NYDIG: Bitcoin Faces Multi-Month Lows Due to ETF and Treasury Reversals

Bitcoin, which had surged to new heights in October, is now experiencing a decline, according to recent insights from NYDIG.

Key Takeaways

Bitcoin's Rally Reverses: NYDIG describes the current shift as “actual capital flight,” marking a significant change in market sentiment.
Impact of Liquidation Events: The liquidation event in October disrupted capital inflow cycles, leading to notable decreases in ETF investments and stablecoin supplies.
Rising Bitcoin Dominance: Despite the outflows, Bitcoin's share of the market is increasing as investors shift away from riskier assets.

Greg Cipolaro, NYDIG's head of research, highlighted that the same dynamics that fueled Bitcoin’s rise—such as ETF inflows and strong demand for digital asset treasuries (DAT)—have reversed, indicating an actual flight of capital rather than merely negative sentiment.

NYDIG: ETF and Treasury Reversals Are Now Pulling Bitcoin to Multi-Month Lows

ETF Inflows Turn Negative After October Liquidity Shock

In a note shared on a Friday, Cipolaro mentioned that the previous surge in Bitcoin’s value was significantly driven by robust inflows into spot ETFs and active accumulation of treasury assets. However, a sharp decline in October disrupted this positive cycle. ETF inflows became negative, DAT premiums fell, and the supply of stablecoins decreased for the first time in months.

These shifts suggest that liquidity is exiting the market.

“Once that loop breaks, liquidity tightens, and leverage attempts to rebuild but struggles to find its footing,” Cipolaro stated. “The momentum shifts, although the underlying mechanics remain unchanged.”

Despite being considered a significant success in the market for 2024–2025, these spot Bitcoin ETFs have flipped from being steady inflow sources to facing large net outflows.

Cipolaro also pointed out that other broader elements—such as global liquidity shifts and macroeconomic uncertainties—are contributing to the current decline in Bitcoin prices. Despite these selling pressures, Bitcoin’s market dominance is rising, a trend often seen during downturns. As investors pull out of riskier assets, many often seek refuge in Bitcoin due to its liquidity and reputation as a stable asset.

Bitcoin dominance rose briefly above 60% in early November before stabilizing around 58%, according to CoinMarketCap data.

Observations on DATs and Stablecoins

Earlier in the cycle, DATs and stablecoins represented a critical demand base for Bitcoin. The current compression in DAT premiums and a decrease in stablecoin supply indicate that investors are withdrawing liquidity from the crypto market. However, Cipolaro noted that the overall DAT environment remains robust, without any signs of financial distress.

“Leverage is still at manageable levels, interest obligations are within reason, and several DAT frameworks enable issuers to defer dividend or coupon payments if necessary,” he commented.

Long-Term Outlook for Bitcoin Remains Positive

While short-term risks are increasing, Cipolaro asserts that Bitcoin’s long-term potential remains intact. Factors such as institutional adoption, sovereign interest, and its function as a neutral form of programmable money continue to support Bitcoin’s future.

“Recent events do not alter that long-term outlook,” he explained, emphasizing that while the immediate narrative may shift, the fundamental trajectory remains positive.

Yet, he cautioned that based on trends from past cycles, market participants should be prepared for a tumultuous period characterized by sudden disruptions as the liquidity landscape changes again.

Additionally, it was reported that the New York Stock Exchange has taken steps to approve the listing of Grayscale’s XRP and Dogecoin exchange-traded funds, allowing these products to initiate trading on Monday.