Bitcoin briefly fell toward $61,000 this week, extending losses to 13% over seven days and roughly 29% year to date, as a forced-liquidation cascade wiped out about $1.8 billion in crypto derivatives positions in roughly 24 hours on Thursday, according to CoinGlass data.

More than $1.5 billion of the liquidated positions were longs, with over $800 million tied specifically to bitcoin longs — including one of the largest single long-bitcoin liquidations recorded this year. The cascade illustrates how leverage, not spot demand alone, now drives short-term price action in the market. Leveraged investors forced out of positions accelerated the downward momentum, turning a steady correction into one of the most painful drawdowns crypto has seen in years.

The move stands in sharp contrast to equities. The Morningstar US Market Index gained 11% over the same period, underscoring how capital has rotated away from digital assets.

Strategy's break with precedent

A key trigger came from Strategy (MSTR), Michael Saylor's company and one of bitcoin's most prominent corporate holders, which sold a portion of its bitcoin holdings for the first time in years. The sale rattled investors already contending with weakening demand and undermined confidence in a market that had treated Strategy's accumulating posture as a structural source of support.

Three weeks of ETF outflows

Spot bitcoin ETFs are on track to close their third consecutive week of net outflows, draining billions of dollars from the market and eroding a pillar of institutional demand that propelled bitcoin higher over the past two years. The US-listed iShares Bitcoin Trust (IBIT) alone recorded $1.2 billion in net outflows between June 1 and June 4.

The pressure extends to Europe. ETFs in Morningstar's Digital Assets category posted three straight weeks of net redemptions, with WisdomTree Physical Bitcoin (BTCW) shedding more than EUR 7.3 million in the first four days of the week.

Dovile Silenskyte, director of digital assets research at WisdomTree, cautioned against reading the outflows as a verdict on the asset class. "Institutional investors do not buy bitcoin because they expect it to outperform every month or every quarter, rather, they buy it because it improves the risk/return metrics of their multi-asset portfolios over an investment horizon that tends to be a few years long," she said. "ETF flows fluctuate as investors rebalance portfolios, manage risk, or respond to market conditions."

Regulatory drag and the Clarity Act

Regulatory uncertainty compounds the pressure. US lawmakers remain deadlocked over the Clarity Act, which would establish a clearer legal framework for digital assets, and institutions are reluctant to add exposure until forward visibility improves. Bitwise CIO Matt Hougan argues the market's problem is prolonged ambiguity rather than bad news itself. "The largest-cap crypto assets will struggle to launch a sustainable rally until the picture becomes clearer," he said.

Hougan also points to a rotation into artificial intelligence and technology stocks, which have displaced crypto as the market's preferred high-growth trade. "Who needs crypto when the Nasdaq-100 is up 43% year-over-year?" he said.

In his framing, crypto is transitioning from a momentum-driven investment to a contrarian bet. "Contrarian bets can be great investments, but their payoff pattern is usually spotty. They require patience, a long-term orientation, and a focus on fundamentals," he said. "Crypto isn't going away. It's just changing the kind of investor and project it rewards."

With ETF outflows still running, leverage partially flushed, and the Clarity Act stalled in Congress, the near-term trajectory for bitcoin hinges on whether lawmakers deliver a regulatory framework — and whether institutional flows stabilize — before the current streak of redemptions extends into a fourth week.