Bitcoin’s $10B liquidation surge as the AI boom diverts capital
Bitcoin slipped nearly 14% last week toward about $60,000, triggering almost $10 billion in long-futures liquidations. It later rebounded to around $63,000, but the article argues the core issue is demand weakening as investors rotate to the AI boom.
Charles Schwab’s Jim Ferraioli says capital has been moving from Bitcoin’s high-growth tech narrative to AI-linked stocks, private tech deals, and expected tech IPOs. Strategy Executive Chairman Michael Saylor adds context: roughly $400 billion flowed into AI infrastructure over six months, while US-listed spot Bitcoin ETFs saw about $4 billion in outflows since mid-May. NYDIG’s Greg Cipolaro also frames AI as a rival trade because both sectors draw the same “emerging tech + high return” investor base.
The selloff worsened because derivatives leverage had rebuilt before prices turned. Futures open interest recovered from about $31B in February to roughly $51B by May (after earlier declines). Once Bitcoin fell, long exposure was forced out: nearly $10B in long futures were liquidated, funding rates moved toward negative, and open interest fell—suggesting leverage was being removed rather than replaced.
Ferraioli characterizes this as “clearing leverage,” not a confirmed bottom. A more constructive setup would require open interest to stop falling, funding to stabilize, and forced selling to fade. Support is near February lows, efficient miner production costs, and the 200-week moving average, but if leverage rebuilds before spot demand recovers, Bitcoin could face another pressure round.
Bearish
The article links Bitcoin’s ~14% weekly drop and nearly $10B in long-futures liquidations to a capital rotation away from Bitcoin toward the AI trade. Forced deleveraging can bring short-term “pain clearing,” but it does not automatically mark a bottom.
In past selloffs where leverage rebuilds quickly (rising open interest and long-biased funding) before spot turns down, price often overshoots lower due to cascading margin calls. Even if liquidations reduce open interest afterward, traders typically watch whether funding stabilizes and whether open interest stops falling; otherwise, another wave can follow if leverage re-accelerates while spot demand remains weak.
Longer term, the key risk is persistent opportunity-cost competition: if investors continue to fund AI infrastructure and tech deals more than crypto, marginal demand for Bitcoin may lag. That keeps the market fragile until ETF flows improve and derivatives positioning normalizes. Net: bearish for the short term due to unresolved leverage/flow dynamics, with a conditional longer-term stabilization only if funding and open interest stabilize and spot demand returns.