Bitcoin’s Abrupt Price Swings and Institutional Outflows: An In-Depth Analysis of Market Dynamics and Liquidity Challenges

In 2025, the cryptocurrency sector has experienced significant structural changes and mounting liquidity challenges, with positioned at the heart of these developments. A notable shift of institutional investments toward artificial intelligence (AI) infrastructure and advanced computing has paralleled increased volatility in Bitcoin, sparking important debates about its future stability. This report examines how institutional exits and evolving market structures are altering Bitcoin’s liquidity landscape and heightening systemic vulnerabilities.

Institutional Exodus: Shifting Focus from Bitcoin to AI Infrastructure

The traditional foundation of institutional support for Bitcoin has weakened as organizations redirect resources to AI-centric ventures. Leading companies such as

have , converting their energy-efficient facilities for AI training purposes. This transition is fueled by the attractive profits in AI infrastructure, where large-scale operators pay substantial premiums for computational capacity. , global investments in AI startups have exceeded $150 billion since 2024, further motivating this capital shift.

This trend has two major consequences for Bitcoin. First, diverting capital and energy from mining threatens the network’s hash rate and overall security. Second, the departure of major liquidity providers—who once stabilized Bitcoin’s trading environment—has intensified price swings. This pattern is further aggravated by broader economic factors, such as ETF withdrawals and uncertainty around Federal Reserve policies, which have

.

Liquidity Trends: Shrinking Order Books and Heightened Risk

In 2025, Bitcoin’s liquidity indicators point to a concerning decline.

from $20 million at the start of October to just $14 million by mid-November. This reduction signals a broader retreat by market makers, who are increasingly favoring AI-related investments over cryptocurrencies. Ether has seen a similar drop, with its order book depth falling to $6 million, highlighting a widespread liquidity squeeze .

Market activity has also become more concentrated, with a few exchanges handling the majority of trades. Exchanges such as Bitget have

, aiming to strengthen spot, futures, and options markets. Nonetheless, these initiatives have not reversed the decline in institutional involvement. Consequently, even minor macroeconomic developments—like changes in Fed policy or AI industry earnings—can now provoke significant price volatility.

Market Structure: An Increasingly Precarious Environment

The combination of institutional outflows and liquidity challenges has revealed weaknesses in Bitcoin’s market framework.

has not only slowed hash rate expansion but also disrupted the energy dynamics that supported Bitcoin’s security. At the same time, —including Tundra’s dual-token platform—has attracted capital away from Bitcoin by offering investors both governance rights and transparent settlement options.

This dispersal of investment has created a feedback loop: as liquidity drops, volatility rises, which then discourages further institutional participation.

by shifting regulations and the rise of AI-driven cyber threats, both of which increase risks for digital assets.

Investment Perspective: Adapting to a Transformed Market

Investors in 2025 must rethink their risk management approaches. Although Bitcoin still plays a central role in digital asset portfolios, its liquidity issues require strategies to manage increased volatility. Alternatives like XRP Tundra, with clear token structures and cross-chain features, could provide new opportunities for yield and governance

. However, the growing dependence on AI infrastructure across the market suggests Bitcoin’s status as a value store may be at risk unless institutional liquidity is restored.

In the near future, Bitcoin’s price is expected to remain highly responsive to macroeconomic trends and developments in the AI sector. Over the long term, its durability will hinge on how well it adapts to a market increasingly shaped by AI-focused capital flows.

Summary

The volatility seen in Bitcoin during 2025 reflects deeper, ongoing changes in the market’s structure. The movement of institutional funds toward AI infrastructure, along with shrinking order books, has produced a fragile environment where liquidity risks are pronounced. While innovations like XRP Tundra’s dual-token approach may broaden investment strategies, the main challenge remains rebuilding institutional trust in Bitcoin’s market. For now, Bitcoin continues to represent a high-risk, high-reward asset in a rapidly changing financial landscape.