Despite bitcoin losing nearly 17% of its value in the worst weekly performance since July 2024, wiping out about $200 billion in market cap, prominent bitcoin advocates argue the decline is temporary. Mati Greenspan, founder of Quantum Economics, told CoinDesk that "bitcoin is not facing a bitcoin problem. It's facing a liquidity problem. AI has become the market's new obsession, but obsessions fade." Michael Saylor, Chairman of Strategy (MSTR), echoed this sentiment, noting that "capital markets are funding the AI buildout at historic scale: ~$400B over six months," while bitcoin ETFs have seen $4 billion in outflows since May 14. The capital flight coincided with record-breaking ETF outflows of $3.45 billion across 11 consecutive sessions, as traditional liquidity pools chase AI infrastructure and data centers.
Bitcoin has experienced the biggest short-term holder capitulation in BTC history over the past week, according to on-chain analyst Frank Fetter. As reported by Bitcoin Foundation, BTC price dropped 14% over the past seven days, currently trading around $62,800 with a 0.7% decline on the day. The short-term holder realized profit and loss ratio has fallen to a new all-time low, indicating that investors who bought more recently are realizing losses at deeper levels than in previous Bitcoin drawdowns. This capitulation represents a significant shift in market dynamics, with the pressure extending beyond new buyers to include long-term holders as well.
The capital rotation away from crypto is evident in the Nasdaq's 34% rise and S&P 500's nearly 24% climb over the past year, as Wall Street's tech appetite remains aggressive despite crypto's decline. Jameson Lopp, bitcoin core developer, pointed to the Anthropic $50 billion IPO targeting a nearly $1 trillion valuation as the clearest indication of where market liquidity might have gone. The anticipated IPOs of OpenAI, Anthropic and SpaceX, which together could raise more than $200 billion, may be drawing investor attention toward AI and technology opportunities at the expense of crypto. While bitcoin advocates point to the asset's historical long-term returns, traditional liquidity pools are currently chasing AI infrastructure, data centers, and multi-billion-dollar private capital rounds.
According to reports from CoinDesk, bitcoin sentiment has reached extreme levels at both market highs and lows in recent weeks. Peak bullishness hit on May 22 with bitcoin near its high of $78,000, while peak bearishness came on June 3 with bitcoin near the low. The report notes that while sentiment is not a timing tool, peak conviction at the highs and peak fear at the lows typically represents the inverse of where trades usually pay off. Latest data shows bitcoin recently tested major support levels around $61,000, including the bull market trendline and 200-week SMA, before stabilizing above these key technical levels. Santiment confirms that sentiment around Bitcoin has moved almost perfectly with price instead of ahead of it, with traders showing super optimism at the top and utter bleakness during the drop.
Despite the current weakness, some maximalists argue it might be time to accumulate bitcoin as its longer-term fundamentals remain intact. Greenspan argued that the recent record-breaking outflows from bitcoin funds are likely part of a rotation back toward monetary assets, with bitcoin's current consolidation phase potentially serving as an accumulation zone if underlying network fundamentals hold. However, he cautioned that "if AI sentiment cracks, bitcoin could get hit twice: first from liquidity leaving crypto, and then again from a broader risk-off move across markets." Meanwhile, Jack Mallers, Strike CEO, is encouraging investors to buy the dip on social media, bypassing broader market debates. The risk picture has deteriorated alongside the price movement, with the current positioning reflecting the inverse relationship between sentiment extremes and market performance, though institutional adoption and regulatory frameworks continue to mature.
