Bitcoin Drops 2% as Altcoins Slide; Traders Blame ETF Unwinding for Market Sell-Off
Bitcoin (BTC) started the week with a 2% decline, dragging the broader crypto market down as major altcoins tumbled up to 5%, according to CoinDesk Indices data.
BTC faced resistance at $84,000 on Sunday, failing to break through for a potential upside move. As of Monday afternoon in Asia, it hovered around $83,300.
Altcoins Take a Hit, Except for BNB
The downturn extended to top altcoins, with Solana (SOL), Cardano (ADA), XRP, and Dogecoin (DOGE) losing up to 5%. However, BNB Chain (BNB) stood out as the only major asset in the green, gaining 3%.
Market Woes: Tariffs and Recession Fears Weigh on Sentiment
Crypto markets have struggled to recover after last week’s sell-off, driven by concerns over U.S. tariffs and worsening macroeconomic conditions. Many traders now worry that Trump’s tariff policies could tip the U.S. into a recession, adding further volatility to crypto markets due to their close correlation with U.S. equities.
Despite the downturn, some analysts expect altcoins and memecoins to see increased volatility in the coming days.
“Altcoin trading volumes are rising after Trump’s World Liberty Financial acquired MNT and AVAX—especially since AVAX was included in VanEck’s ETF application,” said Nick Ruck, director at LVRG Research, in a Telegram message. “This suggests traders may rotate into altcoins for better short-term gains compared to Bitcoin or Ethereum.”
ETF Unwinding and Multi-Strat Hedge Fund Strategies Behind Sell-Off
Traders believe the recent market dip may be tied to ETF and spot market unwinding.
“The prevailing view is that the sell-off is largely driven by multi-strat hedge fund strategies that have dominated the macro space,” said Augustine Fan, Head of Insights at SignalPlus, in a message to CoinDesk.
Multi-strategy (multi-strat) trading involves hedge funds employing diverse tactics—such as arbitrage, long-short positions, and leverage—to optimize returns across various asset classes.
For Bitcoin, a common multi-strat trade is the basis trade, where funds buy spot BTC (often through ETFs) while shorting BTC futures to profit from price spreads. When this trade becomes less profitable due to tightening spreads, funds exit their positions—dumping Bitcoin and ETF shares simultaneously, which can accelerate a sell-off.
This selling pressure was further amplified by tariff-related market turbulence last week.
‘Buy the Dip’ Sentiment Still Strong
Despite the sell-off, bullish sentiment remains intact.
“Equity valuations, outside of large caps, are still reasonable by historical standards. Plus, economic hard data is likely to outperform deteriorating soft data,” Fan added. “So the market consensus is that this remains a ‘buy the dip’ opportunity as we navigate tariff-driven volatility.”
