Author: Nancy, PANews
The sudden escalation of tensions in the Middle East brought Wall Street's weeks-long rally to a halt. The nine-day winning streak of US stocks came to an abrupt end, while the cryptocurrency market was among the first to be impacted by the liquidity crunch.
Over the past month, the AI frenzy has propelled US stocks to new highs, while Bitcoin has bucked the trend and faced pressure. As selling pressure surged and funds accelerated their withdrawal, Bitcoin has continuously breached several key psychological levels.
Bitcoin's rally has ended, and ETF funds continue to flee.
The two-month rebound has come to an end, and Bitcoin has returned to a downward trend. With market risk appetite cooling and funds continuing to flow out, Bitcoin has recorded negative returns for several consecutive trading weeks.
According to CoinGecko data, Bitcoin has fallen by 20.1% in the past 30 days, briefly dipping below $62,000 to its lowest level since February this year, and retreating by nearly half from its all-time high in October last year.
As prices continue to weaken, Bitcoin's global asset status has declined again. According to the latest data from 8MarketCap, Bitcoin's total market capitalization has been surpassed by Tesla, Meta, and Samsung, dropping to 16th place in global asset market capitalization rankings. It is the only asset among the top 100 global assets by market capitalization to experience a double-digit decline in the past seven days.
From a funding perspective, the continued outflow of funds from spot ETFs has become the main reason for the recent market pressure.
According to SoSoValue data, as of June 3, the total net asset value of Bitcoin spot ETFs was $82.88 billion, representing 6.36% of Bitcoin's total market capitalization. Since May of this year, Bitcoin spot ETFs have experienced a cumulative net outflow of approximately $3.83 billion, with about $1.4 billion flowing out in the first three trading days of June alone. Among them, BlackRock's IBIT saw a net outflow of $2.58 billion during the same period, becoming the main driver of this round of ETF fund outflows.
In addition to the continued outflow of funds from ETFs, a series of events have amplified market pessimism and triggered short-term panic selling.
Recently, Strategy's first sale of Bitcoin in four years has attracted market attention. Although the sale involved only 32 Bitcoins (approximately $2.5 million), which is negligible compared to its holdings of over 840,000 Bitcoins, this move has shattered the market's long-held expectation that it would "never sell its coins," weakening the confidence of some investors.
Meanwhile, unusual activity in the Mt. Gox wallet, a veteran of the bear market, has once again raised concerns about potential selling pressure. Arkham data shows that Mt. Gox recently transferred 10,422.65 bitcoins, worth over $739 million, from its cold wallet. Most of the funds were transferred to a new address, while another 116.3 BTC flowed to its known hot wallets. This is Mt. Gox's largest on-chain transfer in months, while its creditors' repayment deadline is October 31, 2026. Currently, Mt. Gox still holds approximately 34,504 bitcoins awaiting distribution, worth approximately $2.43 billion.
Institutional investors and whales also contributed to the selling pressure during the market downturn. For example, crypto asset management firm Abraxas Capital continued to reduce its holdings by 1,469 BTC, transferring the 1,469 BTC ($98.45 million) to Kraken and then withdrawing 22.71 million USDC. In the past day and a half, it has cumulatively reduced its holdings by 2,469 BTC, worth $166 million. Meanwhile, Santiment released data showing that Bitcoin whales and sharks (addresses holding 10 to 10,000 BTC) sold 24,602 BTC in the past week (a reduction of approximately 18%).
Macroeconomic headwinds and the exacerbation of capital drain by AI and mega-IPOs
Changes in the macro environment and shifts in geopolitical risks have also put Bitcoin to the test of liquidity.
JPMorgan analyst Nikolaos Panigirtzoglou stated that as signs of easing tensions in the Middle East emerge, investors are gradually withdrawing from the Bitcoin and gold markets. The devaluation trades (trading strategies where investors turn to assets like gold and Bitcoin to hedge against fiat currency depreciation) that previously drove demand for these assets are losing momentum. Over the past two weeks, both Bitcoin and gold-related ETFs have seen significant outflows, and institutional holdings in the CME futures market have also decreased. This trend indicates that investors are withdrawing from macro hedging trades that were previously popular due to inflation concerns and global instability. Furthermore, it's not a shift of funds from Bitcoin to gold, but rather a simultaneous weakening of demand for both assets. Since the Iranian conflict, Bitcoin has been a primary manifestation of "devaluation trades."
