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Crypto market maker Wintermute published a detailed market update on Tuesday via X (previously Twitter), offering a comprehensive breakdown of Bitcoin’s (BTC) recent collapse, who was behind the selling pressure, and what conditions must change for a meaningful recovery to take hold.
Wintermute Details Brutal Bitcoin Crash
The firm described the past week as exceptionally severe for Bitcoin. Prices fell below $80,000 for the first time since April 2025 and continued sliding to around $60,000 before stabilizing in the low $70,000 range by the weekend.
According to Wintermute, the decline erased all of Bitcoin’s gains that followed Donald Trump’s election victory in November 2024, accompanied by widespread liquidations.
More than $2.7 billion in leveraged positions were wiped out as months of range‑bound trading encouraged excessive leverage that ultimately unraveled.
Wintermute also pointed to the growing influence of Bitcoin exchange‑traded funds (ETFs) on price action, noting that BlackRock’s IBIT ETF alone saw more than $10 billion in notional trading volume on Thursday.
Wintermute identified three major catalysts that struck the market at the same time. The first was the January 30 nomination of Kevin Warsh as Federal Reserve (Fed) Chair, which altered expectations around monetary policy.
The second was a wave of disappointing earnings from large technology firms, highlighted by Microsoft shares dropping 10%. The third was a dramatic reversal in precious metals, where silver plunged 40% in just three days after briefly reaching $121.
The Key Conditions For BTC’s Next Recovery
Data from spot markets suggest that selling pressure was structural rather than isolated. The Coinbase premium remained in negative territory throughout the decline, a pattern that has persisted since December and signals sustained selling by US investors.
Wintermute said its internal over‑the‑counter (OTC) flow data confirmed that US counterparties were heavy sellers throughout the week, a trend that was reinforced by ongoing ETF redemptions.
Institutional demand, which had supported prices earlier in the cycle, has largely faded. Since November, spot Bitcoin ETFs have recorded approximately $6.2 billion in cumulative net outflows, representing the longest continuous stretch of redemptions since these products launched.
Wintermute explained that when ETF sponsors are forced to sell spot Bitcoin into falling markets, it creates a negative feedback loop that amplifies downside pressure.
The firm also highlighted growing fragility in derivatives markets. IBIT and Deribit together now account for half of the crypto options market. Wintermute said the sharp sell‑off reflected investor complacency after periods of low volatility and sideways trading, which left positioning vulnerable once prices began to move.
Beyond crypto‑specific factors, Wintermute argued that the broader investment landscape has been dominated by artificial intelligence. The firm pointed to a viral chart showing Bitcoin’s performance closely mirroring software stocks in the S&P 500.
According to Wintermute, the more important takeaway is that AI has been absorbing a disproportionate share of global capital, often at the expense of other asset classes, including crypto.
Looking ahead, Wintermute expects a period of uneven and volatile price discovery. The firm said it is difficult to envision a sustained rally unless several conditions align: the Coinbase premium turning positive, ETF flows reversing back into inflows, and basis rates in derivatives markets stabilizing.
Featured image from OpenArt, chart from TradingView.com
