The cryptocurrency market experienced a severe downturn this week. Bitcoin plunged 16%, hitting a low of $59,099, its lowest level since October 2024. The core drivers were sell-offs by Strategy and strong US non-farm payroll data pushing up Treasury yields. Bitcoin's dual narratives of "digital gold" and "tech beta" are simultaneously unraveling, with its recent performance severely diverging from record highs in US stocks. Short-selling activity targeting Strategy in the options market has intensified sharply, with a short-selling ETF rising 30% recently.
Bitcoin suffered a heavy blow this week, dropping to its lowest point in over six months under the weight of multiple negative factors, significantly shaking market confidence in cryptocurrencies.
On Friday, Bitcoin touched a low of $59,099.25, its lowest since October 2024. It closed the day down 3.4% at $61,514.90, marking a cumulative weekly decline of 16%.
The trigger for this decline was the sale of part of its Bitcoin holdings by Strategy, a company led by Michael Saylor, which triggered hundreds of millions in forced liquidations. Subsequently, stronger-than-expected May non-farm payroll data pushed US Treasury yields higher, further pressuring risk assets.
Strategy shares closed down 6.9% on the day, with a weekly drop of as much as 24%, marking its worst weekly performance since November 2022. Concurrently, short-selling activity targeting Strategy in the options market has surged dramatically. The related ETF (WNTR) that shorts the company's stock has risen 30% cumulatively since May 11.
Multiple Headwinds Combine, Deepening the Decline
This Bitcoin downturn is not due to a single factor. Charles-Henry Monchau, Chief Investment Officer at Syz Group, told CNBC that the sell-off by Strategy combined with the "crowding-out effect of hot money chasing other assets" drove this week's decline.
"Speculative capital is fully betting on AI stocks and memory chips, especially in the Korean market, while expectations that upcoming super IPOs will attract some retail capital into new shares."
The legislative prospects for the crypto market structure bill, the "Clarity Act," also remain dim. As Congressional legislative priorities shift and lawmakers remain divided on key provisions, this bill, seen as a catalyst for a new Bitcoin rally, is becoming increasingly distant.
From its current price, Bitcoin has fallen more than 50% from its all-time high of around $126,000 reached in October 2025.
Dual Narratives Unravel, Diverging from Stock Market Trends
Bitcoin's two core narratives—"digital gold" and "high-beta tech stock"—are both under pressure simultaneously. While ongoing uncertainty in the Middle East (Iran) continues to weigh on Bitcoin, US stocks have repeatedly hit record highs. The divergence in their trajectories has deeply puzzled the market.
Rajiv Sawhney, Head of International Portfolio Management at Wave Digital Assets, told CNBC:
"Just a month ago, the 30-day Pearson correlation coefficient between Bitcoin and the Nasdaq and S&P 500 was near perfect positive correlation, but that relationship has broken down sharply in recent weeks. While global equities, especially tech stocks, continue to hit new all-time highs, Bitcoin has failed to follow suit."
Regarding Bitcoin ETFs, Thursday saw a net inflow of approximately $3 million, ending a 13-day streak of consecutive net outflows—the longest such streak on record. However, the total assets under management have shrunk from $107.8 billion on May 14 to $80.4 billion.
Despite the gloomy market sentiment, some voices are choosing to speak out against the trend. Matt Cole, CEO of Strive, stated on Friday that Bitcoin's fundamentals have "never been stronger." He noted that this is the fifth time Bitcoin has touched its 200-week moving average, saying, "The previous four times were perfect buying opportunities, and I don't think this time will be an exception."
Short Sellers Target Strategy, STRC Credit Damaged
In the options market, bearish trading activity targeting Strategy (MSTR) surged dramatically on Friday.
Put option volume was more than double call option volume, with the scale of put buying exceeding call buying by more than three times. Volume was roughly three times the average daily level over the past month. Of the approximately $335 million in option premiums on the day, $250 million was related to put options.
Some of the largest put option purchases came from the spread strategy employed by the YieldMax Short MSTR Option Strategy ETF (WNTR), which shorts Strategy stock and generates income by selling put option spreads.
Strategy's floating-rate preferred shares, STRC, are also under pressure. On Thursday, they closed down 3.6% at $92, hitting their lowest price since last November.
David Dziekanski, CEO of Quantify Funds, noted that Saylor previously claimed STRC was an alternative to avoid selling Bitcoin but then proceeded to use cash that was promised to be retained to buy back bonds and ultimately sold Bitcoin.
"This has significantly increased the market's risk premium pricing for Michael Saylor. STRC now needs to offer a significantly higher yield to return to par value."
The continued rise in US Treasury yields also adds extra pressure. After the non-farm payroll data on Friday, the CME FedWatch Tool showed the probability of a rate hike this year rising above 40%. Historically, rate hike cycles have often significantly suppressed crypto assets, with a particularly direct impact on credit instruments like STRC.
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