Wintermute Market Update - BTC Liquidates $2.7 Billion, Erasing All Post-Trump Gains. Market Update - February 9, 2026 Bitcoin fell below $80,000 for the first time since April 2025 amid weekend liquidations exceeding $2.7 billion. The mixed performance of Mag7, the sharp correction in precious metals, and the Fed nomination of Warsh triggered a delayed risk-off rotation across the market. Cryptocurrencies continue to exhibit negative asymmetry compared to the broader market, underperforming both rallies and sell-offs, a pattern typical of bear market conditions. Macroeconomic Update Last week was brutal. BTC broke below $80,000 for the first time since April 2025 and continued its decline, eventually hitting $60,000 before rebounding to the low $70,000s by the weekend. All gains since Trump's November 2024 election were erased. • Leverage built up during two months of range-bound trading finally cleared, leading to liquidations of over $2.7 billion. • IBITs traded over $10 billion notional on Thursday, highlighting how central ETF products have become to price movements. • BTC fell 50% in four months from its October ATH of $126,000, its biggest drop since 2022. • Three catalysts struck simultaneously: the January 30th nomination of Robert Wersh as Fed Chair, Microsoft's disappointing Mag7 earnings, which saw a 10% drop, and the historic precious metals crash, which saw silver lose 40% in just three days after hitting $121. The market took a few days to digest before deciding on widespread risk-off positioning. Who sold? Spot flows reveal structural pressure. The Coinbase premium remained discounted throughout the move, a pattern that has persisted since December and points to persistent selling pressure in the US. Internal OTC flow data confirms that US counterparties have been strong sellers throughout the week, amplified by continued ETF redemptions. Institutional buying, which previously fueled momentum, has dried up: • The spot BTC ETF complex has seen cumulative net outflows of approximately $6.2 billion since November, the longest continuous streak since launch. • When redemptions force sponsors to sell spot at declining prices, the feedback loop becomes self-reinforcing. • IBITs have become both the largest holders and the largest source of incremental supply. In derivatives, IBIT and Deribit now account for roughly half of the cryptocurrency options market. This flush suggests investors have become complacent amidst range-bound trading and compressed realized volatility, only to be caught off guard. AI is sucking air out of the air. A chart that went viral last week showed Bitcoin's performance tracking the S&P's software portfolio almost perfectly. The real story is that AI has been sucking up available capital for months at the expense of everything else. A similar dynamic is unfolding in software. While some stocks are clear AI losers, others face indiscriminate rotation as the market chases the AI narrative rather than studying individual fundamentals. Excluding AI stocks from the Nasdaq largely eliminates the negative asymmetry in cryptocurrencies. The underperformance during rallies and the amplified selling during declines are almost entirely explained by AI rotation. For cryptocurrencies to outperform again, the air must be released from AI trading. Microsoft's weak performance started that process, but more is needed. Wintermute's View Leverage has been cleared, but the question is whether demand will return. Last week felt like a surrender. Volatility surged, liquidations of over $2.5 billion were wiped out, and it wasn't until $60,000 that buyers found buyers. Open interest was building in the market, and funding rapidly turned negative as shorts piled up, until a violent short squeeze on Friday unwound the positions. In an environment where spot volume remains thin, leverage drives price movements. Unless open interest meaningfully rebuilds, limited follow-up is expected on both sides. A structural recovery requires a return of spot demand, but there's currently little evidence of this. However, the bigger picture is grim: cumulative unrealized losses across digital asset treasuries currently stand at approximately $25 billion, concentrated in a few holdings. With BTC trading below the cost of acquiring many treasuries and premiums to NAV compressed, these entities appear more like hodlers than marginal buyers. This effectively leaves one of the primary buyers of the past 18 months off-balance sheet, as raising new capital in this environment is unattractive. The question now is what comes next. We are likely entering a period of choppy price discovery amidst elevated volatility. Sustained gains are unlikely until the Coinbase premium turns positive, ETF flows reverse, and the basis rate stabilizes. While retail diverts its attention to other asset classes, institutional flows through ETFs and derivatives now appear to be dictating the direction. Source