SadaNews – It was thought that Wall Street’s acceptance of Bitcoin would bring stability. In its place was a new vulnerability: dependence on U.S. funds, which is now beginning to decline.
Approximately $8.5 billion has been drained from U.S.-listed spot Bitcoin funds since October 10th. The Chicago Mercantile Exchange’s futures exposure also fell by about two-thirds from its peak at the end of 2024, to about $8 billion.
Prices on the Coinbase platform, which is popular with many US institutions, are trading at a discount compared to the overseas Binance platform, indicating a continued sell-off in the US. Bitcoin fell more than 40% even as stocks and precious metals found buyers.
US capital is an important support for Bitcoin price
Considering market changes, this reversal has unusual weight. For most of Bitcoin’s history, Bitcoin’s price has been determined on offshore platforms by retail traders. But over the past two years, spot funds have pumped billions of dollars through the U.S. tool, with the Chicago Mercantile Exchange becoming the dominant futures trading partner, replacing pension funds and hedge funds as individual buyers. U.S. capital, whether individual or corporate, is the determining factor in marginal prices.
While that fund was in expansion mode, Bitcoin soared to an all-time high on October 6th, but is now languishing with no clear catalyst to reignite momentum. The original cryptocurrency was little changed, trading at around $67,500 on Wednesday.
The collapse of the institutional investor theory and the declining role of Bitcoin as a hedge
The core issue is simple. The theory of institutional investment has collapsed. Investors who bought Bitcoin as a hedge against inflation, currency devaluation, or stock market pressures have watched it fall, sometimes at a faster pace, paralleling the risks that Bitcoin was supposed to alleviate. Those who treated this as a momentum trade moved into assets that were actually moving, from global stocks to gold.
Due to the dismantling of crypto trading, the market is weaker than it appears. Demand for leveraged exposure on the Chicago Mercantile Exchange “hasn’t been this weak since the pre-ETF rush phase in mid-2023,” said David Rowant, head of research at Anchorage Digital. Less leverage means not only fewer forced buyers when prices rise, but also fewer natural buyers who can absorb escalating selling waves.
Some of the institutional waves were also more mechanical than they appeared. Hedge funds executed basis trades by buying spot Bitcoin and selling futures at a premium, capturing the spread as a profit. With this strategy, there was no need to consider price direction; all that was needed was that the yield was higher than what could be obtained elsewhere.
That was the case for most of 2025. But after October 10, when that spread fell below U.S. Treasury yields, trading became irrational and that trend stopped. Most of the ETF reversals appear to be driven by reduced demand for Bitcoin as an asset rather than the economics of a particular arbitrage strategy, but this is one element of the demand situation.
“There’s no reason for that capital to remain,” said Bohumir Bosaryk, chief investment officer at 319 Capital. He added that until serious demand returns for the foreseeable future, “any pullback could become a break-even sell zone rather than a foundation for recovery.” Coinbase’s discount rate has been negative through most of 2026, indicating that the demand has not materialized yet.
Institutional market structure limits recovery
The integration of Bitcoin and US finance has brought real benefits, including deeper liquidity and institutional legitimacy that this asset has long lacked. However, demand is now decreasing and the market has lost the ability to react to good news.
The deeper problem is structural. Institutionalization did not eliminate volatility, but redistributed it. The very products that brought Bitcoin to Wall Street, such as ETFs, yield-generating layers, and options strategies, are designed to smooth out yields in stable conditions. They do so, but they concentrate risk in ways that only become clear when circumstances change.
Structured products that generate yield by selling options suppress price fluctuations when the market is calm, but exacerbate price fluctuations when fluctuations actually occur. Additionally, many ETF investors are trading below their average purchase cost, meaning that rebounds are being sold by holders simply looking to break even, limiting the gains that could have been made by momentum in previous cycles.
“The growing adoption of products like BlackRock’s IBIT creates localized stability for Bitcoin when prices are trading within a range,” said Spencer Halleren, global head of OTC trading at GSR. But when a real catalyst occurs, he added, “the structure itself can actually amplify the move. In particular, yield-producing products that systematically sell options suppress volatility until they amplify it.”
As a result, the market loses its ability to react to good news. When BlackRock announced a product linked to Uniswap, the token briefly rose and then fell again. In previous cycles, similar headlines often triggered extended bullish waves. Well, enthusiasm disappears before it takes shape.
According to Zack Lindquist, Managing Partner at Pure Crypto, “The market structure essentially collapsed on October 10th…We have never seen such continuity and sharp retracement, even in 2018 and 2022.”