Bitcoin Updates: Major Institutions Withdraw and Liquidity Shortage Causes Sharp Bitcoin Decline

Bitcoin Faces Steep Decline Amid Liquidity and Institutional Retreat

Bitcoin has experienced a significant downturn, with its value dropping to around $87,000—over 30% below its October high of more than $126,000. This sharp drop marks the most severe two-month decline since mid-2022, surpassing losses seen in traditional markets, where the S&P 500 and Nasdaq have fallen by 2.5% and 4%, respectively.

Experts point to several contributing factors behind this selloff: unprecedented outflows from Bitcoin ETFs, a reduction in stablecoin reserves, unwinding of leveraged trades, and diminishing confidence from major investors. In November alone, Bitcoin ETFs saw withdrawals totaling $3.5 billion—the largest monthly outflow since February. Notably, funds such as iShares Bitcoin Trust (IBIT) and Grayscale's GBTC have faced persistent redemptions.

This wave of withdrawals has removed a key layer of institutional support that previously helped stabilize prices during the summer rally. The situation was further aggravated by a major leveraged liquidation on October 10, when $19 billion in open interest was wiped out within a single day, establishing a new resistance zone between $98,000 and $102,000. Since the start of November, stablecoin liquidity has shrunk by $4.6 billion, with $800 million exiting the market just last week. Historically, growth in stablecoin supply has preceded Bitcoin price surges, so the current contraction signals weakening market depth and reduced trading leverage.

Capital Shifts and Competitive Pressures

The recent downturn has prompted investors to seek alternatives to Bitcoin. Solana ETFs, which debuted in late October, attracted $531 million in their first week—35% higher than Bitcoin's initial ETF inflows. Solana's appeal lies in its 7% staking rewards, lower transaction costs, and faster processing speeds, making it attractive to those seeking returns in a sluggish Bitcoin market. In contrast, Bitcoin ETFs experienced $3.79 billion in outflows during November, with BlackRock's IBIT alone losing $355.5 million in a single day as Bitcoin's price dipped below $95,000.

Market Structure Weaknesses Intensify Volatility

Bitcoin's vulnerability is heightened by structural weaknesses in the market. Daily trading volumes on exchanges have plummeted by 40% to under $25 billion, and liquidity depth has dropped 30% from 2025 highs. This thinning market creates a feedback loop: ETF sales drive prices lower, which in turn triggers more redemptions. Analysts note that ETF performance is closely tied to stock market sentiment, and with U.S. Treasury yields exceeding 4.5%, many investors are opting for safer assets.

Regulatory and Geopolitical Headwinds

Institutional hesitation is further fueled by regulatory and geopolitical risks. The U.S. Department of Homeland Security has launched an investigation into Chinese Bitcoin mining equipment manufacturer Bitmain, citing national security concerns over potential remote access vulnerabilities. While Bitmain disputes these allegations, the scrutiny highlights broader worries about the use of foreign technology in critical infrastructure.

Opportunities Amid Uncertainty

Despite the current turbulence, some investors are taking advantage of lower prices. Medium-sized holders—wallets with 100 to 1,000 BTC—have increased their holdings by 0.47% since November 11, indicating strategic accumulation at discounted prices. Meanwhile, Ark Invest, led by Cathie Wood, has expanded its positions in both crypto and artificial intelligence sectors, acquiring $56 million in Alphabet shares and $3.75 million in Coinbase stock as part of a broader bet on the convergence of blockchain and AI. However, Wood has adjusted her long-term Bitcoin price forecast for 2030, lowering it from $1.5 million to $1.2 million, citing increased competition from stablecoins.

Looking Ahead: The Need for Renewed Inflows

Bitcoin's recovery depends on a revival of liquidity and renewed institutional participation. Analysts estimate that the market needs at least $1 billion in new weekly inflows to achieve a 4% price increase—a target that remains out of reach for now. The ongoing volatility highlights the fragility of the cryptocurrency ecosystem, where macroeconomic trends and regulatory developments continue to play a decisive role in shaping Bitcoin's future.