The AI frenzy is draining the liquidity pool. How to cope with the high volatility era of Bitcoin?

In the past week, Bitcoin briefly fell below $60,000, experiencing a sharp decline from its peak of $126,000 in October last year. Meanwhile, spot trading volume on mainstream exchanges has shrunk by nearly 30% since the end of 2025.

Behind this phenomenon, a macro force called the “AI Capital Expenditure Cycle” is reshaping global capital flows and triggering a structural liquidity crisis in the cryptocurrency market.

Market Dilemma: From Peak to Halving, Bitcoin Falls into a Liquidity Vortex

The cryptocurrency market is undergoing profound changes. Bitcoin’s performance in February 2026 exemplifies recent market pressures. Last week, its price dropped nearly 20 in a single day, with a weekly decline of 8.6%.

The speed and magnitude of this decline reached historic extremes. Data shows that on February 5, Bitcoin’s Z-score of decline hit -6.05σ, indicating an unprecedented rapid fall second only to the COVID-19 crash in 2020.

Looking at a longer cycle, Bitcoin’s current price has fallen below its 200-day moving average by -2.88σ. This level of deviation is unseen in the past decade, even surpassing the FTX collapse period, indicating a serious departure from long-term trends.

Capital Migration: How the AI Sector Became a “Black Hole” for Liquidity?

The root of the current predicament lies in a global capital migration. Over the past few months, AI-centric tech stocks and related assets have continuously siphoned available funds from the global markets.

This “money吸” effect is not just sector rotation but a deeper macro mechanism: the AI capital expenditure cycle has shifted from a liquidity “injector” to a “drainer.”

Initially, tech giants invested most of their AI funds from idle capital—“dry powder”—which was deployed into the real economy, generating multiplier effects and collectively pushing up risk assets including cryptocurrencies.

But as idle capital depletes, every new dollar invested in AI must be diverted from other assets such as Bitcoin, tech stocks, and bonds. Capital becomes scarce, sparking a “survival of the fittest” competition for limited funds, with highly speculative assets like Bitcoin bearing the brunt.

Ongoing Selling Pressure: US Institutions’ Sell-offs and ETF Fund Outflows

As capital shifts to AI, Bitcoin market also faces persistent structural selling pressure from the US. A key indicator is Coinbase’s persistent discount premium, indicating sustained and strong US selling.

Market maker Wintermute’s internal OTC fund flow data confirms that in the past week, US counterparties have been the main sellers. This trend is amplified by continuous net redemptions from US spot Bitcoin ETFs.

Since November 2025, net outflows from Bitcoin ETFs have exceeded $6.2 billion. Last week alone, Bitcoin ETF net outflows reached approximately $689.2 million. This creates a negative feedback loop: ETF redemptions force issuers to sell Bitcoin in the spot market, further depressing prices.

Leverage and Volatility: The New Normal of “High Volatility Oscillations” in Low Volume

Against the backdrop of drying spot market inflows, the market’s price discovery mechanism has become distorted. Low spot trading volume combined with high leverage derivatives has amplified market volatility.

Data shows that open interest in Bitcoin futures has fallen from over $90 billion in early October 2025 to about $49 billion, with leverage ratios dropping over 45%. This rapid deleveraging process itself intensifies price swings.

The market is in a “high volatility, oscillating price discovery” phase. Without solid spot buying support, the market struggles to establish sustained trends in either direction and is more susceptible to large orders and sentiment swings. Last week’s market was described as a “surrender liquidation,” reflecting this fragility.

Data Insights: Market Structural Pressure Revealed by Gate Ventures

Gate Ventures’ latest market review on February 9 adds specific data points to this macro picture.

The report confirms that market sentiment has plunged into “extreme fear,” with the Fear & Greed Index at just 14. Besides Bitcoin, Ethereum also faced pressure, dropping 7.9% last week, with ETF fund outflows totaling $149.1 million.

Notably, excluding Bitcoin and Ethereum, the total crypto market cap declined by 5.65% last week, slightly less than the overall market decline. This may suggest that, in extreme conditions, some funds are moving out of the two giants to seek opportunities elsewhere, or that certain altcoins are showing differentiated resilience.

Outlook: What Conditions Are Needed for Market Normalization?

When will the market emerge from this high-volatility, trendless state? According to multiple institutional views, several key conditions must be met.

First, the AI trading frenzy needs to cool down. Microsoft’s previously weak earnings reports are seen as the start of this process, but it’s far from enough. Only when the speculative rush into AI subsides will liquidity pressures ease.

Second, the crypto market itself needs to see a return of spot demand. Three micro signals can be observed: Coinbase premium turning positive, ETF fund inflows resuming, and futures basis rates stabilizing. Until these signals appear, sustained market rallies are unlikely.

Finally, clear macro policy guidance is crucial. The market is digesting the potential impact of the Federal Reserve Chair Kevin Warsh’s possible “balance sheet reduction” policy. Although implementation is not imminent, the policy shift expectations will continue to influence market perceptions of global liquidity.

Summary

As of February 11, Bitcoin’s price on the Gate platform remains oscillating around $67,000. The path to market recovery is long, but every extreme fluctuation may contain new opportunities.

Currently, traders should prioritize risk management and position control, patiently waiting for the market to shift from leverage-driven to spot-driven dynamics. Until liquidity (the bathtub water level) rises again, the rubber duck (asset prices) floating on it will find it hard to stabilize and rise.