Despite the current leaks, Bitcoin’s structural demand remains intact

The current correction in Bitcoin and the broader crypto market is the result of a combination of factors, from deteriorating short-term investor sentiment to widespread capital rotation in global financial markets. Bitcoin has lost more than 14% in the last week, and has lost more than 22% in the last four weeks. Today, June 4, the price of the leading cryptocurrency briefly fell to $61,351, accompanied by one of the biggest liquidations in recent months. Foreclosure volume exceeded $1.6 billion, of which approximately $1.4 billion was long.

Institutional factors remain the main drivers of pressure. Since mid-May, US spot Bitcoin ETFs have experienced a steady outflow of capital. Net outflows totaled nearly $400 million on June 3 alone, and in total, more than $3.4 billion has been withdrawn from the funds in recent weeks. Since ETFs have been one of the main drivers of market growth in recent years, a temporary weakening of demand from institutional investors naturally puts pressure on the price.

Rising global uncertainty remains an additional factor. Investors continue to assess the continued impact of international tensions and the lack of signs of an imminent resolution to a number of conflicts, including the situation in the Middle East. In such conditions, market participants traditionally reduce the share of risky assets in their portfolios and increase the positions of defensive instruments, which puts pressure not only on cryptocurrencies, but also on other segments of the global capital market.

However, it is important to look at the bigger picture. Despite the current leaks, the structural demand for Bitcoin remains unprecedented. According to market data, ETFs have accumulated more than 509,000 BTC since March 2024, while Strategy has acquired about 651,000 BTC during the same period. In total, this represents a net demand of over 1.24 million BTC. In comparison, all Bitcoin exchange reserves are currently valued at around 2.7 million BTC, while the volume of coins owned by Satoshi Nakamoto is around 1 million BTC. In other words, in recent years, the market has absorbed a volume of Bitcoin that exceeds the estimated assets of the network creator and accounts for almost half of all exchange reserves, which highlights the scale of institutional interest in the asset.

Against this backdrop, CryptoQuant CEO Ki Yong-ju’s thesis that the market is undergoing a massive shift in Bitcoin ownership is particularly significant. Despite massive buying by ETFs and corporate investors, the price has returned to March 2024 levels. This may indicate not so much weakness in the asset as a major redistribution of supply among different groups of market participants, from early adopters to new institutional investors.

Global competition for capital puts pressure. According to Binance Research, the majority of investment flows are currently directed towards artificial intelligence, semiconductor manufacturers, defense companies and the energy sector. The CBOE dispersion index recently hit 42, one of its highest levels ever recorded, and is a signal that capital is concentrating on a limited number of popular investment themes. Under these conditions, Bitcoin and other digital assets temporarily lose some liquidity in favor of other segments of the market.

This is why we view the current correction as largely a result of macroeconomic factors and capital flows, rather than a crisis within the crypto industry. Unlike previous cycles, the market is not facing systemic infrastructure issues, bankruptcies of major players, or regulatory upheavals that could undermine confidence in the industry. On the contrary, the fundamentals of the sector continue to improve. institutional participation is increasing, use cases for digital assets are expanding, and the integration of cryptocurrencies with the traditional financial system is becoming ever deeper.

Kirill Khomyakov, Regional Head of Central and Eastern Europe and Central Asia at Binance

—