Bitcoin and ether suffer worst weekly rout since 2022 as $390B market cap evaporates

Digital asset markets endured a severe correction this week, marking one of the most turbulent periods for investors since the FTX collapse in November 2022. Bitcoin fell 17.3% to trade just above $60,000, while ether dropped 22% to approximately $1,550. The broader market contraction was equally stark, with total market capitalization shedding roughly $390 billion to hover near $2 trillion, less than half of the $4.2 trillion peak recorded in October. Data compiled by Woofun AI shows that despite a modest stabilization on Saturday, both major assets remained entrenched near their weekly lows, signaling persistent selling pressure.

The volatility extended deeply into the derivatives sector, triggering one of the year's most significant liquidation events. Approximately $7 billion in leveraged positions were wiped out across digital assets, with the most severe flushes occurring on Monday and Friday. Of this total, about $5.7 billion consisted of long positions, indicating that bullish bets were disproportionately targeted during the downturn. This massive deleveraging event underscores the fragility of market sentiment when faced with sudden price dislocations.

A primary catalyst for the selloff emerged from Strategy (MSTR), the largest corporate holder of Bitcoin, which disclosed its first BTC sale in nearly four years. Although the transaction involved only 32 BTC worth roughly $2.5 million, the move rattled investors who had long viewed the firm as a perpetual source of demand. Woofun AI notes that market participants are now questioning whether Strategy may need to liquidate additional holdings to service obligations tied to its expanding stack of preferred equities, introducing a new layer of uncertainty regarding corporate treasury management strategies.

Concurrently, Bitcoin exchange-traded funds continued to experience significant outflows, reflecting a broader rotation of capital away from crypto. Vetle Lunde, head of K33 Research, argued that these outflows are driven by the rising opportunity cost of holding Bitcoin as capital migrates toward artificial intelligence investments. With AI-related stocks hitting record highs and anticipation building for potential IPOs from entities like OpenAI, Anthropic, and SpaceX, investors are increasingly reallocating funds to sectors perceived as having higher immediate growth potential.

Technological vulnerabilities further exacerbated the market's fragility, particularly for privacy-focused protocols. Zcash, which had been a top performer earlier in the year, tumbled more than 40% after researchers utilized Anthropic's latest AI model to uncover a critical flaw in the network's privacy system. This incident highlighted the growing concern that advanced AI capabilities could expose structural weaknesses in cryptographic protocols, adding a technical dimension to the prevailing bearish sentiment.

The final blow to market confidence arrived with Friday's stronger-than-expected U.S. jobs report, forcing a rapid reassessment of Federal Reserve policy expectations. Markets that had priced in rate cuts are now increasingly anticipating potential rate hikes if inflation remains stubborn. U.S. Treasury bond yields surged, and the Nasdaq 100 suffered its worst day since the tariff-driven selloff in April 2025, snapping a record-setting rally that had fueled Wall Street enthusiasm. Woofun AI analysis suggests that the convergence of higher bond yields, rate-hike fears, and competition from AI investments creates a formidable hurdle for any immediate market recovery.

For now, the selling pressure appears to have paused with traditional markets closed for the weekend and crypto prices stabilizing on Saturday.

However, the question remains whether this rout represents a capitulation event often seen at market bottoms or merely the latest episode in a prolonged downtrend. The path forward will likely depend on the broader macroeconomic landscape, with continued competition from AI sectors and shifting monetary policy expectations remaining key variables for traders to monitor.