The recent surge in demand for Bitcoin has taken a downturn, leading to a drop in its price to multi-month lows. This shift is attributed to factors such as crypto treasury reversals and significant outflows from crypto funds, indicating a trend of “actual capital flight” rather than mere negative sentiment, according to NYDIG.
Greg Cipolaro, head of research at NYDIG, highlighted in a recent note that the inflow of capital into exchange-traded funds (ETFs) and the demand for digital asset treasuries (DATs) were crucial to Bitcoin”s previous growth cycle. However, a major liquidation event in early October reversed ETF inflows, caused treasury premiums to collapse, and led to a decline in stablecoin supply, signaling a significant exit of liquidity from the market. Cipolaro noted that these events are classic indicators of a market losing momentum.
“Historically, once that loop breaks, the market tends to follow a predictable sequence,” Cipolaro stated. “Liquidity tightens, leverage attempts to re-form but struggles to gain traction, and previously supportive narratives stop translating into actual flows.” He emphasized that while the narrative may change, the underlying mechanics of the market remain consistent.
While ETF capital is flowing out, there is a notable increase in Bitcoin”s market dominance. Cipolaro pointed out that spot Bitcoin ETFs, which have been among the most successful aspects of this cycle, are now facing challenges as inflows have reversed into a significant headwind. Despite this, broader factors such as global liquidity changes, macroeconomic headlines, and market structure stress continue to shape Bitcoin”s trajectory.
Bitcoin”s dominance has seen a resurgence, climbing above 60% in early November before settling around 58%, according to data from CoinMarketCap. This trend suggests that during periods of market drawdown, capital often consolidates back into Bitcoin, the most established and liquid asset in the crypto ecosystem.
Additionally, the structural demand for Bitcoin from DATs and stablecoins has also seen a decline, with DAT premiums compressing across the board and stablecoin supply dipping for the first time in several months. Despite the market”s current downturn, Cipolaro remains optimistic about the DAT sector, asserting that it has a considerable runway for recovery before stress becomes a pressing issue. “Leverage remains modest, interest obligations are manageable, and many DAT structures allow issuers to suspend dividend or coupon payments if needed,” he added.
Looking ahead, Cipolaro believes that the long-term narrative for Bitcoin is still robust. The cryptocurrency is gaining traction among institutional players, interest from sovereign entities is gradually increasing, and its role as a neutral, programmable monetary asset continues to be relevant. “Nothing in the past few weeks changes that long-horizon trajectory,” Cipolaro concluded, “but the cycle story, driven by flows, leverage, and reflexive behavior, is now asserting itself more forcefully.”
