Bitcoin tumbled nearly 14% last week, briefly touching $60,000, triggering roughly $10 billion in liquidations of long futures positions. The sell-off erased weeks of gains, and while the price has since bounced to about $63,000, the debate over what caused the slump is far from settled.
The $10 Billion Liquidation Wave
The scale of the wipeout was stark. Open interest in Bitcoin futures had climbed back to about $51 billion by May after bottoming near $31 billion in February. That rebuilt leverage made the market vulnerable, and when the sell-off hit, cascading liquidations amplified the drop. Funding rates, which measure the cost of holding long positions, have since slipped back toward negative territory — a sign that the aggressive long bias that built up during the recovery has largely unwound.
Why AI Is the New Competitor
Analysts at Charles Schwab and NYDIG attribute the Bitcoin rout to capital rotating out of crypto and into artificial intelligence and other high-growth trades. Jim Ferraioli, head of crypto research and strategy at Charles Schwab, noted that crypto investors repeatedly chase the market's dominant momentum trade — and for much of the year, that's been AI. Greg Cipolaro, global head of research at NYDIG, flagged AI as one of several forces weighing on Bitcoin, pointing out that both sectors draw investors seeking exposure to emerging technologies and high return potential.
Michael Saylor, executive chairman of Strategy, quantified the shift: roughly $400 billion has flowed into AI infrastructure over the past six months, while US-listed spot Bitcoin ETFs have seen about $4 billion in outflows since mid-May. The numbers underscore a real competition for capital, not just a narrative.
Tech IPOs Could Pull More Capital
Private market investors are already positioning for potential blockbuster listings from companies such as SpaceX, OpenAI, and Anthropic. Any of those could prompt institutions to raise cash or trim existing positions — which, in practice, might mean selling Bitcoin or other liquid holdings. The threat of a few massive tech IPOs adds another layer of uncertainty for crypto markets already struggling with outflows.
For now, the direction of Bitcoin hinges on whether the AI and tech rally keeps drawing capital away — and whether the liquidations have cleaned out enough leverage to allow a sustainable recovery. The next few weeks will test which trade has more staying power.
