Author: Michael Ebiekutan

Translated by: Shenchao TechFlow

Senchao Introduction: Since Bitcoin reached its historical high of $126,000 in October 2025, the cryptocurrency market has been experiencing its most severe pullback since 2022. A recent report from market maker Wintermute points out that, in addition to a net outflow of up to $6.2 billion from ETFs, capital is massively rotating into the AI sector. The report analyzes why the Coinbase premium, ETF inflows, and basis rates will become key indicators in this round of structural recovery.

The full text is as follows:

• The Bitcoin ETF has become the main driver of the overall decline in the cryptocurrency market, with a net outflow of over $6.2 billion since November last year.
• The AI narrative is absorbing funds that originally belonged to Bitcoin and even software stocks.
• Before the Coinbase premium turns positive, ETF funds continue to flow in, and basis rates stabilize, Bitcoin may struggle to emerge from this trough.

According to Wintermute, this wave of downward trend in Bitcoin (BTC), since the leverage washout on October 10, 2025, is primarily dominated by ongoing ETF fund outflows and the rotation toward the AI narrative.

In a report released on Tuesday, this market maker company pointed out that Bitcoin has given back all its gains since the election of U.S. President Donald Trump in November 2024. Over the past few months, this leading cryptocurrency has experienced the largest capital withdrawal since 2022, with prices falling from an all-time high of $126,000 in October to about $60,000 last Friday, a decline of over 50%.

The report notes that after experiencing a crash from October to November, Bitcoin was mainly in a range-bound state in December and January, during which the slowly accumulated leverage was again wiped out in the past week due to liquidations amounting to about $2.7 billion.

Wintermute emphasized that the downward pressure mainly comes from the U.S. market, as evidenced by the negative growth trajectory of the Coinbase premium since December, and the heavy sell-off from U.S. counterparties in the over-the-counter (OTC) market last week.

Additionally, the report points out that U.S. spot exchange-traded funds (ETFs) have seen $6.2 billion in outflows since November, marking the longest outflow in history. Notably, BlackRock's IBIT saw nominal trading volumes reach about $10 billion during last Thursday's market crash.

Wintermute's desk strategist Jasper De Maere wrote: "When redemptions force sponsors to sell the spot in a price decline, the feedback loop becomes self-reinforcing."

However, last week's declines were not limited to cryptocurrency. The broader market also experienced sluggishness, with both precious metals and stocks retreating. On the surface, cryptocurrency once again proved its negative skew, underperforming major asset classes during the decline—just as it performed better during the uptrend—Wintermute stated, this pattern is consistent with bearish markets.

The AI narrative boom comes at the expense of cryptocurrencies and software stocks

Further analysis by the company shows that the resilience of stock indexes in market ups and downs is largely attributed to the rotation toward the AI narrative, rather than a broad rally in the overall stock market. Wintermute notes that the trading patterns of Bitcoin and software companies in the S&P 500 have been highly similar over the past two years.

De Maere wrote: "The real story is that for months, AI has been absorbing available capital at the expense of all other assets... If AI stocks are removed from the Nasdaq index, the negative skew of cryptocurrencies basically disappears."

He added: "For cryptocurrencies to outperform the market again, the inflation of AI trading needs to be squeezed out. Microsoft's weak earnings report opened this process, but more catalysts are needed."

Comparison of Bitcoin and S&P Software Index performance

Source: Wintermute

The report also emphasizes that the spot demand required to initiate a structural recovery remains weak. Digital Asset Treasuries (DATs) were one of the main sources of buying power over the past year, but as prices fell below their average purchase cost, they now hold as much as $25 billion in unrealized losses. The resulting contraction in net asset value (NAV) premiums limits their ability to raise funds again to support demand.

Wintermute noted: "It is hard to see sustained upside before the Coinbase premium turns positive, ETF fund flows reverse, and basis rates stabilize."

As of the time of publication on Tuesday, Bitcoin was trading at approximately $69,700, down 0.3% in the past 24 hours.