Bitcoin The start of June has taken a hit as the market loses its dominant narrative and liquidity continues to shift to other assets.
This combination leaves the flagship cryptocurrency vulnerable to further downward pressure as investors reduce risk and shift capital to markets with more momentum or more obvious short-term triggers, such as the chip rally or SpaceX’s IPO. According to Coinmetrics, Bitcoin is down 13% this week, marking its worst week since February.
This is a well-known feature of cryptocurrency cycles. Once the dominant narrative loses momentum, liquidity quickly shifts to other parts of the market. And without new catalysts to support demand, Bitcoin will be vulnerable to rapid flow-driven price fluctuations. Traders are now reevaluating what will drive the next stage of the cycle.
On Wednesday, Bitcoin ETFs posted their 13th consecutive day of record net outflows, according to SosoValue. Total assets across the fund fell to $82.8 billion from $107.8 billion on May 14.
Citi analyst Alex Saunders said in a note that this flow is “a major driver of BTC price appreciation, explaining approximately 45% of the week-to-week return variation, and is a great vehicle for tracking investor adoption/appetite.”
He added that a key catalyst for renewed investor interest in Bitcoin – the possibility of passage of the Cryptocurrency Market Structure Act, known as the Transparency Act – is drifting increasingly out of reach as legislative priorities shift and lawmakers remain divided on key provisions of the bill.
“With no positive news on the regulatory front and no ‘ground subsidence’ concerns around fiscal conditions, we expect sentiment to remain lackluster, especially as the divergence from equity performance remains significant,” Sanders said.
what happened this week
The key catalyst this week was the surprise revelation from Michael Saylor on Monday. strategy The company revealed that it sold 32 BTC for approximately $2.5 million to cover dividend obligations on preferred stock. This is the first Bitcoin sale since 2022 and the second in history.
This move was well communicated by the company and represented less than 0.004% of its holdings. Nevertheless, Saylor’s shift from his “never sell Bitcoin” mantra to a new approach funded by the Bitcoin Treasury has cracked investor confidence. Strategy and Bitcoin fell that day.
This led to a series of long-term liquidations, accelerating downward pressure. When leveraged traders who are betting on high prices are let go of their positions, the exchange automatically sells their holdings to cover their losses. According to CoinGlass, the cryptocurrency exchange recorded $594 million in long-term liquidations in 24 hours.
existential crisis
For months, Bitcoin has been disconnected from its main narrative. It is not acting as digital gold that benefits from geopolitical uncertainty, nor is it acting as an inflation hedge. It also hasn’t moved like beta tech stocks.
In fact, while the price of Bitcoin has languished, the stock market has hit several all-time highs, and as investors chase rising chips and become increasingly obsessed with AI infrastructure, money is moving elsewhere. chip manufacturer advanced micro device, intel and micron It has more than doubled in value this year. Private market excitement around companies like SpaceX and Anthropic has become a bigger focus for growth-minded investors.
Although it is not clear exactly how much capital is left in cryptocurrencies for more active trading, it is clear that Bitcoin is losing out in the race for increasing speculative capital.
“With markets at (tech-driven) all-time highs in recent weeks, one would think this would be an ideal environment for cryptocurrencies. Maybe AI and semiconductors are just sucking up all the excess liquidity?” Wolf Research analyst Rob Ginsberg wrote in a note Thursday. “After all, who in their right mind would buy cryptocurrencies now, when they can close their eyes and buy semiconductor stocks and double or triple their investment in a matter of weeks?”
Future roadmap
Investors will find out on Monday whether Strategy was a buyer, seller, or if there was no activity this week. After last week’s small but significant sell-off, the company’s return as an active buyer could help stabilize sentiment.
If reports show that cryptocurrencies have been sold or have been inactive, traders may become concerned about one of the most important sources of structural demand for cryptocurrencies.
“The last time MSTR sold BTC…just two days later, it bought back more than it sold,” said Jeff Kendrick of Standard Chartered. “This time, I think the buying following the selling will be more aggressive. I think it will be either 10x (+320BTC) or 100x (+3200BTC). If I am correct, the question is how the market will take it. I see this as a preliminary sign that a low has been made.Given that logic, I suspect the weekend sell-off will be subdued (given the risk that MSTR will turn out to have bought a significant portion of BTC this week).
Looking further into the future, even though Bitcoin has broken its definitive narrative, its typical four-year cycle (three years up, one year down) is still a good guide, but traders could end up stuck in this bear market for months to come, Wolf said.
“We continue to adhere to the four-year cycle. This cycle has not led us astray yet and continues to sustain us,” Ginsburg said. “An average high-to-low period of 381 days and an average drawdown of 79% means the price will bottom out below $40,000 in late October. Nothing is perfect, but there’s no reason to abandon it, especially given that the target is mostly on track.”
