Bitcoin’s rollercoaster ride just took another sharp dip. After years of bullish runs and excitement in the digital asset world, the cryptocurrency market is experiencing a significant downturn. Bitcoin, once the face of the crypto revolution, is facing an $US1 billion liquidation, leaving many investors worried. Here’s what’s happening, and what it could mean for the future of Bitcoin and other digital currencies.
The Fall of Bitcoin’s Perpetual Futures
For years, Bitcoin futures have been a key metric for understanding the sentiment in the market. Traditionally, these have been positive, indicating that investors were optimistic about Bitcoin’s price potential. However, recently, the funding rate for Bitcoin’s perpetual futures contracts has turned negative, signaling a shift in market sentiment. It’s the first time in a while that this has happened, and it’s a major red flag for crypto traders.
What this essentially means is that speculation on Bitcoin is losing its appeal. Retail traders, who once poured money into Bitcoin futures, are now turning to other alternatives—like sports betting ahead of the Super Bowl or trading in zero-day options on equities and other higher-yielding crypto assets. The once-popular digital currency is no longer the go-to option, and the shift in investor focus could have long-term implications for its value and appeal.
No Longer a Hedge or Momentum Play
Bitcoin has been praised for its ability to hedge against inflation and act as a safe haven during geopolitical uncertainty. But it seems the days of Bitcoin behaving like digital gold are behind us. During recent periods of geopolitical turmoil, Bitcoin failed to rise in value, unlike gold, which surged in price. It’s also no longer functioning as a momentum trade, as Bitcoin failed to make a strong rebound despite deeply oversold signals.
With Bitcoin’s role as a safe-haven asset diminishing, its growing presence in institutional portfolios has made it more vulnerable to the same market forces that affect tech equities and precious metals. Bitcoin is no longer seen as the magical digital asset that can perform well regardless of broader market conditions, explains AFR.
The Impact on Bitcoin ETFs
For much of 2025, Bitcoin enjoyed significant support from US spot-bitcoin ETFs, with billions of dollars flowing into the funds, keeping Bitcoin prices afloat. But with the recent price plummet, this support has evaporated. $US5 billion has been pulled from Bitcoin ETFs in the past three months, and this figure is only likely to rise. Without the constant influx of money from institutional investors, Bitcoin’s price has become even more volatile, and its value is looking more uncertain than ever.
Smaller Tokens and Crypto Platforms Take a Hit
The decline in Bitcoin’s price is reverberating throughout the entire crypto market. Smaller, less liquid speculative tokens have suffered even more. The MarketVector Digital Assets 100 Small-Cap Index, which tracks 50 of the smallest digital assets, has plunged around 70% over the past year. Exchanges like Coinbase, Gemini, and Bullish have also been hit hard, as trading volumes—the engine driving their business—have plummeted.
These platforms are facing a 60% drop in share prices over the past three months, and analysts are slashing expectations for their earnings. As the market shrinks, so does the profitability of these exchanges, putting additional pressure on the industry.
Defensive Positions and Bearish Outlooks
Amid the downturn, traders have become more defensive, leading to a surge in demand for downside protection. There’s been a noticeable increase in the buying of options that protect against further drops, especially as Bitcoin’s price hovers around the $US70,000 mark. Medium-term contracts expiring in late June are showing a more bearish outlook, with the majority of open interest concentrated around $US60,000 and even $US20,000—levels that many didn’t think possible just a few months ago.
