This week marked another difficult chapter for cryptocurrency markets, with a sharp sell-off reinforcing the broader downturn that has defined trading conditions so far this year. Prices across major assets moved lower, sentiment deteriorated further, and volatility picked up as investors reassessed risk in an already fragile environment. Rather than a single catalyst, the weakness reflected mounting pressure across positioning, leverage and market psychology. This update focuses on how sentiment unraveled, what signals are emerging from the volatility, and what the market is watching next.

Bitcoin led the move lower, dragging the wider market with it as total crypto market capitalisation declined sharply over the week. Major altcoins underperformed, with many recording steeper losses as liquidity thinned and risk appetite faded. Measures of sentiment moved deeper into extreme fear territory, while liquidation data pointed to a significant flush-out of leveraged positions on the long side. Momentum indicators weakened across multiple timeframes, suggesting this week represented an acceleration of the existing downtrend rather than a clean reset. While brief periods of stabilisation emerged, overall price action remained heavy and confidence fragile.

Analysts and on-chain data increasingly pointed to conditions consistent with late-stage capitulation. Bitcoin’s relative strength index fell into deeply oversold territory, levels historically associated with panic selling and, in some cases, medium-term bottoming behaviour. Data from CryptoQuant showed that nearly 60,000 BTC, worth around US$4.2 billion, held by short-term holders were moved to exchanges at a loss within a 24-hour period. This type of behaviour typically reflects stress among newer market participants and often coincides with sentiment extremes. Bitcoin is now trading below its previous cycle (2021) high of US$69,000, a psychologically important level that had been widely viewed as long-term support. At the same time, USDT dominance climbed toward all-time highs, signalling a defensive shift into stablecoins.

As markets remained under pressure, several notable industry developments unfolded throughout the week. Binance addressed renewed speculation around its balance sheet, with analysts confirming that exchange reserves remained steady and that claims likening the situation to “FTX 2.0” were not supported by on-chain data. Adding to the broader wave of public scrutiny surrounding Bitcoin, rumours circulated after newly released US Department of Justice files suggested that an entity linked to Jeffrey Epstein may have invested approximately US$3.25 million into cryptocurrency exchange Coinbase in 2014. While the claims relate to historical disclosures rather than current operations, the headlines contributed to an already fragile sentiment environment. Pressure was not limited to digital assets, with traditional safe-haven markets also seeing sharp moves. Gold and silver both sold off during the week, a development that appeared to spill over into crypto markets and reinforced broader risk-off behaviour across asset classes.

Institutional positioning continued to diverge from short-term market panic. Michael Saylor’s Strategy added approximately US$75.3 million worth of Bitcoin during the dip, marking one of the first occasions since 2023 that purchases were made below the firm’s average cost basis. The move reinforced the long-term accumulation thesis held by some corporate treasuries, even as prices weakened. In contrast, indicators of broader institutional demand turned more cautious. The Coinbase premium fell to its lowest level of the year, suggesting reduced buying pressure from US-based investors, while spot Bitcoin ETFs recorded record outflows as risk exposure was cut across portfolios.

Looking ahead, markets remain highly sensitive to shifts in sentiment, liquidity and macroeconomic conditions. Investors will be watching closely for signs that selling pressure is easing, including reduced exchange inflows, stabilisation in derivatives positioning, and any improvement in broader risk appetite. Key technical levels are likely to remain reference points rather than predictive signals, particularly as volatility remains elevated. While periods like this often test conviction, they also tend to reset positioning across the market. The coming weeks are less about price forecasts and more about whether confidence can begin to rebuild once forced selling subsides and conditions start to stabilise.

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