Bitcoin took a drastic dip dropping nearly 9% in 48 hours to test $67,000 for the first time since March, dragging the general market down with it.
About $176 billion was erased from total crypto market capitalization, leading to an estimated $1.5 billion in forced liquidations on over leveraged long positions. And the question on every trader's lips now is why crypto keeps bleeding when US equities keep recording all time highs?
Between May 12 and May 20, net outflows from US-listed spot Bitcoin ETFs reached $2.1 billion, a flow pattern that shows a more cautious participation among both institutional and retail participants. But derivatives traders saw this coming. The annualized BTC futures premium had been sitting below the neutral 4% threshold for over three months, a constant signal for bullish leverage. The spot ETF outflows didn't cause the correction alone; they just confirmed the long speculations that has been in the market for weeks.
Fresh US airstrikes near the Strait of Hormuz reversed the hope of a ceasefire that had been building for weeks. Meanwhile Bitcoin had held above $74,000 through multiple rounds of Iran headlines but the May 28th strikes broke that floor, and the speed of the liquidation dip revealed traders were caught leaning the wrong way.
The trio factor of higher oil, a stronger currency, and a bid for Treasuries is the classic risk-off rotation that has been known to drain liquidity from speculative assets.
Coinbase analysts pointed out a sustained recovery in Bitcoin's price range would likely require either a clear improvement in the system’s liquidity or a definitive downward trend in inflation and the Fed minutes confirmed neither is visible right now.
Between May 11 and May 25, Strategy repurchased $1.5 billion face value of its 0% Convertible Senior Notes due 2029, paying an estimated $1.38 billion an 8% discount to par. Michael Saylor framed it as a deliberate effort to reduce debt but not everyone agreed.
Jeff Dorman, Chief Investment Officer at Arca, called it a direct warning about capital structure strain, noting that roughly $15 billion in outstanding preferred stock and approximately $1.5 billion in annual dividend obligations now put real pressure on Strategy's accumulation model.
The company also made a brief Coinbase Prime deposit of 411 BTC, which pushed Polymarket odds of a 2026 Bitcoin sale above 90%, before withdrawing the funds hours later. That sequence of events reduced confidence in what had been crypto's most reliable institutional buyer.
At the start of the year, futures traders were pricing two or more rate cuts before year-end and treating another hike as nearly impossible. By May 20, CME FedWatch was showing a 54.1% probability of a rate hike by December, a full reversal in expected monetary policy direction.
For Bitcoin, that's not a small adjustment. Rate hike expectations drain the exact conditions that made the 2024-2025 rally possible in the first place like cheap money,and loose liquidity. The Bears have not fully taken control yet but the floor is expected to break any minute.