NYDIG: The Same Forces That Catapulted Bitcoin to Its October Highs Are Now Driving It Back to Multi-Month Lows

Bitcoin’s retreat from its October peak is no simple correction—NYDIG warns it is a structural unwind driven by the very mechanisms that once propelled it higher. In a newly released analysis, the firm argues that a sharp reversal in liquidity dynamics, ETF flows, and market reflexivity is now exerting sustained downward pressure on the asset.

A Rally in Reverse: From Inflows to “Actual Capital Flight”

NYDIG characterizes Bitcoin’s latest downturn as “actual capital flight”, a dramatic shift from the heavy inflows that defined the rally earlier in the quarter.

What began as a mild cooling has accelerated into a broad-based extraction of liquidity, with money flowing out of crypto-specific vehicles and risk markets at large.

The October Liquidation Event Broke Bitcoin’s Momentum Engine

According to NYDIG, October’s liquidation cascade didn’t just reset leverage—it fundamentally disrupted the reflexive feedback loop that powered Bitcoin’s advance.

During the rally, ETF inflows lifted price, which attracted more investors, which in turn spurred additional inflows—forming a virtuous cycle.

But that cycle has now inverted.

Spot ETFs Have Turned From Tailwind to Headwind

NYDIG points to a decisive shift:

• DAT (Digital Asset Trust) premiums have compressed, signaling weakening demand.
• Stablecoin supply has contracted, reflecting declining liquidity entering the system.
• Spot Bitcoin ETFs, once a powerful inflow engine, are now exerting net outflow pressure, amplifying the corrective move.

The firm notes that this shift is not superficial—it is structural, rooted in changes to investor behavior, risk appetite, and macro positioning.

Bitcoin Dominance Rises Despite Outflows: A Warning Signal

One of the most telling indicators cited by NYDIG is rising Bitcoin dominance even as total crypto liquidity falls.

This pattern typically emerges when traders are de-risking:

• capital exits altcoins first,
• rotates into Bitcoin as a temporary safe haven,
• and eventually leaves the ecosystem altogether.

It’s a dynamic often seen during early stages of broader risk-off cycles.

Greg Cipolaro: The Reflexive Loop Has Inverted

Greg Cipolaro, NYDIG’s head of research, emphasizes that Bitcoin’s market structure is driven heavily by reflexivity.

The same mechanisms that amplified gains now amplify losses:

• ETF inflows once magnified upside momentum.
• Now ETF outflows magnify the downside.

Cipolaro warns that until inflows stabilize—or macro conditions improve—the loop may continue functioning in reverse, keeping pressure on price and sentiment.

A Market Searching for New Equilibrium

NYDIG concludes that Bitcoin is now entering a recalibration phase shaped by liquidity withdrawal, ETF positioning reversals, and investor caution.

Where the asset finds support will likely depend on:

• shifts in macro policy expectations,
• the behavior of ETF flows,
• and whether stablecoin liquidity begins to expand again.