The cryptocurrency market has experienced a severe downturn this week, with Bitcoin falling to its lowest level in over six months under the weight of multiple negative factors, significantly shaking market confidence.
On Friday, Bitcoin hit a low of $59,099.25, its weakest point since October 2024, before closing the session down 3.4% at $61,514.90, marking a cumulative weekly decline of 16%.
The initial trigger for this sell-off was the sale of a portion of its Bitcoin holdings by MicroStrategy, led by Michael Saylor, which triggered hundreds of millions in forced liquidations. Subsequently, stronger-than-expected May non-farm payroll data pushed U.S. Treasury yields higher, further pressuring risk assets.
MicroStrategy shares closed down 6.9% on Friday, with a weekly plunge of 24%, representing its worst weekly performance since November 2022. Concurrently, short activity targeting the company surged in the options market. The related ETF that shorts MicroStrategy stock (WNTR) has gained 30% cumulatively since May 11th.
Multiple Headwinds Intensify the Sell-Off
This decline in Bitcoin was not driven by a single factor. Charles-Henry Monchau, Chief Investment Officer at Syz Group, told CNBC that the sell-off from MicroStrategy combined with a "crowding-out effect as hot money chases other assets" fueled this week's drop.
"Speculative capital is going all-in on AI stocks and memory chips, particularly in the Korean market, while expectations for upcoming mega IPOs are also seen diverting some retail inflows into new shares," he noted.
The legislative outlook for the "Clarity Act," a crypto market structure bill, has also continued to dim. With shifting Congressional priorities and persistent disagreements among lawmakers on key provisions, this bill—once seen as a potential catalyst for a new Bitcoin rally—appears increasingly out of reach.
From its current price, Bitcoin has now fallen by more than half from its all-time high of approximately $126,000 reached in October 2025.
Dual Narratives Unravel as Bitcoin Diverges from Stocks
Bitcoin's two core investment theses—"digital gold" and "high-beta tech stock"—are both under pressure. While ongoing geopolitical uncertainty surrounding Iran continues to weigh on Bitcoin, U.S. stock markets are repeatedly hitting new record highs, creating a puzzling divergence in their performance.
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/S&P 500 was near perfect positive correlation, but that relationship has broken down dramatically over the past few weeks. Global equities, especially tech stocks, keep making new highs, but Bitcoin has not participated in that rally."
Regarding Bitcoin ETFs, Thursday saw a net inflow of approximately $3 million, ending a streak of 13 consecutive trading days of net outflows—a record-long stretch. However, total assets under management have shrunk from $107.8 billion on May 14th to $80.4 billion.
Despite the gloomy sentiment, some voices are choosing to go against the grain. Matt Cole, CEO of Strive, stated on Friday that Bitcoin's fundamentals are "as strong as they've ever been." He noted this is the fifth time Bitcoin has touched its 200-week moving average, adding, "The previous four times were perfect buying opportunities, and I don't think this time will be any different."
Short Sellers Target MicroStrategy, STRC Credit Under Pressure
In the options market, bearish activity targeting MicroStrategy (MSTR) spiked sharply on Friday.
The volume of put options traded was more than double that of call options, with the volume of puts bought exceeding calls by over three times. Total volume was roughly three times the average daily level of the past month. Of the approximately $335 million in option premiums traded, around $250 million was related to put options.
Some of the largest put buying came from the spread strategies employed by the YieldMax Short MSTR Option Strategy ETF (WNTR), which profits by shorting MicroStrategy stock through selling put option spreads.
MicroStrategy's floating-rate preferred shares, STRC, are also under pressure. They closed down 3.6% at $92 on Thursday, hitting their lowest level since last November.
David Dziekanski, CEO of Quantify Funds, noted that Saylor had previously pitched STRC as an alternative to avoid selling Bitcoin, only to then use cash that was promised to be retained to buy back bonds and ultimately sell Bitcoin.
"This has significantly increased the market's risk premium pricing for Michael Saylor," Dziekanski said. "STRC now needs to offer a materially higher yield to get back to par value."
The continued rise in U.S. Treasury yields adds further pressure. Following Friday's jobs data, the CME FedWatch Tool indicated the probability of a rate hike this year has risen above 40%. Historically, rate-hiking cycles have significantly pressured crypto assets, with a particularly direct impact on credit instruments like STRC.
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