Bitcoin Faces Deep Correction While DeFi & Stablecoins Attract TradFi

The crypto market is currently navigating a period of pronounced divergence, with Bitcoin grappling with a deepening correction while the broader decentralized finance (DeFi) and stablecoin sectors continue to attract significant institutional interest. This trend amplifies the market's split observed over the past few days, where Bitcoin's struggles contrast sharply with the growing utility and adoption of other digital assets.

Bitcoin's Persistent Downward Pressure

Bitcoin's price action has been decidedly bearish, sinking below $65,000 and wiping out recent weekend gains (The Block). Market sentiment has reached its most bearish levels ever, with Polymarket odds indicating a 72% chance of BTC falling below $55,000 (Cointelegraph). A primary driver of this weakness is the sustained outflow from US-based spot Bitcoin ETFs, which have now endured a five-week bleed, shedding approximately $2.6 billion in 2026 alone (Cointelegraph). This marks Bitcoin's longest streak of spot ETF outflows since March 2025, a trend that has been exacerbated by intensified whale selling and miner capitulation, as seen with Bitdeer liquidating its entire 943 BTC treasury to zero (The Block).

Treasury firms logging a rare selling streak near $66,000 further contributes to the downward pressure, though some analysts view this as a healthy flush of speculative leverage (Cointelegraph). The sudden plunge also triggered nearly $360 million in crypto long liquidations within an hour, according to Coinglass data (The Block).

Undercurrents of Bitcoin Bullishness

Despite the prevailing bearish sentiment, several signals suggest a potential rebound for Bitcoin. CME "smart money" futures traders significantly reduced their bearish bets last month, a move that historically preceded substantial rallies, including a 70% increase in 2025 and a 190% surge in 2023 (Cointelegraph). Furthermore, institutional confidence remains evident, with Michael Saylor hinting at Strategy's 100th Bitcoin purchase, adding to their massive accumulation of 717,131 BTC since August 2020 (Cointelegraph). On the regulatory front, Missouri is advancing a Bitcoin Strategic Reserve Fund bill, allowing the state treasurer to invest and hold Bitcoin, signaling growing governmental acceptance (The Block). Long-term historical metrics also offer a bullish outlook, with one model suggesting an average return of $122,000 over 10 months and 88% odds of higher prices by early 2027 (Cointelegraph).

DeFi & Stablecoins: Attracting TradFi Giants

While Bitcoin navigates its correction, the broader crypto ecosystem, particularly DeFi and stablecoins, is flourishing with institutional adoption. Standard Chartered projects that stablecoin growth could generate up to $1 trillion in new T-bill demand by 2028, potentially reshaping Treasury issuance (The Block). This highlights their increasing role in traditional finance. Moreover, TradFi giants like BlackRock, Apollo, and Citadel are actively acquiring DeFi tokens, signaling a strategic pivot into decentralized protocols (The Block). In South Korea, Hanwha Asset Management has partnered with the Jito Foundation to explore JitoSOL-based exchange-traded products (ETPs), further expanding institutional access to liquidity staking (The Block). This diversification beyond major assets is a clear trend, as crypto investors look for wider opportunities amid market uncertainty (Cointelegraph). Even Ethereum, despite some selling pressure from co-founder Vitalik Buterin (Cointelegraph), continues to underpin much of this innovation, building on its previous institutional traction in the RWA sector.

What to watch next

Investors should closely monitor Bitcoin's ETF flow data for any signs of reversal, alongside CME futures positioning for shifts in institutional sentiment. The continued expansion of TradFi involvement in DeFi and stablecoins, particularly new product launches and regulatory developments, will be crucial indicators of the market's evolving landscape. Keep an eye on the broader macro environment, especially US tariff discussions, which could introduce volatility across global markets.

Sources

• Bitcoin treasury firms log rare selling streak as BTC trades near $66K
• Stablecoins could drive $1 trillion in T-bill demand, giving Treasury room to shift issuance: Standard Chartered
• Hodlers have 'given up' at $65K: Five things to know in Bitcoin this week
• Bitcoin sinks below $65,000 as macro shocks rattle fragile market: analysts
• The Funding: Why TradFi giants like BlackRock are buying DeFi tokens now
• Bitcoin price may rebound to $85K as CME 'smart money' slashes shorts