Bitcoin has spent years trying to shed its reputation as a playground for speculative retail investors. The recent sell-off has exposed the trade-off: Wall Street brought scale and legitimacy, but the retail buyers who once helped Bitcoin absorb sharp declines have largely disappeared.
On Wednesday, the original cryptocurrency dropped 5.4% to $59,023, its smallest decline since October 2024. This marks a roughly 50% decrease from the record high set in October.
Deutsche Bank noted that this cryptocurrency sell-off differs from previous ones, as the influx of new retail buyers has largely dried up and institutional demand is also beginning to weaken. Many investors have not exited the crypto market but instead shifted their focus toward artificial intelligence-related investments, pulling capital away from digital assets.
“Marginal buyers are no longer retail investors, but rather ETF allocators or corporate treasuries—and an increasing number of these investors are weighing the value of Bitcoin against artificial intelligence,” said Marion Labre, the bank’s research analyst. “When these participants withdraw or shift to other assets, Bitcoin declines faster and more mechanically, a trend that is far more pronounced than in past cycles dominated by retail investors.”
This rotation comes at a time when the Federal Reserve is adopting a more hawkish stance, with some economists now expecting two additional rate hikes this year. This shift could reverse the liquidity tailwinds that have supported risk assets in recent years.
Labre noted that investors have withdrawn over $6 billion from Bitcoin-tracking exchange-traded funds (ETFs), marking the longest consecutive decline since 2024. She added that ETF demand has become a key driver of Bitcoin’s price movements, meaning outflows are now amplifying the downturn, just as inflows previously fueled the upward trend.
This shift has also changed how the market reacts to bad news. Earlier this month, Strategy Inc. disclosed selling 32 bitcoins—the company’s first sale since 2022—rekindling concerns that highly leveraged corporate shareholders could ultimately turn from buyers into sellers. Although the transaction is negligible relative to the company’s holdings, it carries symbolic significance.
Even though the company has since resumed procurement, Deutsche Bank said the incident highlights the market’s growing sensitivity to institutional behavior.
She said, “Bitcoin is currently trading below the strategy’s average cost of $75,699, and the market has already begun to price in the possibility of leveraged corporate holders being forced to sell. We expect this issue to persist.”
The bank also noted that funds exiting the cryptocurrency sector are increasingly finding new destinations rather than sitting idle. The largest hyperscale data center operator in the U.S. is expected to invest over $700 billion this year in artificial intelligence infrastructure. If this capital rotation proves structural rather than temporary, the drag on cryptocurrency demand could persist longer than during previous economic downturns.
She said, “Cryptocurrencies and growth stocks share the same marginal buyers—investors seeking returns from high-volatility assets—so when confidence declines, the risk across the entire portfolio also drops simultaneously.”
As a result, the Bitcoin market is increasingly influenced by portfolio allocations rather than retail enthusiasm. Wall Street helped drive cryptocurrencies into the mainstream, but as retail participation declines, prices are becoming more sensitive to institutional capital flows, macroeconomic expectations, and the competition from artificial intelligence for investor funds—making the market more vulnerable when these investors pull back.
Steve Kurz, Global Co-Head of Digital Assets at Galaxy, believes that potential positive developments from the White House could serve as an upward catalyst.
Market observers have been closely watching the so-called Clear Act, which would establish the Commodity Futures Trading Commission as the primary regulator for most areas of the cryptocurrency industry, while leaving regulatory authority over digital securities to the Securities and Exchange Commission.
Kurz said, “The current situation in Washington, D.C. is highly strategic. While everyone enjoys assessing the likelihood of legislation like the Clear Act, the reality is that all parties genuinely intend to move this bill forward, and the legislative calendar has already been set. These two realities are clashing, so the situation is likely to remain highly strategic for the time being.”
