Bitcoin’s Demand Engines Reverse, but Long-Term Outlook Remains Strong: NYDIG

The same forces that helped push Bitcoin to its October peak are now contributing to its decline — a shift that reflects genuine capital leaving the ecosystem rather than simply negative market sentiment, according to NYDIG head of research Greg Cipolaro.

In a market note published Friday, Cipolaro explained that exchange-traded fund (ETF) inflows and digital asset treasury (DAT) demand were the critical engines behind Bitcoin’s rally to $86,784 earlier in the cycle. But a sudden reversal in early October has now turned those former tailwinds into clear headwinds.

ETF Inflows Collapse, Treasury Demand Weakens

According to Cipolaro, October’s “major liquidation event” triggered:

• ETF inflows turning sharply negative

• DAT premiums collapsing

• A decline in stablecoin supply for the first time in months

These factors collectively signaled liquidity exiting the system, a pattern Cipolaro called “classic signs” of a cycle losing momentum.

“Historically, once that loop breaks, the market follows a predictable sequence. Liquidity tightens, leverage attempts to re-form but struggles, and narratives stop translating into actual flows.”

The reflexive loop that drives Bitcoin higher in bullish cycles is now running in reverse — setting the stage for the next phase of the cycle, he added.

Spot Bitcoin ETFs Shift From Tailwind to Headwind

Spot Bitcoin ETFs, once the strongest source of structural inflows this cycle, have now flipped into meaningful outflows. But Cipolaro emphasized that the situation is influenced by more than ETF reversal alone.

Factors now weighing on Bitcoin include:

• Global liquidity tightening

• Macro-driven risk-off sentiment

• Market structure fragility

• Behavioral feedback loops

Despite outflows, Bitcoin is still consolidating power in the broader crypto market.

Bitcoin Dominance Rises During Drawdowns

As capital exits speculative assets, it tends to consolidate into Bitcoin. This pattern is consistent across cycles.

Bitcoin dominance:

• Surged above 60% in early November

• Currently sits around 58%, according to CoinMarketCap

This dynamic reflects Bitcoin’s role as the most established and most liquid asset in the ecosystem — a safe harbor during periods of risk reduction.

DATs and Stablecoins Decline, but No Signs of Distress

DATs and stablecoins had been an important structural demand source for Bitcoin throughout the year. But recent data shows:

• DAT premiums have compressed

• Stablecoin supply is declining

• Liquidity is being withdrawn

Despite these reversals, Cipolaro noted there is no indication of stress within the DAT sector.

“Leverage remains modest, interest obligations are manageable, and many DATs allow issuers to suspend dividends or coupon payments if needed.”

He said the sector still has “a long runway” before concerns about financial strain would be warranted.

Long-Term Thesis Unchanged Despite Short-Term Pressure

While the market may continue to experience volatility and uneven behavior in the near term, Cipolaro stressed that Bitcoin’s long-term trajectory remains intact.

Key structural drivers remain strong:

• Growing institutional participation

• Increasing sovereign interest

• Bitcoin’s role as a neutral, programmable monetary asset

“Nothing in the past few weeks changes the long-horizon trajectory,” Cipolaro said.

“But the cycle story — driven by flows, leverage, and reflexive behavior — is asserting itself far more forcefully.”

He warned investors to expect an emotionally challenging environment ahead, consistent with previous Bitcoin cycles:

“Hope for the best, but prepare for the worst.”

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