AI Rotation and Rebuilt Leverage Trigger $10B Bitcoin Sell-Off

A shift of capital into AI-linked investments and rebuilt leverage in crypto derivatives prompted nearly $10 billion in long Bitcoin futures liquidations after BTC fell toward $60,000 last week. Bitcoin dropped about 14% during the sell-off and later recovered to roughly $63,000.

Futures open interest rose from about $31 billion in February to roughly $51 billion by May, reflecting a return of leveraged exposure as Bitcoin rallied earlier in the year. When prices turned lower, forced liquidations removed long exposure rather than being replaced by new long bets and funding rates moved toward negative territory. Jim Ferraioli, head of crypto research at Charles Schwab, observed that the decline in open interest during the sell-off showed exposure was being cut rather than re-established.

Capital flows into AI-linked equities, data-center infrastructure and private technology deals coincided with weak marginal demand for crypto. Michael Saylor estimated roughly $400 billion flowed into AI infrastructure over the past six months while U.S.-listed spot Bitcoin ETFs registered about $4 billion in outflows since mid-May. Greg Cipolaro, global head of research at NYDIG, noted that some investors who seek emerging-technology returns have redirected funds toward AI-linked trades.

ETF holder composition shifted during the pullback. Hedge funds reduced their share of BlackRock’s iShares Bitcoin Trust from near 29% earlier in May to about 19% by May 31. Investment advisers increased exposure during the dip and retail brokerage accounts trimmed holdings.

Technical and cost-based levels provided reference points during the decline. Prices returned near February lows, efficient miner production costs and the 200-week moving average-areas traders watch for signs that distress selling may be easing. Ferraioli warned the price action reflected a clearing of leverage rather than a fresh wave of speculative inflows and listed metrics to monitor for a more constructive setup: open interest stabilizing, funding rates settling, and forced selling fading.

Bitcoin’s partial recovery to around $63,000 followed the liquidation wave. Market participants will watch whether spot demand returns or whether capital tied to AI and private tech deals continues to draw funds away from crypto.