Bitcoin’s fall to $84,000 is being driven less by mood and more by mechanics, according to Greg Cipolaro, Global head of research at NYDIG. In a report, Cipolaro said the core engines in the 2024-25 rally have been switched to reverse gear.
Spot bitcoin ETFs, once the primary source of demand for the cycle, are now showing sustained redemptions. These vehicles channeled billions into bitcoin during the first half of the year, the report points out, but the subsequent five-day flows have turned negative.
Data from SoSoValue shows that these ETFs are on track to record their highest monthly outflows since launch, having soaked up $3.55 billion so far in November, just shy of the record outflow of $3.56 billion seen in February.
Read more: Bitcoin ETFs hit soft record of 3.79 billion USD in November
Aggressive capital flight
Stablecoins are flashing a similar signal.
Total supply has fallen for the first time in months, and the USDE algorithmic token has lost nearly half of its outstanding supply since the October 10 liquidation shock. NYDIG’s Cipolaro said this decline points to money exiting the market rather than moving to the sidelines.
“Given its role in the selloff, which saw it fall to $0.65 on Binance, its rapid contraction underscores how aggressively capital has been withdrawn from the system,” he wrote.
The report suggests that other factors point to capital outflows.
Corporate treasury trades built around DAT share premiums relative to net asset value have also collapsed. As these premiums were turned into discounts, companies that once issued shares to buy bitcoin are now selling assets or buying back shares. Sequans, for example, unloaded BTC earlier this month to cut debt.
“Importantly, while these reversals mark a clear shift from a once-strong demand engine to a potential headwind, no DAT has yet shown signs of financial distress,” Cipolaro pointed out. “Gearing remains modest, interest obligations are manageable and many DAT structures allow issuers to suspend dividend or coupon payments if necessary.”
Major bitcoin purchases during the dive, including those from Strategy and the country of El Salvador, failed to stop the price drop. For Cipolaro, “the fact that these significant purchases did not even slow down the decline is telling.”
He argued that these chargebacks form a feedback loop that was triggered by the $19 billion liquidation event on October 10. The mechanisms that once pushed prices up are now reinforcing the decline.
In his view, investors should “hope for the best but prepare for the worst,” noting that “the long-term thesis is still alive, but the near-term environment may be shaped by worn-out cyclical mechanics.”
“History suggests the next stretch may be bumpy, but secular convictions remain an important asset for long-term investors,” Cipolaro added.
Read more: Crypto liquidity still gaping after October crash, risks sharp price swings
