Author: Michael Ebiekutan
Compiled by: Deep Tide TechFlow
Deep Tide Guide: Since Bitcoin hit its all-time high of $126,000 in October 2025, the crypto market is experiencing its sharpest pullback since 2022. A recent report from market maker Wintermute points out that, in addition to a net outflow of $6.2 billion from ETFs, capital is rotating massively into the AI sector. The report provides an in-depth analysis of why the Coinbase premium, ETF flows, and basis rates will be key indicators for this structural recovery.
Full text as follows:
- Bitcoin ETFs have become the main driver of the overall decline in the crypto market, with net outflows exceeding $6.2 billion since last November.
- The AI narrative is absorbing capital that would otherwise have gone to Bitcoin or even software stocks.
- Bitcoin may struggle to emerge from its trough until the Coinbase premium turns positive, ETF inflows become sustained, and basis rates stabilize.
According to Wintermute, this downward trend in Bitcoin (BTC) since the leverage washout on October 10, 2025, has been primarily driven by persistent ETF outflows and a rotation into the AI narrative.
In a report released on Tuesday, the market-making firm noted that Bitcoin has given back all the gains it made since the election victory of U.S. President Donald Trump in November 2024. Over the past few months, the top cryptocurrency has experienced its largest capital exodus since 2022, with its price falling from the October all-time high of $126,000 to around $60,000 last Friday, a drop of over 50%.
The report stated that after the sharp decline in October-November, Bitcoin mainly traded within a range in December and January, during which slowly accumulated leverage was once again wiped out in the past week by liquidations worth approximately $2.7 billion.
Wintermute emphasized that the downward pressure is primarily coming from the U.S. market, as evidenced by the negative trajectory of the Coinbase Premium since December and the heavy selling pressure from U.S. counterparties in over-the-counter (OTC) trading last week.
Furthermore, the report pointed out that U.S. spot exchange-traded funds (ETFs) have witnessed outflows of $6.2 billion since November, marking their longest streak of outflows ever. Notably, BlackRock's IBIT saw a notional trading volume of approximately $10 billion during last Thursday's market crash.
Jasper De Maere, Desk Strategist at Wintermute, wrote: "A self-reinforcing feedback loop is created when redemptions force sponsors to sell spot assets amid falling prices."
However, last week's decline was not limited to cryptocurrencies. Broader markets also experienced weakness, with precious metals and stocks pulling back. On the surface, cryptocurrencies once again demonstrated their negative skew, underperforming major asset classes during the downturn—just as they outperform during uptrends—a pattern Wintermute says is consistent with bear market conditions.
The AI Narrative Frenzy is Happening at the Expense of Crypto and Software Stocks
The firm's further analysis revealed that the resilience of stock indices during both market rises and falls is largely thanks to a rotation into the AI narrative, rather than broad-based strength across the entire stock market. Wintermute noted that Bitcoin and software companies within the S&P 500 have shown highly correlated trading patterns 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 everything else... If you remove AI stocks from the Nasdaq index, the negative skew for cryptocurrencies largely disappears."
He added: "For cryptocurrencies to outperform again, the air needs to be let out of the AI trade. Microsoft's weak earnings print started this process, but more catalysts are needed."
Bitcoin performance vs. S&P Software Index
Source: Wintermute
The report also highlighted that the spot demand needed to initiate a structural recovery remains weak. Digital Asset Treasuries (DATs), which were one of the main sources of buying power over the past year, are now sitting on floating losses of up to $25 billion as prices have dropped below their average cost basis. The resulting contraction in Net Asset Value (NAV) premiums limits their ability to raise further funds to support demand.
Wintermute noted: "It is difficult to see sustained upside until the Coinbase premium turns positive, ETF flow direction reverses, and basis rates stabilize."
At the time of writing on Tuesday, Bitcoin was trading around $69,700, down 0.3% in the past 24 hours.
