Why Is Crypto Crashing? Record $700M Exits Bitcoin ETFs in Single Day as Wall Street De-Risks Ahead of Trade War

Core Insights - Over $700 million was withdrawn from US spot Bitcoin ETFs in a single day, marking the largest outflow since November 20, indicating a significant shift in investor sentiment [1] - The outflow was influenced by renewed trade tensions due to President Trump's tariff threats against Europe, leading to a broader risk-off sentiment in global markets [2][3] Market Dynamics - Bitcoin's price fell below $88,000 during the sell-off but stabilized around $89,500, with the total crypto market cap declining by approximately 2-3% to just above $3 trillion [2][3] - In early January, spot Bitcoin ETFs had net inflows of about $1.4 billion in a week, highlighting the rapid change in market sentiment driven by macroeconomic factors [3] Trading Activity - Derivatives data suggests a de-risking approach rather than a complete market unwind, with Bitcoin futures open interest at approximately $58.5 billion and $63.5 billion traded in the last 24 hours [3] - Liquidations were around $110 million, and the wider crypto market's futures open interest was near $132 billion, indicating cautious repositioning rather than panic selling [4] On-Chain Analysis - Bitcoin's on-chain trading volume remains relatively low, with only $0.7 million in spot DEX volume and $15 million in perpetual flows compared to nearly $14.4 billion in global DEX spot trades [5] - Approximately 15,000 BTC, valued at around $1.35 billion, flowed into centralized exchanges over the past week, suggesting increased selling pressure [6][7]