by the unwind of hedge fund positions that were long BTC and short ETH. Second, native crypto traders recognized a trend and moved into spot and perpetuals. Third, ETF flows turned positive in May and June 2025, with ETH ETF inflows at one point exceeding BTC inflows. He said that was striking at the time. After that, passage of the GENIUS Act gave ETH another boost because so much stablecoin activity depends on the Ethereum network.
The larger point was that durable rallies are layered. They require fresh buyers to keep arriving from one segment after another. Without those additional layers of demand, the move burns out.
Stocks have fresher stories, and crypto has been left behind
Erlic pointed to shifting leadership in equities, with the Mag 7 still struggling, AI names running hard, and capital rotating toward smaller cyclical stocks such as those in the Russell 2000. He asked what that said about risk appetite and what it meant for crypto.
Baehr said it reminded him of crypto’s second quarter. Even though the quarter was weak overall, smaller crypto tokens actually outperformed BTC, ETH and SOL on a relative basis, and even XRP was rising, which he called remarkable. He recalled his work on the CoinDesk 80 Index, which tracked tokens ranked roughly 21 to 100 by market capitalization. In a healthy, or even neutral, market environment, large-cap tokens should typically outperform smaller ones because collective attention tends to cluster around bigger, more liquid names.
That was not what happened in Q2. Instead, smaller tokens fell less than the majors. To Baehr, that suggested money was leaving the main benchmark assets that usually sit at the center of ETF demand, perpetuals trading, spot allocation and digital asset treasury company buying. He said that may have been a kind of capitulation signal late in the quarter.
On the stock market rotation itself, his explanation was simple. Traders chase action. With attention absorbed by names and themes such as a possible SpaceX IPO, Anthropic and OpenAI, crypto has struggled to compete for excitement, and even crypto ETF allocations can be pulled away by those opportunities.
Digital asset treasury companies are not the first wave of buyers
When the conversation turned to structural demand, Erlic said ETF money is not permanent capital, something the past eight weeks had already shown. He also said stablecoin supply had fallen by about $10 billion since May, the biggest contraction since the Terra/Luna collapse, and that digital asset treasury companies were not acting as active buyers at this stage.
He gave Strategy as an example, saying the company had just sold nearly $500 million of stock through its ATM program without buying any Bitcoin, choosing instead to hold the cash to pay preferred dividends. He said Metaplanet was in a similar position.
Baehr replied that he remains constructive on digital asset treasury companies over the longer run. In his view, they do help complete part of the market structure by combining a corporate treasury centered on a single digital asset with native expertise in managing that asset. That gives equity investors another form of digital asset exposure with its own features.
But in terms of timing, he does not see those companies as the first buyers into a rally. In his framework, they tend to arrive around the middle stage. Shareholder sentiment takes time to filter through, and rising stock prices need to create the momentum that enables further token purchases. Compared with ETF holders, he described these treasury companies as more structural and more permanent, but not the initial spark.
DeFi fixed income is starting to take shape
Baehr also spent part of the interview discussing on-chain fixed income products and vault structures. Most people, he said, still interact with crypto by buying and selling tokens or trading perpetuals and options. Those are asset-based activities that feel closer to equities or commodities in traditional finance. They are not ideal for building a fixed income market, a money market or an alternative yield curve.
DeFi is starting to build those pieces on its own. There is no central bank in the system, only supply and demand. Capital markets on-chain do not rely on large institutions using overnight repo to shape the next day’s SOFR. People simply trade and borrow in real time. As those activities cluster, stablecoin lending rates begin to reveal where the market thinks they should sit.
He described vaults as an effective wrapper. Managers identify lending pools, combine them into a portfolio and issue a token representing ownership or claim on the yield. Economically, he said, that looks a lot like a money market fund. He was careful to add that it is not a fund, not a security, and in most cases not regulated. Even so, it runs 24/7 and is broadly accessible around the world. For people who understand what they are using, he said, it is a highly efficient product.
From an asset manager’s perspective, Baehr said vault managers carry responsibilities that resemble fiduciary duties. They should be accountable for outcomes and disclose information to vault holders. He framed that as a view shaped by his CFA standards and values, whether or not the law explicitly demands it. As the market grows, he expects a clearing process around what standards managers should be held to.
CLARITY Act remains an overlooked catalyst
Apart from DeFi rates and Fed policy, Baehr also called the CLARITY Act an underappreciated catalyst. Erlic said that while they were speaking, the White House was holding a meeting involving the president, chief of staff Susie Wilds, several Republican senators involved in negotiations, and Blockchain Association CEO Kristen Smith. The focus, he said, was to finalize a compromise around an ethics provision seen as essential to winning Democratic support. If the bill passed before the August 7 deadline, he asked, would it act as a shot in the arm for the market?
Baehr said passage would matter a great deal over the long term. But he added that the longer a process drags on, the lower the odds that it gets done. He pointed to Polymarket, where the implied probability of passage had dropped from 75% in May to below 40%. In his view, almost no disruptions and a very strong tailwind would now be needed to finish the job within three weeks.
On the ethics provision, he said he found it hard not to see it as a “tasty political snack” some people wanted to take home. He also said disclosures that the president’s family had made more than $1 billion from digital assets gave Democrats an easy target.
Still, his market call was clear. If the CLARITY Act does pass, investors are likely to treat it as a real surprise rather than something fully priced in. Surprise, he said, is one of the strongest emotional drivers of price moves in either direction. For that reason, he said it was hard to imagine the market not rallying on passage.
His bottom line: watch rates first, then talk about reversal
Baehr’s framework throughout the interview stayed consistent. First, watch whether the macro environment is moving closer to consensus on the hawkish peak, or what he called the Fed solstice. Second, watch whether market demand can build in layers across derivatives, spot, ETFs and eventually digital asset treasury companies. Third, and most directly, watch borrowing rates on Aave and similar DeFi venues.
If USDC borrowing rates on Aave remain in the 3.75% to 4.1% range and do not open up much distance versus Treasuries, then the market is still operating with low energy. If a macro or policy catalyst genuinely ignites risk appetite, on-chain borrowing rates should show that change in leverage demand before a price chart settles the argument.
Until then, Baehr’s conclusion is cautious. This may be a rebound, but he is not ready to call it a full trend reversal.