Bitcoin and Ether Face Worst Weekly Rout Since FTX Collapse

The crypto market lost roughly $390 billion in value this week, marking one of the largest drawdowns in years. According to CoinDesk, bitcoin and ether are on track for their biggest weekly losses since the FTX collapse in November 2022.

The selloff wiped out hundreds of billions of dollars from digital asset markets. Total market capitalization is now hovering just above $2 trillion, which is less than half of the nearly $4.2 trillion peak reached in October. Bitcoin traded just above $60,000, while ether changed hands around $1,550.

The volatility hit derivatives traders particularly hard. Roughly $7 billion in leveraged positions were liquidated across digital assets during the week. About $5.7 billion of those liquidations involved long positions.

Several bearish drivers converged to drive this decline:

• Corporate Selling: Strategy (MSTR), the largest corporate holder of bitcoin, disclosed it sold BTC for the first time in nearly four years. The transaction involved 32 BTC worth roughly $2.5 million. While the sale was negligible, it signaled a shift for investors who viewed the company as a consistent source of demand.
• Capital Rotation: Bitcoin ETFs continued to see heavy outflows. K33 Research head Vetle Lunde noted that these outflows reflect a rotation of capital away from crypto and into artificial intelligence (AI) investments.
• Macro and Structural Pressures: Increased competition from AI investments and fears regarding Fed rate hikes weighed on the market. Additionally, investors are questioning if Strategy may need to sell more bitcoin to cover obligations tied to its preferred equities.

This week demonstrates that the era of "perpetual demand" from major corporate holders is facing scrutiny. When the largest holders move from accumulation to liquidation, even small transactions can trigger broader market anxiety.

Watch the liquidity levels in the derivatives market. The liquidation of $7 billion in positions suggests that the market remains highly sensitive to price swings and leveraged bets.