Bitcoin slipped below $65,000 on Monday as traders positioned their portfolios ahead of the Federal Reserve's policy decision scheduled for Wednesday. The pullback across major cryptocurrencies reflects heightened caution among investors awaiting clarity on interest rate policy, with significant capital flows indicating a defensive stance in the digital asset market.

Market Movements and Liquidations

The broad correction affected leading digital assets, with Bitcoin trading at $64,729.37. Ethereum declined to $1,930.74, while Solana dropped to $75.33. Other major tokens also faced downward pressure: XRP traded at $1.08, Dogecoin at $0.07159, and Shiba Inu at $0.000005033.

Volatility intensified over the weekend, resulting in substantial trader losses. According to Coinglass data, 118,449 traders were liquidated in the past 24 hours, totaling $437.94 million. This wave of forced exits underscores the sensitivity of leveraged positions to pre-FOMC uncertainty.

Institutional Flows and Analyst Views

Institutional sentiment appeared cautious, with SoSoValue data showing net outflows of $240.08 million from spot Bitcoin ETFs on Wednesday. Spot Ethereum ETFs also saw net outflows of $70.6 million during the same period. Despite the broader downturn, specific altcoins such as Pump.fun, LayerZero, and Aerodrome Finance emerged as top gainers in the past 24 hours.

Technical analyst Lennaert Snyder noted that Bitcoin's weekend rally is retracing as expected after rejecting the $65,800 level. He identified liquidity above those highs as a likely future upside target. Snyder highlighted three potential long-entry zones, starting around $63,500. He maintained that the preferred accumulation area remains around $60,000, with $59,000 viewed as the extreme range low offering the best risk-reward if buyers step in. Snyder cautioned traders to account for potential volatility ahead of this week's FOMC meeting.

Trader KillaXBT argued that current calls for a drop to $50,000–$40,000 mirror the 2022 market dynamics, where many investors waited for prices to fall to $10,000–$12,000 after Bitcoin had already bottomed near $16,000. He contended that buying at $16,000, $20,000, or even $25,000 all proved profitable, rewarding those willing to enter early. Applying this logic to the current cycle, he remains confident that Bitcoin will exceed $160,000, asserting that long-term gains will outweigh the timing of entry.

What the Numbers Show

The divergence between massive retail liquidations ($437.94 million) and institutional outflows ($240.08 million from spot Bitcoin ETFs) suggests a synchronized risk-off event driven by macroeconomic anticipation rather than asset-specific fundamentals. While technical analysts identify support levels near $60,000–$63,500, the heavy liquidation volume indicates that leveraged long positions were disproportionately exposed to the pre-FOMC volatility, potentially creating a temporary oversold condition if buying interest returns at these identified zones.

Macro investor Jordi Visser asserts that the era of effortless gains in artificial intelligence (AI) stocks is concluding, creating potential room for Bitcoin (CRYPTO: BTC), Ethereum (CRYPTO: ETH), and the broader cryptocurrency market to attract significant capital flows in 2026. Speaking with Anthony Pompliano on July 25, Visser argued that while AI remains a transformational theme, the specific window for generating seven- or eightfold returns by simply owning the sector’s most obvious winners has likely closed. This shift implies that future returns will depend on identifying companies with durable infrastructure and real competitive advantages, rather than broad sector exposure.

Visser clarified that his statement "the AI trade’s over" does not mean the technology itself is finished, but rather that the market is entering a more difficult phase of the cycle. He noted that investors should no longer expect the extraordinary gains seen during the early boom phase, although he believes annual returns of around 30% from AI infrastructure investments could still be attractive. This maturation of the AI investment thesis suggests a rotation of liquidity away from high-multiple tech equities toward alternative asset classes that offer different risk-reward profiles.

The potential beneficiary of this rotation appears to be the digital asset market. Visser pointed out that Bitcoin has held up relatively well despite remaining nearly 50% below its record high, and he expects it to eventually move higher. He has been personally adding exposure to Bitcoin during the downturn. However, the key signal for broader market direction may be coming from the relative performance within the crypto ecosystem itself. A crypto ecosystem index created by Visser recently moved above its mid-June highs, even though Bitcoin had not, indicating underlying strength in the wider market.

Visser highlighted that Ethereum has begun outperforming Bitcoin, suggesting the market is starting to look more toward the "revenue side" of the equation. He stated that this development favors Ethereum over Bitcoin, which he views as constructive for the long-term health of the crypto market. This shift indicates a growing investor preference for digital assets with active utility and cash flow generation capabilities, mirroring the traditional equity market’s focus on earnings power after initial hype cycles subside.

What the Numbers Show

The divergence between Bitcoin’s price action and the broader crypto ecosystem index reveals a nuanced market structure. While Bitcoin remains depressed near its 50% drawdown level, the ecosystem index breaking above mid-June highs suggests that capital is rotating into altcoins and utility-focused tokens. This decoupling supports Visser’s thesis that investors are prioritizing revenue-generating protocols (like Ethereum) over pure monetary assets (like Bitcoin) in the current cycle. The outperformance of Ethereum against Bitcoin serves as a leading indicator for this preference, signaling that the market is valuing network activity and fee generation over simple scarcity narratives.

Visser also expects AI and crypto to become increasingly interconnected as autonomous agents begin carrying out financial transactions. He argued that stablecoins could become the primary payment system for AI agents, while blockchain networks provide always-on, programmable infrastructure that operates without relying on conventional banking hours. Notably, Visser argued that stablecoins, not Bitcoin, are more likely to replace parts of the SWIFT payments system. Governments, banks, and technology companies are already positioning themselves around these new financial rails, merging the worlds of past and future at a very fast pace.