Wintermute: Market Recovery Requires Spot Demand to Rebound, but Few Signs Are Evident

Odaily News Wintermute stated in its latest market analysis article that last week's market action exhibited characteristics of a capitulation sell-off — a surge in volatility, over $2.5 billion in positions liquidated, and buying interest emerging around $60,000. Previously, open interest had been accumulating continuously, with short sellers rushing in causing funding rates to plummet sharply. The intense short squeeze and liquidations on Friday further exacerbated the volatility.

In an environment of light spot trading, leverage dominates price movements. If open interest is not significantly rebuilt, the sustainability of moves in either direction will be limited. A structural recovery requires the return of spot demand, but currently, there are few signs of this.

A more severe reality is that the total unrealized losses for institutions holding digital assets have reached approximately $25 billion, and these are concentrated among a few entities. The current Bitcoin price is below the cost basis for many of these institutions, and the premium (relative to net asset value) has compressed. These institutions have shifted from being marginal buyers to passive holders — the primary buying force over the past 18 months has already dissipated, and raising new funds in the current environment lacks appeal.

Going forward, the market may enter a phase of high volatility and chaotic bottom-searching. Sustained upward movement is difficult to envision unless the Coinbase premium turns positive, ETF fund flows reverse, and basis rates stabilize. With retail attention dispersed across other asset classes, institutional fund flows through ETFs and derivatives have become the dominant force shaping market direction.