Bitcoin’s (BTC) price has been trading in the red since the start of the year, dropping from $96,000 to $58,000 at the start of July, with prediction markets speculating it will close at $64,000 by the end of the year. In six months, the cryptocurrency lost nearly 40% of its value.
Analysts are pointing to global liquidity increasingly chasing artificial intelligence (AI), mega-cap tech, Initial Public Offerings (IPOs), and high-yield credit, which currently offer more compelling narratives than the crypto market. This is compounded by outflows from spot Bitcoin exchange-traded funds (ETFs) and lingering fears over Fed rate policy.
Michael Saylor Strategy’s introduction of a BTC monetization program, which allows the company to selectively liquidate portions of its BTC holdings, added another layer of uncertainty to the crypto market. JPMorgan said this introduced a “two-way” risk as the token’s largest and steadiest buyer can now also become a seller.
“Bitcoin is no longer just a long-term treasury asset. It can start to look like one of the few liquid assets the company can tap if it needs flexibility,” Maksym Sakhrov, the co-founder and group CEO of WeFi, told DeFi Rate.
BTC spot ETFs close their worst month
In June, spot BTC ETFs closed their worst month since launching in January 2024, recording $4.5 billion in net outflows. BlackRock’s IBIT alone accounted for roughly $3.3 billion of that figure, about 75% of the monthly total from a single fund. The withdrawals were not a one-off panic, either: Bitcoin ETFs posted 13 consecutive days of net outflows between mid-May and early June, the longest such streak on record.
“Many expected ETFs to eliminate Bitcoin’s volatility, but I think that expectation misunderstood what ETFs actually changed… [They] transformed Bitcoin’s ownership structure – not its economic nature,” Dean Chen, lead analyst at Bitunix, said.
WeFi’s Sakhrov added that ETFs do not “change investor psychology” per se but change the way investors access the asset.
“For institutions, ETFs make Bitcoin easier to buy, but they also make it easier to reduce exposure quickly when risk sentiment turns negative. So, when macro pressure builds, the ETF wrapper does not make investors calmer or more committed. It simply gives them a more efficient way to exit.”
Strategy’s balance sheet is feeling a new kind of pressure
At the end of June, Strategy unveiled changes to the playbook that has underpinned its Bitcoin strategy for years: a “Digital Credit Capital Framework” that gives the company broader powers to sell Bitcoin, buy back securities, and preserve liquidity as it adapts to mounting pressure on the structure that fueled its aggressive accumulation. The plan authorizes the company to sell up to $1.25 billion in Bitcoin, with proceeds earmarked to fund preferred-stock dividends and shore up cash reserves.
Bitunix’s Chen noted Strategy’s recent decision could be a way for the company to redesign its balance sheet to “better withstand Bitcoin’s volatility”. He explained that the company’s asset side is highly concentrated in BTC, while its liabilities consist of multiple layers of convertible notes topped by equity and common stock.
According to JPMorgan, Strategy would need sufficient liquidity to cover two to three years of dividend payments before investors could be confident it would not need to monetize its holdings again.
“Strategy is shifting from pure accumulation to balance-sheet management. Its model relied on raising capital, buying Bitcoin and using the company’s market premium to support new financing. That becomes harder when its valuation gets too close to the Bitcoin it holds and preferred funding becomes more expensive,” Shawn Young, chief analyst at MEXC Research, noted.
Are institutions playing a weak market?
Steep drawdowns tend to lead to the same question: could large institutional players be deliberately pushing Bitcoin lower so they can accumulate at a discount? With Strategy’s new seller risk and record ETF outflows landing in the same month, the theory has more oxygen than usual.
Speaking of the insider trading angle, WeFi’s Sakharov noted that many people are drawn to that explanation because it is “simple”.
“The reality is usually messier. But I do think large players know how to use weak conditions to their advantage.”
MEXC’s Young noted the pressure in the market is akin to that of a “flow and positioning problem”.
He pointed out that institutions can influence short-term liquidity through ETFs, derivatives, and balance-sheet hedging, which can make the market look coordinated even when it is not.
“The market can appear coordinated when many funds respond to the same macro signals,” he said.
Bitcoin’s recent downturn seems to be pointing towards a market when liquidity, leverage, and investor confidence are all being tested at the same time. ETFs made Bitcoin easier to trade, not easier to hold through a downturn, and Strategy’s next move will likely say more about sentiment than supply.
“Bitcoin is no longer competing only with gold or other cryptocurrencies. It is competing for global liquidity… Ultimately, today’s market is repricing the global cost of capital more than Bitcoin itself,” Chen concluded.
