Why Bitcoin is Turning into a Pumpkin: The Shocking Selloff!

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Oh dear! ETF redemptions and relentless U.S. selling have cast a dark cloud over Bitcoin, hinting at deeper troubles ahead beyond mere leverage-fueled liquidations!

In a rather dramatic twist of fate, Bitcoin’s tumble this past week has wiped out all the jolly gains it made since the infamous Donald Trump waved his magic wand in election victory! Yes, indeed, the market sentiment has taken a nosedive. With heavy liquidations and weak institutional interest, prices are plummeting faster than a cat on a hot tin roof. And as if that weren’t enough, the shifting macro signals have added to the pressure like a cherry on top of a rather sad cake!

Wintermute, the market’s very own detective, suggests that these recent shenanigans are not just a short-term hiccup but rather a sign of deeper structural woes. Everyone’s now watching to see if any brave buyers will emerge after this tumultuous leverage reset.

BTC Selloff Deepens After $2.7B in Liquidations, as Institutional Demand Takes a Vacation

Hold onto your hats! Bitcoin once breezed past the lofty heights of $80,000 for the first time since last April. But, lo and behold, our beloved OG coin has descended nearly 50% from its October high of about $126,000! Weekend trading was like a rollercoaster ride, with prices dipping down to a thrilling $60,000 before bouncing back into the cozy low $70,000 range.

Liquidations soared above a staggering $2.7 billion, as months of stagnation led to excessive leverage-like a game of Jenga gone horribly wrong! Once prices broke those crucial levels, forced selling flared up across major venues faster than you can say “bubble burst!”

To make matters worse, the macro conditions were less than pleasant. Kevin Warsh’s nomination as U.S. Federal Reserve Chair on January 30 sent shivers down the spines of investors, sparking fears of tighter financial conditions. As a result, not just Bitcoin, but major tech firms and even shiny precious metals found themselves in a bit of a pickle!

Attempts at rallies fizzled out quicker than a soda left open overnight, as investors scrambled for the exit. This is quite the predictable pattern during bearish phases, isn’t it? Exchange-traded funds have become the stars of the show during these clumsy dances. The iShares Bitcoin Trust (IBIT) traded over $10 billion in notional value on Thursday alone-proof that ETF flows are now the puppet masters of short-term price direction.

Image Source: X/Wintermute

Most of the selling pressure, it seems, was coming from the good ol’ U.S. of A. Coinbase’s spot premium stayed negative throughout the decline, indicating that domestic sellers were having a field day. Data from Wintermute shows U.S. counterparties have been trimming their exposure like they’re pruning a bush all week long!

ETF redemptions only cranked up that pressure, creating a vicious cycle where falling prices forced further spot sales. Since November, spot BTC ETFs have seen approximately $6.2 billion in cumulative net outflows-the longest dry spell since their grand debut!

AI Capital Rotation Leaves Bitcoin Feeling a Little Exposed During Market Pullback

In a curious turn of events, options activity has clustered around IBIT and Deribit, which now account for about half of total crypto options volume. Compressed volatility during previous range trading encouraged complacency, like a cat napping in the sun.

As prices broke lower, traders rushed to exit their crowded positions like they were escaping a bad date. This triggered funding rates to dive into negative territory before a fleeting short squeeze appeared late in the week.

Let’s not forget the capital rotation toward artificial intelligence stocks, which added another layer of trouble. For months, investor attention and liquidity flowed into AI-linked equities while ignoring other assets like a kid choosing candy from a jar.

The charts floating around last week showed Bitcoin closely mirroring software names in major indices. But when AI-related trades stumbled, crypto couldn’t seem to attract any stray capital. Thus, prices were left dangling precariously during broader sell-offs. Quite the spectacle, isn’t it?

Wintermute considers last week’s chaos a form of capitulation, with leverage washed away like sandcastles on a stormy beach. Volatility jumped as weaker positions were ejected, with buyers tentatively stepping in around the $60,000 mark.

However, spot trading remains as light as a feather, limiting the potential for recovery. About $25 billion in unrealized losses across institutional treasuries is also weighing heavily on new demand. Without a trend flip, we can expect price action to remain as choppy as a boat on stormy seas!

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2026-02-11 01:36