The market is sliding deeper into fear, the kind of phase where conviction begins to turn to capitulation.
Looking at the broader design and that of Bitcoin [BTC] recent downturn, this dynamic is worth paying attention to. On the macro side, after a few weeks of relative calm, US President Donald Trump recently ordered the US military to prepare for a possible large-scale attack on Iran. This added momentum to already rising oil prices as they head towards $110 per barrel.
For Bitcoin, this is happening at a tough spot in the cycle. As the chart shows, BTC has been rejected for now based on the Short-Term Holders’ fees, which are almost $81,000. At the same time, the STH MVRV ratio, which had reached the 1.0 level (basically breakeven for short-term holders), has rolled out of that zone.
In summary, this setup suggests that short-term investors are exiting the market quite aggressively for the time being.
Compounding the weakness, Bitcoin ETFs started the new week with nearly $650 million in net outflows, extending last week’s $1 billion+ redemptions. But according to CoinMarketCap, the selling pressure is broader this time. ARKB and IBIT are almost tied for the largest outflows, with outflows of between $310 million and $324 million each. In contrast, January’s redemption waves relied more heavily on IBIT alone.
From an institutional perspective, this points to a deeper fear spreading among the big players, reinforcing risk appetite in the market. Meanwhile, Santiment recently noted rising FUD around Bitcoin on social media platforms. Essentially, the macro FUD now appears to be shifting from conviction to early-stage capitulation, which begs the question: is Bitcoin’s recent correction the start of a deeper unwind?
THIS Bitcoin divergence is becoming increasingly apparent
The rising fear in the market can go both ways: either investors panic sell or step in to buy the FUD.
When we look at Bitcoin ETFs, the first scenario is currently more prevalent. Typically, during periods of ‘extreme’ fear, heavyweight players absorb excess liquidity, reducing circulating BTC supply and setting the stage for a recovery once sentiment returns to ‘risk-on’.
The key word here is ‘excess’. As the chart below shows, Bitcoin’s Fear & Greed Index recently returned from the fear zone to neutral territory, marking the second such rebound in the second quarter. The first came in late April-early May, when BTC was trading around $75,000. That recovery ultimately pushed sentiment above 50, which was in line with Bitcoin’s breakout past $82,000. It indicates that anxiety has never really reached an ‘excessive’ level.
In this context, the setup still suggests that Bitcoin is not yet in a complete capitulation phase.
Instead, recent short-term holder selling and ETF outflows look more like repositioning than panic exits, while overall sentiment is still holding up quite well. So far, macro FUD hasn’t yet fully contributed to investor decision-making, making this move look more like a short-term rotation rather than a deeper collapse, even as ETFs continue to bleed.
This in turn makes it a strong signal to monitor the rest of the second quarter closely.
Final summary
- Bitcoin is showing rising fear in the short term, but sentiment has not yet been completely broken, suggesting rotation rather than capitulation.
- Because fear never reached ‘excessive’ levels, this looks more like a correction phase worth watching in the second quarter than a deeper crash.