Bitcoin sinks below $67K as liquidations mount and ETF outflows grow

Bitcoin dropped below $67,000 on Tuesday, extending a sharp selloff that pushed the world's largest cryptocurrency to its lowest level since early April.

BTC fell more than 6% to as low as $66,614 during trading, while broader crypto markets also came under pressure.

The decline triggered a wave of liquidations across digital asset markets, with total crypto liquidations reaching approximately $1.25 billion over a 24-hour period, according to market data.

The latest move comes as Bitcoin continues to lag traditional risk assets.

While the S&P 500 has climbed to fresh record highs, the cryptocurrency has struggled to regain momentum after failing to sustain rallies above key technical levels.

The weakness has raised fresh questions about investor demand for Bitcoin amid growing interest in artificial intelligence-related investments and a challenging macroeconomic backdrop.

Liquidations intensify as leveraged positions unwind

Market pressure accelerated as leveraged bullish positions were forced to close.

According to CoinGlass data, crypto exchanges recorded hundreds of millions of dollars in long liquidations over the past day as traders betting on higher prices were forced out of positions.

The selloff gained momentum after Strategy, formerly known as MicroStrategy, disclosed that it had sold a portion of its Bitcoin holdings, marking its first sale since 2022.

While the transaction had been previously signaled by the company, the move unsettled some investors, given Executive Chairman Michael Saylor's long-standing support for holding Bitcoin indefinitely. 

Analysts noted that elevated open interest in derivatives markets may have contributed to the severity of the decline.

Commentator Exitpump warned that an "insane amount of spot selling" could trigger further weakness.

"I think this can end with a big red candle wiping out all the underwater longs from the system," the analyst wrote on X.

"Maybe we hit low 60Ks or even mid 50Ks", the analyst added.

Prediction market Kalshi has also reflected growing expectations that Bitcoin could revisit lower price levels in the coming months.

ETF outflows and fading institutional demand weigh on sentiment

Institutional demand has also shown signs of weakening.

According to K33 Research, spot Bitcoin exchange-traded products recorded outflows of 62,794 BTC over the past three weeks, marking the second-largest outflow streak on record.

Bitcoin ETFs recently registered an 11-day streak of net outflows, the longest such run since the products launched.

K33 Research head Vetle Lunde said investors are increasingly directing capital toward AI-related opportunities instead of cryptocurrencies.

"Much of the market views the opportunity cost of holding BTC as too high while anything AI-related soars," Lunde wrote.

The firm noted that Bitcoin has failed to reclaim its 200-day moving average while major equity indexes continue setting new records.

Upcoming public offerings from companies such as SpaceX and Anthropic may also be attracting investor attention and capital away from crypto assets.

Analysts warn of deeper downside risks

Technical analysts have become increasingly cautious as Bitcoin remains below major resistance levels.

Trader and analyst Rekt Capital said Bitcoin could test its 50-month exponential moving average near $66,250 before potentially moving lower.

"There could be a limited reaction from there on contact, but over time Bitcoin is likely to break down from this EMA and continue macro downside in this Bear Market," he wrote. 

Meanwhile, CollinTalksCrypto argued that Bitcoin appears to be following a familiar bear-market pattern after breaking down from a bear flag formation.

"Many wanted to overcomplicate this with 'this time is different,' but bitcoin is just doing the same thing it always does in bear markets. It breaks down," he wrote.

K33 Research has not abandoned its view that the cycle low may have been established near $60,000 earlier this year, but the firm has adopted a more cautious stance.

"We read the latent selling pressure in those leveraged longs as a warning of possible deeper lows and advise caution," the report said.

For now, analysts say Bitcoin faces a difficult environment as ETF outflows persist, institutional participation softens, and investors continue favoring sectors tied to the artificial intelligence boom.