CryptoSlate
Bitcoin shed nearly 14% last week, falling toward $60,000 and triggering close to $10 billion in long futures liquidations before recovering to around $63,000. The selloff exposed how quickly a capital rotation — in this case toward artificial intelligence — can become a forced-selling cascade when leverage has quietly rebuilt beneath the surface.
Why it matters
Charles Schwab's head of crypto research Jim Ferraioli and NYDIG's global research chief Greg Cipolaro both identify AI as a direct competitor for the speculative capital that once flowed into Bitcoin. Strategy's Michael Saylor put numbers to the pressure: roughly $400 billion has moved into AI infrastructure over the past six months, while US-listed spot Bitcoin ETFs have seen about $4 billion in net outflows since mid-May. Bitcoin is no longer just competing with gold or macro trades — it is being benchmarked against the dominant growth story in global markets.
The leverage dynamic amplified the damage. Futures open interest had recovered from roughly $31 billion in February to about $51 billion by May, rebuilding the very exposure that turned rotation into liquidation. Funding rates slipped toward negative territory as the long bias unwound, and hedge funds cut their share of BlackRock's IBIT from around 29% to 19% by May 31.
Market impact
Ferraioli frames the episode as a leverage flush rather than a confirmed bottom. Open interest has fallen, liquidations have surged, and funding rates are negative — signals that stretched positioning is being cleared. A more constructive setup would require open interest to stabilize, funding to recover, and forced selling to fade.
Frequently asked questions
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Why did the AI boom specifically trigger Bitcoin liquidations rather than a gradual decline?
Futures open interest had recovered from $31 billion in February to $51 billion by May, rebuilding leveraged long exposure. When capital rotated toward AI-linked assets and ETF outflows accelerated, that leverage became automatic selling pressure — margin calls forced traders out regardless of their long-term view on…
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How much did hedge funds reduce their Bitcoin ETF exposure during the selloff?
Hedge funds cut their share of BlackRock's IBIT from approximately 29% to around 19% by May 31, according to Charles Schwab research. Investment advisers moved in the opposite direction, adding exposure during the decline.
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What conditions would signal that Bitcoin's leverage flush has run its course?
Charles Schwab's Ferraioli says a constructive setup requires open interest to stop falling, funding rates to stabilize out of negative territory, and forced liquidations to fade. Key technical levels — the 200-week moving average, February lows, and efficient miner production costs — are also being watched as…
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