Bitcoin is enduring a multi-pronged attack on spot market liquidity as exchange-traded funds, short-term speculators, and crypto miners allocate assets simultaneously.
This concerted selling pressure depleted market demand at the fastest pace since the collapse of the Terra/Luna ecosystem in 2022.
As a result, the price of BTC has plummeted by 12% over the past week, pushing the all-time high cryptocurrency towards the $60,000 level amid intense hedging activity by market traders. According to , BTC is trading at $64,036 at the time of writing. crypto slate data.
However, this spot market flash is creating a structural contradiction that could still cause BTC’s value to skyrocket.
The volume of selling has made the derivatives market increasingly lopsided, with a wall of record short positions pinning the market in place.
However, while traditional spot indicators are pointing to the downside, a pause in selling could trigger a mechanical short squeeze, with traders betting on Bitcoin becoming forced buyers to fuel the next rally.
Bitcoin ETF outflows continue after AI trading
The main factor behind Bitcoin’s recent price decline is a sharp reversal in institutional capital flows. The Spot Bitcoin ETF recently recorded 13 consecutive days of liquidations from mid-May to early June.
According to Galaxy Research, these funds released 59,351 BTC, draining approximately $4.33 billion from the market.
In seven days, the fund lost $2.78 billion, marking the worst Bitcoin outflow ever. The bleeding continued for 10 days and $3.06 billion was leaked. In the 14-day window, $4.21 billion was outflowed from the market, while the 20-day trailing window recorded an outflow of $5.42 billion, with 73,080 BTC outflows.
Galaxy Research noted that the last 20 days are the single largest outflow window on record, both in dollar value and total Bitcoin volume.
Industry executives see this as a macroeconomic realignment rather than an internal failure of the digital asset class. Traditional capital markets are currently pumping approximately $400 billion into artificial intelligence infrastructure over a six-month period.
Michael Saylor, Chairman of Strategy, said:
“This is a rotation of capital, not a write-down of Bitcoin. Capital markets are funding the construction of AI on a historic scale. Volatility creates opportunity.”
Bitwise advisor Jeff Park echoed this sentiment. He suggested that traders are leveraging their Bitcoin allocations to fund future “hot-ball” trades in the market, shifting liquidity to go after tech companies like SpaceX and Anthropic.
Going forward, the breakdown of this correlation will itself be the driving force behind future market trends, Park noted.
Speculative Panic and Miners’ Surrender
As institutional support waned, retail investors and short-term holders entered a phase of complete capitulation.
According to data from CryptoQuant, overall Bitcoin demand, which combines speculative and spot market purchases, shrank by 501,000 BTC in the last month.
At the same time, short-term BTC holders are driving the most concentrated and loss-making transfers this year.
These holders moved 53,800 BTC directly to the exchange in a 24-hour window. CryptoQuant researchers highlighted an important divide. 100% of these coins moved with losses, while inflows on the profit side collapsed to zero.
This means that these behind-the-scenes buyers are choosing to liquidate their positions directly during market downturns, rather than waiting for volatility to rise.
Historically, peak inflows due to losses from short-term holders have been concentrated around local capitulation events, CryptoQuant noted. They mark weak hands, flush out, and transfer supply from overleveraged latecomers to more confident holders.
In addition to overhead supply, BTC miners also move coins. CryptoQuant noted that on June 2, Bitcoin miner inflows to the Binance exchange surged to 24,716 BTC, 6.8% higher than the previous February peak.
CryptoQuant researchers pointed out that the large influx of miners does not support an immediate sale on the open market. Miners frequently move coins for strategic purposes such as hedging, liquidity management, and internal financial rebalancing.
However, having this amount of Bitcoin concentrated on a single exchange means that the supply held by miners has moved directly adjacent to market liquidity.
If these inflows remain increasing over the next few days, traders may interpret the data as a new sign of miner distribution.
supply absorption puzzle
This relentless selling creates a structural puzzle when contrasted with data accumulated over time. While short-term speculators are fleecing capital, veteran investors are actively absorbing indirect supply.
Long-term holders added 200,000 BTC to their wallets this month, and they now control 16.3 million BTC, near the highest holdings ever, said Brian Hoonjung Paik, CEO of Smash Phi, a Bitcoin-focused company.
Mr Pike said:
“The people who have held Bitcoin the longest are not selling on this weakness. They are buying your panic.”
However, the sheer volume of coins on the market indicates massive changes.
CryptoQuant CEO Ki Young Ju said that historically bear markets only end after the spot price falls below the realized price. According to this metric, the current average investor cost basis is approximately $53,000.
However, reaching that level should theoretically prove difficult given the barrier of institutional capital entering the market.
Ki Young Ju analyzed calculations to illustrate the scale of this absorption. Since January 2023, Strategy (formerly MicroStrategy) has purchased 711,206 BTC and sold only 32 bits, effectively locking up 711,174 coins.
Additionally, since Bitcoin traded at $63,000 in March 2024, spot ETFs have absorbed an additional 509,102 BTC and strategies have acquired an additional 650,706 BTC.
Financial institutions swallowed a total of 1,240,808 BTC, but the spot price is still fixed at the same level.
By the way, the total world exchange reserves are about 2.7 million BTC, and Satoshi Nakamoto’s estimated holdings are equivalent to about 1 million BTC.
Despite the market absorbing a larger supply shock than the entire Satoshi stack, prices remain subdued.
The move highlights that while traditional long-term holders and financial institutions are amassing large amounts of capital, a group of unusually motivated sellers continues to suppress upward momentum.
BTC coil spring setup
While the spot market paints an image of depletion, the derivatives market has transformed into a coiled spring. During this decline, there was a rush to short Bitcoin, creating a top-class leverage structure.
Data from analytics firm Alfaractal shows dramatic changes in the global liquidation map in 72 hours. On the first day of the flush, the market was 66% short-heavy.
By the second day, it had reached 76%. By the third day, the market had shifted to an extreme short bias of 89%. The indicator currently compares short positions of $98.3 billion to long positions of $12.2 billion.
The short to long ratio is 8.06 times. The market has already washed out most of the leveraged longs, so limited downside risk remains on the chart. The magnetic downside level of $61,054 holds just $1.3 billion in long-term liquidation.
Conversely, upside is concentrated around short liquidation triggers. The gradual rise opens three forced buying waves: $2.1 billion at $72,201; Another $2.2 billion for $80,293. And the final $2 billion layer remains at $82,630.
According to Alpharactal, short sellers have amassed more than $6.3 billion in sensitive liquidation triggers that are 15% to 32% above the current spot price.
The most similar structure to this dataset occurred in November 2022, when the same metric recorded a short-heavy reading of 84%. Over the next 11 sessions, Bitcoin gained about 24%.
Bitcoin currently faces undeniable spot pressure from miners, panicked retail traders, ETF capital flight, and more.
However, by over-allocating to bearish trades, the market creates a mechanical trap.
While the underlying selling pressure is still real, the resulting structural imbalance means that even a slight cessation of spot circulation could easily trigger a violent upward cascade driven solely by traders betting on Bitcoin’s decline.
(Tag translation) Bitcoin
