'Basis traders' are done dragging down Bitcoin price, says investment adviser

Bitcoin's recent sharp decline—dropping more than $10,000 in under two weeks to reach its lowest level since early December—has been driven primarily by large holder liquidations outpacing institutional inflows, particularly through spot ETFs. However, according to Two Prime CEO Alex Blume, a critical market dynamic may be shifting: basis traders, who have been a persistent source of selling pressure, appear to have concluded their liquidation positions. This development arrives as a dominant institutional buyer is simultaneously accelerating its Bitcoin purchases, potentially positioning the market for stabilization or recovery.

The timing of these shifts occurs amid a broader macroeconomic environment that traditionally should have supported cryptocurrency valuations. Since early 2025, precious metals prices have surged 85% to 160%, while the U.S. dollar has weakened against most major currencies. U.S. equities have also performed solidly, with the Nasdaq 100 returning approximately 20% through early 2026. Surprisingly, crypto assets have failed to benefit from these typically bullish conditions, revealing a fundamental breakdown in historical correlations. Bitcoin's correlation with gold, which peaked at +0.41 on a rolling 12-month basis during the Federal Reserve's pandemic-era quantitative easing, has dropped to near zero by 2026. Similarly, Bitcoin's negative correlation with the Bloomberg Dollar Index—which reached as strong as –0.4 in 2022–2023—has also weakened toward zero, suggesting that cryptocurrency price movements are increasingly disconnected from conventional macro drivers.

Bitcoin's recent weakness has had cascading effects across the broader cryptocurrency sector. Despite other digital assets offering superior technological specifications, including faster blockchains and enhanced efficiency, the entire crypto market has experienced downward pressure correlated with Bitcoin's losses. This "undertow effect" underscores Bitcoin's continued dominance as a price-setting mechanism for the broader asset class, regardless of the relative merit of competing protocols or use cases. The convergence of basis trader exit pressure finally lifting, combined with institutional accumulation accelerating, suggests market participants view current valuations as attractive entry points, though volatility is expected to persist amid ongoing macroeconomic and geopolitical uncertainties.