Bitcoin fell nearly 14% last week, triggering almost $10 billion in liquidations of long futures as traders who had bet on higher prices were forced to exit positions. The selloff sent the asset toward $60,000 before it recovered to around $63,000, exposing the risks embedded in leveraged derivatives markets at a moment when capital is rotating aggressively toward artificial intelligence and private technology deals.
The liquidation cascade reflects a structural shift in investor appetite. According to Jim Ferraioli, head of crypto research and strategy at Charles Schwab, “crypto investors have repeatedly shifted toward the market’s dominant momentum trade.” That momentum has pivoted sharply away from Bitcoin. About $400 billion has flowed into AI infrastructure over the past six months, establishing artificial intelligence as a direct competitor for Bitcoin among investors seeking exposure to high-growth technology.
Futures positioning had become crowded before the decline. Open interest in Bitcoin futures had climbed to roughly $70 billion at its peak, then settled around $51 billion by May after dropping to approximately $31 billion in February. When the selloff began, that leverage amplified the downside. Traders rebuilding risk in derivatives markets found themselves on the wrong side of a sharp reversal.
Hedge funds were the primary source of selling pressure. Data from May 31 shows hedge funds reduced their share of BlackRock’s iShares Bitcoin Trust to approximately 19% from around 29%, signaling institutional repositioning. Simultaneously, US-listed spot Bitcoin ETFs experienced roughly $4 billion in outflows since mid-May, though investment advisers added exposure during the decline while retail brokerage accounts reduced holdings.
The capital rotation reflects a broader competitive dynamic. Investors are positioning for potential major technology listings, with companies such as SpaceX, OpenAI, and Anthropic viewed as eventual public-market candidates. Bitcoin now competes not only with traditional assets like gold but also with an AI cycle that has become the dominant growth narrative across financial markets.
Bitcoin’s recovery to $63,000 places it near areas around its February lows and the 200-week moving average, levels that typically attract technical interest. Whether the asset stabilizes at these levels or faces further pressure depends partly on whether capital rotation toward AI and private deals continues to accelerate.
