Why is Bitcoin plunging?
Bitcoin’s recent decline is being driven by a mix of ETF outflows, forced liquidations, regulatory uncertainty, and a growing investor preference for AI stocks.
Key takeaways
- Bitcoin is down nearly 30% year to date as ETF outflows, institutional selling, and regulatory uncertainty weigh on investor sentiment.
- A massive derivatives liquidation event accelerated the selloff, with roughly USD 1.8 billion in crypto positions wiped out in 24 hours.
- According to analysts, investors are moving into AI and technology stocks, leaving crypto struggling to compete for capital.
Bitcoin’s sharp decline has deepened into one of the cryptocurrency market’s most painful corrections in years, with BTC briefly falling toward the USD 61,000 level and extending losses to 13% over the week.
The cryptocurrency is down about 29% year to date after this week’s battering, contrasting with US stocks, with the Morningstar US Market Index up 11% in the same period.
What’s behind Bitcoin’s recent selloff?
The decline reflects a combination of institutional selling, persistent ETF outflows, regulatory uncertainty, and a broader shift in investor attention away from crypto and toward artificial intelligence.
A key trigger came from Strategy MSTR, Michael Saylor’s company and one of bitcoin’s most prominent corporate backers, which sold a portion of its bitcoin holdings for the first time in years. The move rattled investors, undermining confidence in a market already struggling with weakening demand.
The decline has also triggered a wave of forced liquidations in crypto derivatives markets, accelerating volatility and downward momentum as leveraged investors were pushed out of positions. According to CoinGlass data, roughly USD 1.8 billion of crypto positions were liquidated in about 24 hours on Thursday, with more than USD 1.5 billion of that from long positions and over USD 800 million tied specifically to BTC longs. This includes one of the largest wipeouts of a long bitcoin position so far this year. The liquidation wave highlights how leverage has become a critical driver of short-term price action.
3 weeks of net outflows for Bitcoin ETFs
The selling pressure has been amplified by a sustained exodus from spot bitcoin ETFs, which are about to conclude their third consecutive week of outflows. This removes billions of dollars from the market and erodes one of the most important pillars of institutional demand that drove the cryptocurrency higher in recent years. The US-listed iShares Bitcoin Trust ETF IBIT alone saw USD 1.2 billion of net outflows between June 1 and June 4.
In Europe, ETFs in the Digital Assets Morningstar category saw three consecutive weeks of net redemptions, with WisdomTree Physical Bitcoin BTCW bleeding more than EUR 7.3 million in the first four days of the week.
However, according to Dovile Silenskyte, director of digital assets research at WisdomTree, exchange-traded fund outflows should not be automatically interpreted as a loss of confidence in bitcoin.
“Institutional investors do not buy bitcoin because they expect it to outperform every month or every quarter, rather, they buy it because it improves the risk/return metrics of their multi-asset portfolios over an investment horizon that tends to be a few years long. ETF flows fluctuate as investors rebalance portfolios, manage risk, or respond to market conditions,” she says.
Why the US Clarity Act mattersfor Bitcoin
Regulatory uncertainty is adding another layer of pressure. While lawmakers continue to debate the future of US crypto regulation—specifically the Clarity Act, which aims to establish a clearer legal framework for digital assets—institutional investors remain reluctant to increase exposure before there is greater forward visibility. According to Bitwise CIO Matt Hougan, markets can absorb bad news, but they don’t digest prolonged uncertainty, a dynamic that is currently weighing on sentiment across the sector. “The largest-cap crypto assets will struggle to launch a sustainable rally until the picture becomes clearer,” he says.
Is Bitcoin now a contrarian bet?
At the same time, investors are increasingly rotating capital into artificial intelligence and technology stocks. With AI-related investments continuing to outperform and dominate market narratives, crypto assets have lost their status as the market’s preferred high-growth trade, according to Hougan. “Who needs crypto when the Nasdaq-100 is up 43% year-over-year?”
Crypto, says Bitwise CIO, is undergoing a transition from a momentum-driven investment to a contrarian bet, requiring investors to focus more on fundamentals than hype.
“Contrarian bets can be great investments, but their payoff pattern is usually spotty. They require patience, a long-term orientation, and a focus on fundamentals,” he adds. “This is one reason why investors are increasingly focused on revenues. Crypto isn’t going away. It’s just changing the kind of investor and project it rewards.”
