Crypto markets fracture as liquidity islands and capital dispersion emerge amid broad selloff: analysts

Despite a sharp selloff where Bitcoin dropped over 17% in a week, analysts observe that the market's key feature is fragmentation rather than a decisive directional reset. This fragmentation manifests as "liquidity islands," where capital is unevenly distributed across exchanges, causing funding rates to spike on some venues while turning negative on others, according to Axis analysts. On-chain data from Nansen shows a split in positioning, with some platforms exhibiting a net long bias while others see rotations toward stablecoins or tokenized gold. Capital dispersion is also evident in product flows, with Bitcoin and Ethereum ETPs seeing redemptions while Solana and XRP products attracted inflows. Furthermore, some assets like Hyperliquid's HYPE token rose significantly during the downturn. Experts suggest this dislocation, where even gold briefly showed higher realized volatility than Bitcoin, might precede a decisive move, as indicated by historically tight Bollinger Bands on Bitcoin's monthly chart.

(Source：The Block)