QCP Capital analysts pointed out that the escalating tensions in the Middle East and the stalled US-Iran negotiations have driven up international oil prices, bringing the risk premium related to the Strait of Hormuz back into the market's spotlight. Meanwhile, stronger-than-expected US job openings data further weakened market expectations for a short-term interest rate cut by the Federal Reserve, reinforcing the market consensus that "high interest rates will be maintained for longer."
More noteworthy than the macroeconomic headwinds is the shift in global capital allocation logic. Over the past month, driven by the AI boom, US tech stocks have continued to hit record highs, with a large influx of funds rapidly flowing into a few leading AI companies.
Binance Research points out that the recent weakness in the crypto market is due to the high concentration of funds in the US stock market. The CBOE Dispersion Index rose to 42, the third highest in history, reflecting the concentration of funds within the S&P 500 index on a few popular themes, thus marginalizing Bitcoin.
According to The Kobeissi Letter, since the S&P 500 hit a low on March 30 this year, US technology sector ETFs have seen a cumulative net inflow of $27 billion, while all other sectors have seen a combined net outflow of $4 billion during the same period, resulting in a historically extreme level of divergence in investment.
Ned Davis Research strategist Rob Anderso and BTIG analyst Jonathan Krinsky further pointed out that the proportion of stocks that outperformed the S&P 500 over the past two months has fallen to the third lowest level since 1972, and the index's rise is highly tied to a few leading AI stocks.
For investors, the opportunity cost of holding Bitcoin is constantly increasing as AI-related assets continue to rise.
Bitcoin is in a rather awkward position: it underperforms AI assets when prices rise, but falls even more sharply when prices fall. Just last night, after a pullback from their highs, the three major US stock indices all closed lower, but Bitcoin's decline was significantly amplified, with intraday losses exceeding 7% at one point.
The capital-siphoning effect of the US stock market will further intensify. With super unicorns SpaceX, OpenAI, and Anthropic successively advancing their IPOs, the public market is expected to add nearly $4 trillion in market value. This capital feast will kick off a new battle for funds, and the crypto market will likely find it difficult to remain unaffected.
Bitcoin faces key support level test; may enter a volatile summer.
With continued capital outflows and weak market sentiment, Bitcoin's key support levels are facing a major test, and price recovery will still face significant resistance in the short term.
QCP Capital believes that weak spot demand, rising oil prices, higher real interest rates, and increased macroeconomic uncertainty are collectively suppressing the performance of risk assets. The current market is more inclined to allocate downside protection tools rather than actively increasing risk exposure. Investors are awaiting a clearer direction from the macroeconomic environment between a "soft landing" and a "high inflation, high interest rates, low liquidity" scenario. They predict that Bitcoin's first major support zone is between $63,000 and $64,000. If this area is breached, the market will further focus on the $62,000 support level, followed by the psychologically significant $60,000 mark, with the next key defense line around $58,000.
BIT holds a similar view, pointing out that Bitcoin is currently still in a correction phase, and $63,445 is a key support level that needs to be closely monitored. If the price can stabilize in this area, this decline can still be considered a phase of correction within a bull market; if it breaks down effectively, it may enter a deeper correction and consolidation.
According to Vetle Lunde, Head of Research at K33 Research, Bitcoin's weakness reflects reduced institutional demand, significant outflows from ETFs, and the growing fragility of the derivatives market. With funds chasing AI stocks, external capital is reluctant to enter, and existing holders are reducing their exposure, potentially leading to a volatile summer for the market.
“The crypto market cycle is resetting.” Wintermute believes that the market environment in the summer months looks relatively weak, but some long-term investors have begun to increase their positions through over-the-counter trading platforms. They do not want to accurately predict the bottom, but rather believe that the current price level is quite attractive from an 18-month perspective.
CryptoQuant founder Ki Young Ju stated that while the current Bitcoin price is roughly the same as it was two years ago, the market structure has changed significantly. Those who entered the market in this cycle and have held for 6 months to 2 years now account for 53% of the realized market capitalization, compared to only 15% two years ago. In the previous cycle, Bitcoin bottomed out when this group reached 68%. Currently, short-term holders are gradually evolving into long-term holders.
Currently, Bitcoin is facing not only a price adjustment, but also a test of liquidity and market confidence.
