Wintermute: AI fund rotation is draining Bitcoin liquidity, fueling volatile price swings
Market maker Wintermute warns that a macro rotation into AI-related assets is siphoning liquidity away from crypto, leaving Bitcoin subject to ‘high-volatility, low-spot demand’ price discovery. The firm cites persistent U.S. selling — shown by a sustained Coinbase discount — and continuous ETF redemptions as structural selling pressures that pushed BTC briefly to $60,000. Wintermute says low spot volumes and elevated leverage have turned moves into “surrender-style” clears, where institutional ETF flows and derivatives dominate direction. Key metrics at the time of reporting: BTC near $68,700, 24h volume roughly $46–49 billion, total crypto market cap about $1.37 trillion. Wintermute’s conditions for a durable recovery: a return of spot demand, a positive Coinbase premium, reversing ETF outflows, and stabilizing basis. Short-term implication: heightened volatility and choppy price action. Longer-term: performance depends on whether money rotates back from AI assets into crypto.
Bearish
Wintermute’s note points to structural selling drivers: U.S. counterparties as net sellers, a persistent Coinbase discount, and ongoing ETF redemptions. These factors reduce spot liquidity and leave price discovery to leveraged positions and institutional flows — a setup that increases downside risk and episodic volatility. Historically, when ETF outflows and concentrated sector rotations (e.g., money shifting into tech themes) have drained spot liquidity, crypto prices have experienced sharp drawdowns and choppy ranges until spot demand returns (examples: 2022 deleveraging episodes and ETF-linked flow periods). For traders, the near-term outlook is elevated risk: stop-hunt style volatility, fast directional moves, and unreliable trend continuation. Liquidity gaps (noted support near $60k) may attract transient buy interest, but absent reversal in ETF flows and a positive Coinbase premium, rebounds are likely fragile. Over the medium-to-long term, the market impact will depend on whether capital rebalances back from AI assets into crypto; a sustained capital return would be bullish, but until then structural selling makes the outlook more bearish.