Bitcoin Weakness Grows as ETF Outflows and Cycles Collide
- Bitcoin drops to 16 monthly lows as ETF selling and cycle pressure weigh on the price.
- Analysts point to 4-year cycle patterns as derivatives reshape Bitcoin price discovery.
- Miners face rising stress as costs exceed prices and gold continues to outperform BTC.
Bitcoin fell below $61,000 last week, marking its lowest level in roughly 16 months as market leaders pointed to the four-year cycle, ETF redemptions, and investor rotation into gold and artificial intelligence stocks. The decline erased all gains since the November 2024 election and ranks among the largest drawdowns since 2022.
Matt Hougan, chief investment officer at Bitwise Asset Management, said investors should not blame a single trigger for the retracement. He told CNBC’s “ETF Edge” that the four-year cycle stands as the primary downward catalyst.
“People are looking for one thing to blame for the current retracement in bitcoin,” Hougan said. “But there is no one thing to blame.” He added that investors have favored other assets during the downturn. “There is some quantum risk. There is fear of [Fed nominee] Kevin Warsh,” Hougan said. “In bear markets, all these things are amplified.”
Bitcoin reached a record $126,279 in October before falling below $90,000 in November. Since then, momentum has shifted.
ETF Redemptions and Shifting Focus
Wintermute analysts linked the downtrend to exchange-traded fund redemptions and a pivot toward AI stocks. They reported that bearish momentum remains intact, although the pace of selling has eased.
At the same time, Hougan said the current market reflects a “self-fulfilling prophecy.” He argued that structural demand still supports Bitcoin’s long-term framework despite short-term turbulence.
“There is good news underneath the surface. It’s just slow to materialize,” Hougan said. He maintained that financialization does not weaken Bitcoin’s scarcity. He noted that only 21 million coins exist and that derivative demand must eventually reach the spot market.
Bitwise manages more than $15 billion in assets and remains active in crypto ETFs. The firm launched the Bitwise Solana Staking ETF on Oct. 28 to track Solana. The fund has declined about 57% since launch, while Solana has fallen more than 30% this year.
Related: Bitcoin Crash Tied to IBIT Dealer Hedging, Says Arthur Hayes
Derivatives, Miners, and Structural Strain
Some analysts raised concerns about derivative exposure. Market commentator 0xNobler pointed to the synthetic float ratio, arguing that derivatives and ETFs create claims on Bitcoin without matching physical supply. The price discovery process is disrupted through the system disruption, establishing additional stability risks for Bitcoin markets.
Bitcoin miners currently experience financial difficulties because market prices remain under their typical operational costs. Operators experience decreasing profit margins, together with an increased burden on their business activities. Some miners have shut down high-cost operations, which has reduced the network hashrate. In turn, distressed miners have sold assets to maintain liquidity. That selling has added short-term volatility.
Bitcoin’s recent decline forms part of a broader crypto winter that began in January 2025. Hougan estimated that crypto winters typically last around 13 months, suggesting a possible recovery in early 2026. Yet other analysts question whether the bear phase will end on that timeline.
Inflation Hedge Debate and Market Test
The economic downturn has sparked renewed discussions about Bitcoin’s capacity to function as an inflation hedge and digital gold. Larry Swedroe argued that Bitcoin does not behave as a safe-haven asset during market stress. He observed that gold has surpassed Bitcoin’s value in recent times.
The value of Bitcoin is being tested because gold is becoming more popular, and AI stocks are attracting investment. The market now weighs institutional adoption, regulatory developments, and broader economic conditions.
The central question remains: can Bitcoin sustain its scarcity-driven thesis amid derivative expansion and ETF-driven price swings?
