Bitcoin drops 17% over seven days, Ethereum crashes 22%, marking "the worst week since FTX" as the total cryptocurrency market cap evaporates $400 billion.

This week, Bitcoin dropped 17%, Ethereum fell 22%, marking the largest weekly decline since the FTX collapse in November 2022, with the total crypto market capitalization evaporating about $70k.
(Background: MicroStrategy Strategy sold 32 BTC for the first time! MSTR pre-market drops 5%, breaking the "never sell coins" myth)
(Additional context: BTC falls below $70k! Bitcoin spot ETF has lost $3.5 billion over 11 days, setting a record! Strategy's coin sales trigger panic)

Table of Contents

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• Strategy's first sale of Bitcoin
• ETF funds exit, destination is AI
• Zcash plummets: AI uncovers a fatal flaw in privacy protocols
• Strong non-farm payroll data, rate hikes become an option again

This week, the crypto market delivered a troubling report card: Bitcoin (BTC) declined 17 over the week, currently around $61k; Ethereum (ETH) dropped 22%, to about $1,560, marking the worst weekly performance since the FTX collapse in November 2022. The total crypto market cap evaporated nearly $400 billion, down to about $2 trillion, less than half of the nearly $4.2 trillion peak last October.

While the exact reasons are hard to pinpoint, four negative signals simultaneously triggered this week, indeed intensifying market volatility.

Strategy's First Sale of Bitcoin

First, Michael Saylor’s Strategy disclosed for the first time in an SEC filing that it sold Bitcoin over the past four years, though only 32 coins, worth about $2.5 million. Compared to the company’s holdings of over 500k coins, this is negligible, but it breaks the myth of the company’s "never sell" stance.

Strategy’s Bitcoin buying narrative has long been a key anchor of institutional confidence. Once this "never sell" promise shows its first crack, investors immediately start calculating: Do the company’s preferred stock obligations, convertible debt structures, and holding costs imply more selling pressure to come? The conclusion remains unclear, but the market won’t wait for certainty to be priced in.

ETF Funds Exit, Destination is AI

Bitcoin spot ETF holdings continued to decline this week. Vetle Lunde, head of K33 Research, pointed out in commentary that some of the outflow reflects active asset reallocation by institutions, shifting funds from cryptocurrencies toward AI sectors.

The anticipated IPOs or private rounds of companies like OpenAI, Anthropic, and SpaceX are actively competing for what might have otherwise flowed into digital assets. More concerning is that this competitive relationship isn’t short-term; the AI capital cycle may be entering its most capital-intensive phase.

Zcash Plummets: AI Finds a Fatal Flaw in Privacy Protocols

The most dramatic asset decline this week was Zcash (ZEC), known for its privacy features, which once dropped over 50%. The trigger was a report revealing that researchers, using Anthropic’s latest AI model, successfully discovered a serious vulnerability in Zcash’s privacy system.

The symbolic significance of this case far exceeds Zcash’s market cap impact. If AI can systematically scan and break cryptographic protocol assumptions, the entire "privacy coin" category’s technological moat faces reassessment, prompting the market to run first and ask questions later.

Strong Non-Farm Payroll Data, Rate Hikes Reconsidered

On the other hand, the US non-farm payroll data released on Friday exceeded market expectations, once again challenging the recent consensus that the Federal Reserve would cut rates by 2026. Bond yields surged, and the Nasdaq 100 suffered heavy losses.

A strong employment market is generally a sign of a healthy economy, but in the current context, it suggests that the pace of inflation cooling may be slower than expected, and the likelihood of rate hikes is being re-priced. The high-interest-rate environment is a structural headwind for high-risk assets, and the crypto market, being liquidity-sensitive, is naturally among the first to be affected.