AI Isn't The Only Thing Killing Bitcoin... Reality Is

Summary Bitcoin (BTC-USD) is rated a strong sell due to lack of intrinsic value and deteriorating investor sentiment. BTC has seen declining active addresses, falling ETF net flows, and negative dollar volume trends, indicating weakening adoption and speculative interest. Recent Bitcoin ETF outflows and Strategy Inc.'s (MSTR) first sale since 2022 underscore a shift away from long-term holding. Capital rotation into AI and rising interest rates further erode BTC's investment case, with no compelling bullish catalysts visible. There's a pretty good chance that if you follow my work closely, you know that I am ideologically opposed to the very concept of Bitcoin ( BTC-USD ) and other cryptocurrencies. To be clear, I am not against all cryptocurrencies. I actually do think that well managed and regulated stablecoins have the potential to do quite well and I have expressed as much in articles in the past. But Bitcoin is, in my view, virtually worthless. Although I have been harping on that for a little while now, the market might finally be coming around to my own thinking on the matter. Year to date, Bitcoin is down 31.3%. And over the last year, it has plunged 41.6%. On June 5th, it even dipped just below $60,000 briefly. But honestly, it deserves to fall significantly more than this. I have explained this in previous articles like here and here . Unfortunately for those who are bullish about it, the picture is looking worse. And I do think that speculators who have exposure to Bitcoin would be wise to bail from their positions. That's why I have it rated a ‘strong sell’ at this moment. Because in my view, it deserves to drop very close to a big old goose egg. Bitcoin is deteriorating The last article that I wrote regarding Bitcoin was published in February of this year. In that article, I warned market participants that the plunge that the cryptocurrency was experiencing wasn't even close to being over. From that time through this moment, prices have fallen another 9%. This is abysmal considering that the S&P 500 is up 6.1% over the same window of time. It's down even more, about 44.7%, since I proclaimed in October of last year that Bitcoin bulls have lost, but that they didn't know it yet. Although my views regarding Bitcoin are based on the fact that it has no backing, unlike any other major asset or even the US dollar (which is backed by the most powerful military on the planet and the ability of the government that military serves to impose taxation on citizens), it's not just my ideological stance that has me warning of further downside. In my previous article about the faux currency, I mentioned how Richard Farr, the chief market strategist and a partner of Pivotus Partners, set a price target of zero for Bitcoin. His argument at the time was that it has failed to serve its function as a dollar hedge and he argued that ‘no serious central bank will ever own something where Michael Saylor controls the float’. This was a reference made to the executive in charge of Strategy Inc . ( MSTR ), a company that up to that point had accumulated a large chunk of the cryptocurrency. It is funny that I mentioned that because, since then, a lot has transpired. Earlier this month, shares of Strategy dropped after the company sold $2.5 million of Bitcoin. That's not much in the grand scheme of things. But it represented a massive sea change for the company after Michael Saylor had previously said that their strategy was to never sell Bitcoin. This was literally the first time that Strategy sold Bitcoin since 2022 and represented only the second time in its history that it did. Instead of holding the cryptocurrency, the company now seems focused on its own yield paying security that it issued that allows investors to earn income that's backed by its Bitcoin heavy balance sheet as opposed to buying Bitcoin directly. Strategy is down 24.3% since the start of June and has fallen 67.3% over the last year. But that makes sense considering how much of its value is tied up in Bitcoin and how much Bitcoin has plunged. Author - Data from Bitbo Of course, my short thesis does not rely solely on a single company making a relatively small sale of this ill-fated currency. It's based on so much more. Interestingly, as the chart above illustrates, we have actually seen a surge in volume associated with Bitcoin. But the total dollar volume of it has fallen sharply in recent months. Year over year for the month of May, volume as measured by units sold ended up rising 16.1%. But because of the plunge in pricing, the dollar volume has dropped 17.6%. This is concerning, but not as concerning as the fact the number of active addresses involving Bitcoin continues to drop. Author - Data from Glassnode Studio In the table above, you can see the number of active addresses that traffic in Bitcoin. These are measured in thousands. For the first five months of this year, we have seen an average of 11.72 million active addresses. This actually marks the third straight year in a row in which the first five months saw a decline in activity. We are currently down 11.9% year over year and down 31.5% compared to the first five months of 2023. For the month of May, we have seen similar declines. Year over year, the number of active addresses is down 9.7%. In fact, I traced the data back from 2020 through the present day and May of this year ended up being the lowest May of activity in this window of time. Interestingly, it's also one of the lowest of the 77 months that I traced data for. Only February through April of this year ended up being worse. Author - Data from Glassnode Studio Those who are bullish about Bitcoin might argue that this would be expected as it transitions from being used for speculative trading toward being a legitimate asset class. Investing for the long haul, as an example, could mean that owners of Bitcoin aren't as active now as in the past. But that argument is weak. For starters, in the first chart below, you can see the total value of ETF balances that hold Bitcoin. At $105.32 billion, it is higher than in any other month this year save January. But outside of this year, it is actually down rather substantially. Year over year, ETF balances have fallen 19.7%. And as the second chart below illustrates, we are seeing significant weakness when it comes to ETF net flows. In fact, the $2.48 billion in net outflows that Bitcoin saw in April ended up being the third worst month on record dating back to at least April of 2024. Only January of 2025 and October of 2025 ended up being worse. Author - Data from CoinMarketCap Author - Data from CoinMarketCap One might argue that I am merely cherry-picking different months to support my stance on the matter. But honestly, almost any way that you look at it, the picture is looking pretty bad. In the chart below, as an example, you can see trailing 6 month ETF flows. We have seen negative net flows now for six consecutive months on a trailing 6 month basis. The $2.70 billion that we have seen in the aggregate over the last six months that represents a net outflow is a stark contrast to what we saw in 2024 and 2025. Some of those windows of time, we were seeing trailing 6 month aggregations as high as $24.17 billion. This means that market participants are bailing out of ETFs. And this is happening, mind you, at a time when the stock market has hit an all time high. Author - Data from CoinMarketCap There are probably a few different things going on here besides just panicking about the long term viability of Bitcoin. For starters, prediction markets are pointing toward at least one interest rate hike before this year is out. Higher interest rates should prove to be a negative for cryptocurrency in general as other assets like U.S. Treasuries become more attractive. But then we also have multiple reports that Bitcoin investors are selling out in order to put capital into AI instead. In fact, going back on Michael Saylor is illustrative here. Not long ago, he claimed that capital markets are pumping a tremendous amount of cash into building out AI infrastructure. He pegged the number over the span of six months at around $400 billion. He argued that this did not represent an impairment of Bitcoin but rather a capital rotation as investors seek higher return opportunities. However, I do think it is worth pointing out that I have also been critical of what I am increasingly seeing as a bubble in AI. I firmly believe that AI, unlike Bitcoin, is truly transformative for the economy. But it has many different attributes that you would expect from an unsustainable bubble. So while I firmly believe that Bitcoin is heading toward zero, I also believe that when the bubble bursts, many of the AI stocks will take a huge drop lower even though the long-term value will still exist there. Author - Data from CoinMarketCap I do think it is noteworthy that while ETF flows have been significantly negative in recent months, investors in Bitcoin that own the cryptocurrency through ETFs were actually less likely to sell than those who own it outside of these structured investments. As the chart above illustrates, the percentage of Bitcoin in terms of market capitalization that is an asset held under management in ETFs has steadily risen. At 7.1% last month, it is the highest that we have on record with the exception of the 7.2% that we saw in January. For 2025, it ranged between 5.9% and 6.9%. So we are experiencing a very slow but steady increase. All this means, however, is that ETF investors are a little less panicky than everyone else. It does not support the view that Bitcoin has gained any sort of significant status as an investment. In fact, if we were seeing greater adoption in this regard, I would imagine that we would be experiencing a more rapid increase in the share of Bitcoin that is held in ETFs. Author - Data from CoinMarketCap The last point that I would like to touch on is what is known as the 1-Year HODL Wave. This is an important metric in the space and it serves as a measure of the percentage of Bitcoin holders, using the number of addresses or wallets out there, that have held Bitcoin for at least a year without conducting any outgoing transactions. This is a good proxy for those who are considered long term investors, or speculators as I would call them, in the cryptocurrency. As the chart above illustrates, we actually have seen this number level off a little bit over the last couple of months now. However, it is still undeniably lower than what we saw over the last few years. In fact, it has been higher every single month from January of 2022 through the start of June of this year with the exception of December of last year through May of this year. This means that we have seen a bit of short term support. But compared to prior years, the share of Bitcoin investors who are holding it as a long term investment has fallen measurably. Again, if this were a market where we were experiencing a rise in adoption for the purpose of holding it long term, as opposed to merely speculating on it, I would expect a recovery to the levels that we saw in previous years and perhaps even an increase compared to what we experienced back then. But that has not transpired and does not seem likely to. Author - Data from Bitbo Takeaway Based on all the data that's available right now, I firmly believe that investors should stay clear away from Bitcoin. I don't see any compelling reason to be bullish on it. Even if you accept the narrative that has developed that AI investments are drawing in capital from holders of Bitcoin, which in and of itself is not an absurd take, then you are admitting that while AI might be in a bubble, this very legitimate asset opportunity is overshadowing one with no fundamental value. That does not seem particularly compelling if you ask me. But if you take the data in its entirety, you end up with a picture where markets are becoming increasingly bearish about this faux currency. And at some point, I suspect that this will cause the bottom to truly fall out. This is why I don't have a problem maintaining it as a ‘strong sell’ candidate.