These Three Catalysts Could Spark Bitcoin’s Next Rally, According To Wintermute

Overview

Wintermute, a prominent crypto market maker, provided a detailed analysis of Bitcoin’s recent downturn in a market update shared on X. The report outlines the factors that contributed to Bitcoin’s substantial price decline and highlights key conditions necessary for a recovery.

Bitcoin’s Recent Collapse

According to Wintermute, the previous week was particularly challenging for Bitcoin, with prices dropping below $80,000 for the first time since April 2025. The decline continued, reaching around $60,000 before stabilizing in the low $70,000 range by the weekend. This price drop effectively erased all of Bitcoin’s gains following Donald Trump’s election victory in November 2024. The market experienced widespread liquidations during this period, with over $2.7 billion in leveraged positions being wiped out. The firm noted that excessive leverage had built up during months of range-bound trading, which ultimately contributed to the sharp decline.

Wintermute pointed out the growing impact of Bitcoin exchange-traded funds (ETFs) on market dynamics. For instance, BlackRock’s IBIT ETF recorded more than $10 billion in notional trading volume on a single day, highlighting the significant role such products play in price action.

Catalysts Behind the Market Shift

Wintermute identified three major catalysts that coincided with Bitcoin’s decline:

1. Federal Reserve Nomination: The nomination of Kevin Warsh as Federal Reserve Chair on January 30 altered expectations regarding future monetary policy.
2. Disappointing Technology Earnings: A wave of disappointing earnings reports from major technology firms, including a notable 10% drop in Microsoft shares, added to the negative sentiment.
3. Precious Metals Reversal: There was a dramatic reversal in precious metals, marked by a 40% plunge in silver prices over three days after briefly reaching a high of $121.

These events collectively contributed to a structural selling pressure in the Bitcoin market.

Conditions for Recovery

Wintermute’s analysis suggests that the selling pressure in the Bitcoin market is not an isolated incident but a structural issue. The Coinbase premium remained negative throughout the decline, a trend that has persisted since December, indicating ongoing selling by U.S. investors. The firm’s internal over-the-counter (OTC) flow data corroborated this, showing that U.S. counterparties were significant sellers during the week. Additionally, ETF redemptions have further exacerbated the situation, with spot Bitcoin ETFs seeing approximately $6.2 billion in cumulative net outflows since November, marking the longest stretch of redemptions since the launch of these products.

The firm warned that forced selling by ETF sponsors in declining markets could create a negative feedback loop, intensifying downward pressure on prices. Furthermore, there is growing fragility in the derivatives markets, with IBIT and Deribit accounting for half of the crypto options market. The sharp sell-off was attributed to investor complacency following periods of low volatility and sideways trading, which left market positions vulnerable once prices began to move.

Wintermute also noted that the broader investment landscape has been heavily influenced by developments in artificial intelligence, which has absorbed a significant share of global capital, often at the expense of other asset classes, including cryptocurrencies.

From Author

The detailed analysis provided by Wintermute sheds light on the multifaceted nature of Bitcoin’s recent decline. It highlights the interconnectedness of various market factors, including regulatory changes, corporate earnings, and broader economic trends. Understanding these dynamics is crucial for investors looking to navigate the volatile crypto landscape.

Impact on the Crypto Market

• Bitcoin’s significant price drop has led to a loss of investor confidence, impacting overall market sentiment.
• The structural selling pressure indicates a potential shift in market dynamics, requiring careful monitoring of ETF flows and investor behavior.
• The ongoing redemptions from spot Bitcoin ETFs suggest a need for renewed institutional interest to stabilize prices.
• The fragility in derivatives markets may lead to increased volatility as investors adjust their positions.
• The influence of artificial intelligence on capital allocation could continue to divert investment away from cryptocurrencies, affecting market recovery prospects.