Bitcoin (CRYPTO: BTC) has shed almost 50% of its value from its top last October and plummeted below its November 2024 price.
The $2.7 Billion Liquidation Flush
According to Wintermute, the sell-off in early February triggered more than $2.7 billion in liquidations, marking Bitcoin's steepest drawdown since 2022.
The move was followed a string of macro catalysts: Kevin Warsh's nomination as Federal Reserve chair, weak "Magnificent Seven" earnings, including a 10% drop in Microsoft, and a sharp correction in precious metals.
After several sessions of consolidation, markets rotated decisively into risk-off mode.
Wintermute described the selling pressure as structural:
- A persistent Coinbase (NASDAQ:COIN) discount signaled sustained U.S. spot selling.
- Spot Bitcoin ETFs recorded about $6.2 billion in cumulative net outflows since November.
- ETF redemptions forced additional spot selling, creating a reflexive downside loop.
- BlackRock's (NASDAQ:IBIT) played a central role in both liquidity, topping $10 billion in notional volume last week, and supply dynamics.
- Compressed volatility and range-bound trading encouraged excessive leverage, which was later flushed out.
AI Trade Drains Crypto Liquidity
Wintermute noted that capital has rotated aggressively into AI-linked equities, leaving crypto with a negative skew, underperforming in both rallies and selloffs, a pattern typical of bear markets.
Excluding AI names from Nasdaq performance narrows much of crypto's relative weakness.
Although leverage has been largely cleared and buyers stepped in near $60,000, sustained upside will likely require a return of spot demand, something that remains absent.
ETF flows remain negative, basis rates are unstable and digital asset treasuries are sitting on roughly $25 billion in unrealized losses, limiting fresh institutional buying.
In the near term, Wintermute expects choppy and volatile price action.
For a durable recovery, analysts say three signals are key: a return of the Coinbase premium, renewed ETF inflows and stabilization in basis rates.
For now, institutional ETF and derivatives flows continue to dominate price direction.
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