What is causing Bitcoin’s collapse and how bad could it get?
Kevin Nyaga6 min read·Just now--
Several things at once. And that’s precisely what makes this selloff more concerning than a typical crypto correction.
Bitcoin has dropped more than 20% in a month, sliding below $63,000 after losing 11% in a single week. The Crypto Fear and Greed Index has crashed to 11 out of 100, its lowest reading since early April and deep inside extreme fear territory.
Source: TradingView
US spot Bitcoin ETFs have now recorded outflows for 12 consecutive trading days, the longest such streak since the funds launched, with $519 million leaving on Tuesday alone and $3.97 billion exiting over the full streak.
Source: Coinglass
Whales and sharks, entities holding between 10 and 10,000 BTC, have offloaded 24,602 BTC over the past week. Open interest has dropped from $54.24 billion to $52.35 billion. More than 272,000 traders were liquidated in 24 hours, with total crypto liquidations hitting $1.8 billion, most from long positions.
This isn’t one bad day. It’s a sustained, broad-based unwind across every layer of the market simultaneously.
The causes aren’t a mystery
Iran launched retaliatory missile strikes against the US Fifth Fleet headquarters in Bahrain following US strikes, which immediately sent risk-off sentiment through crypto markets. Investors moved toward defensive assets. Oil prices jumped on fears of renewed energy inflation, which puts the Fed back in an impossible position.
Strong US jobs data released this week erased any remaining room for a rate cut this year, removing one of the key macro tailwinds that had been supporting risk assets. When you strip out the possibility of easing and add a fresh geopolitical escalation on top, the pressure on speculative assets like Bitcoin compounds quickly.
The AI capital rotation is the second force, and it’s arguably the more structurally significant one. K33 Research’s latest note, titled “Summertime Sadness,” made the point plainly. Capital flowing into AI stocks is draining liquidity from Bitcoin and the broader crypto market.
Nvidia’s market cap has surged past $5.5 trillion. Planned IPOs from SpaceX and Anthropic are pulling investor attention and capital toward the AI ecosystem. When the hottest trade in markets is AI, Bitcoin loses its position as the primary destination for high-conviction, high-risk capital. That’s a rotation problem, not just a sentiment problem, and rotations take time to reverse.
Strategy added an unexpected layer of negative sentiment when it disclosed the sale of 32 BTC for roughly $2.5 million, its first Bitcoin sale in nearly four years. The amount is trivial in the context of its holdings. The signal it sends is not. Strategy’s buy-and-hold narrative has been one of the most visible institutional confidence signals in the Bitcoin market. Any deviation from that playbook, however small, raises questions about conviction at exactly the moment the market is looking for reasons to sell.
Mt. Gox-linked wallets moved 10,422 BTC worth approximately $739 million to a new address, reviving fears about creditor repayments adding fresh spot supply into an already weak market. No confirmed sale occurred, but in a market trading at extreme fear, the optics alone are enough to accelerate selling.
Peter Schiff versus the data
Peter Schiff wasted no time. He warned on X that “there is way too much complacency in Bitcoin for the market to be anywhere near a bottom,” and reiterated his prediction that Bitcoin falls below $20,000 once it breaks $50,000.
He also praised Mark Cuban for selling his Bitcoin and called Strategy’s preferred stock a death spiral in the making. The counter-argument comes from the sentiment data itself. The Fear and Greed Index at 11 is historically the kind of reading that precedes relief rallies rather than capitulation events.
Cryptic Trades, a widely followed analysis account, made the case directly: “Engagement is low, the sentiment is terrible, the social media interest has collapsed, and bearishness is everywhere. Ironically, that is exactly why I continue to remain bullish on the high timeframes.”
The logic is straightforward. Maximum fear readings tend to mark points of exhaustion rather than acceleration. When everyone who wants to sell has sold, the next marginal buyer sets the price. The question is whether we’re at that point yet or whether the macro headwinds have more to deliver first.
How bad could it get
Below $63,000, the next meaningful support sits around $62,300. A clean break there opens the door toward $50,000, which is where Schiff’s scenario starts to gain some technical credibility. Getting there would require either a significant further escalation in the Iran conflict, a Fed that turns actively hawkish, or the AI rotation continuing to deepen at Bitcoin’s expense for an extended period. None of those are impossible. None are guaranteed.
The retail absorption problem is worth flagging. Typically when whales sell, smaller holders buy the dip. Over the past week, wallets holding less than 0.1 BTC acquired only 61 coins, growing their holdings by just 0.12%. The usual mechanism for absorbing large-holder selling isn’t functioning at anywhere near the required scale. That’s a liquidity gap that doesn’t close overnight.
The bull case rests on rotation as the S&P 500 is hitting all-time highs.
Source: TradingView
On the other hand, Bitcoin is dropping below $63,000.
Source: TradingView
That divergence can’t persist indefinitely. At some point, capital that has rotated into equities and AI stocks looks for the next trade, and an asset that has underperformed by more than 20% in a month starts to look interesting again. Cryptic Trades framed it as a catch-up trade, arguing that once the macro and geopolitical backdrop stabilises and the AI narrative softens, crypto has the potential to become one of the main beneficiaries of liquidity rotation.
That may be the right long-term read. The short-term picture is messier. Iran is still escalating. The Fed has no room to cut. ETF outflows haven’t stopped. Whales are still selling. And the retail bid that would normally cushion all of that is largely absent.
Schiff’s $20,000 target requires a lot to go wrong simultaneously over a sustained period. The path to $60,000 requires far less. And right now, Bitcoin is already most of the way there.
Bitcoin technical outlook
Bitcoin has broken down to retest the critical 62,300 support zone after a sustained selloff from the 82,000 resistance area. The speed of the decline suggests bearish momentum remains firmly in control, with sellers continuing to pressure the market into a major support region.
A daily close below 62,300 would signal a breakdown of the recent range and could trigger another wave of liquidations, opening the door for a move into lower support levels. Conversely, if buyers defend this area, Bitcoin could see a relief rally as short-term sellers begin taking profits.
Momentum indicators remain heavily bearish. RSI has plunged deep into oversold territory, indicating the selloff may be becoming stretched in the short term. While oversold conditions can support a bounce, they are not by themselves a reversal signal and can persist during strong downtrends.
The MACD also continues to deteriorate, with both the signal lines and histogram expanding lower. That suggests bearish momentum is still accelerating rather than stabilizing.
The short-term outlook remains bearish while Bitcoin trades at or below 62,300. A successful defense of this level could spark a temporary recovery, but a confirmed break lower would likely shift focus toward significantly lower price targets.
Source: TradingView
