Crypto Liquidity Rotates as Bitcoin and Ethereum Lose Momentum

The cryptocurrency market remained under pressure this week as traders pulled capital away from Bitcoin and Ethereum, redirecting liquidity toward alternative instruments, including perpetual contracts linked to stocks and private companies.
According to data from Block Scholes, trading activity in Bitcoin and Ethereum on the Hyperliquid platform has fallen to its lowest level in several quarters. While the two largest cryptocurrencies struggled to attract fresh buying interest, trading volumes in contracts tied to equities and pre-IPO private companies surged, highlighting a notable shift in speculative appetite.
The decline in activity coincided with weakening prices across the major digital assets. Bitcoin briefly approached the $60,000 level during the week, while Ethereum suffered some of its sharpest losses in recent months. Block Scholes noted that risk appetite indicators for both cryptocurrencies have deteriorated, suggesting traders are becoming increasingly selective about where they deploy capital.
Adding to the cautious mood, several developments have weighed on sentiment. Bitcoin spot ETFs listed in the United States recorded their longest streak of outflows since launch, signalling softer institutional demand. Meanwhile, reports that Strategy trimmed part of its Bitcoin holdings raised eyebrows among investors, given the company's long-standing reputation as one of the market's most committed Bitcoin accumulators.
Despite the weakness in the flagship cryptocurrencies, analysts do not believe investor interest in digital assets has disappeared. Instead, liquidity appears to be rotating into different segments of the market rather than exiting the ecosystem entirely.
Hyperliquid data illustrates the slowdown clearly. Daily Bitcoin perpetual futures volume has stabilised around $2 billion, while Ethereum volumes have fallen to between $600 million and $700 million per day, both representing multi-quarter lows.
The market also faced additional pressure from a significant options expiry event. Approximately $1.89 billion worth of Bitcoin and Ethereum options contracts expired during the week, increasing short-term volatility and forcing traders to adjust positions.
Around 25,600 Bitcoin options contracts, with a notional value of roughly $1.62 billion, reached expiry. The contracts carried a put-to-call ratio of 0.56 and a maximum pain level near $70,500, well above prevailing market prices. Bitcoin's sharp decline below $70,000 triggered increased demand for downside protection, particularly around the $68,000, $65,000, and $60,000 levels.
Ethereum saw approximately 155,000 options contracts expire, representing around $270 million in notional value. The contracts carried a put-to-call ratio of 0.92 and a maximum pain level near $2,000, again above current market levels.
As traders sought protection against further losses, short-term implied volatility increased and options skew turned negative, indicating stronger demand for bearish hedging strategies than for bullish exposure.
By Friday, selling pressure intensified further. Bitcoin fell nearly 3% on the day to around $61,700, extending its weekly decline to approximately 13%, its worst weekly performance since February. Ethereum dropped more than 7% to around $1,650, while Ripple also recorded significant losses.
The broader backdrop remains challenging for risk assets. Higher global interest rates, persistent geopolitical uncertainty, and slowing economic momentum have encouraged investors to reduce exposure to speculative sectors, including cryptocurrencies and growth-oriented technology investments.
Investors are now turning their attention to Washington, where lawmakers are expected to introduce new cryptocurrency tax legislation. The proposed framework could become a key catalyst for the market, either by providing greater regulatory clarity and attracting institutional capital or by introducing additional compliance and tax burdens that dampen participation.
Market Outlook
The cryptocurrency market remains trapped in a risk-off environment, with momentum indicators pointing to continued caution among traders. While Bitcoin's decline toward the $60,000 region has attracted hedging activity rather than aggressive buying, the shift of liquidity into alternative trading instruments suggests that speculative capital has not disappeared—it has simply moved elsewhere.
In the near term, traders will closely monitor regulatory developments in the United States, ETF flow data, and whether Bitcoin can hold key support levels around $60,000. A sustained recovery in risk appetite could stabilise prices, but until fresh catalysts emerge, volatility is likely to remain elevated and rallies may struggle to gain traction.
For now, the market narrative has shifted from aggressive accumulation to capital preservation, leaving Bitcoin and Ethereum vulnerable to further downside pressure if macroeconomic conditions deteriorate or institutional demand continues to soften.