Bitcoin's February Flow: Prediction Market Odds, Capital Flows, and Liquidity Metrics

The market is pricing in a high-probability bounce. As of earlier this week, prediction markets on Polymarket showed a 64% chance of a major legislative breakthrough for the CLARITY Act, a key crypto market structure bill. This figure represents a recent pullback from a peak of 72% odds earlier in the month, highlighting the volatile sentiment around this critical policy development.

That optimism is directly tied to the brutal price action that preceded it. The 64% probability for a legislative win comes on the heels of a drawdown of more than 50% from Bitcoin's October highs to around $60,000. The prediction market's high conviction in a policy-driven rebound raises the central question: is this market sentiment supported by actual capital flows, or is it a lagging indicator of a potential bottom?

The early data on accumulation suggests a shift is underway. Glassnode's metrics show broad-based accumulation across nearly all wallet cohorts for the first time since late November. This synchronized buying, particularly from mid-sized wallets stepping in during the dip, indicates that capital may be flowing into the asset as sentiment turns. The setup now hinges on whether this real capital flow can validate the prediction market's 64% bet and drive prices toward the $75,000 level.

Institutional Capital Flows: The Sell-Off and Early Accumulation

The capital flow picture shows a stark, negative signal from institutional players. For 21 straight days leading into the crash, Bitcoin traded at a premium of -$167.8 on Coinbase versus offshore exchanges. That's the most negative reading in a year and a clear sign that US institutions were aggressively selling into the dip while global retail traders tried to catch it. This persistent negative premium revealed a market where structural demand from hedge funds and ETFs had already begun to unwind.

That institutional selling pressure is now giving way to a synchronized accumulation phase. Glassnode's data shows the Accumulation Trend Score by cohort has climbed above 0.5, reaching 0.68. This marks the first broad-based accumulation since late November, a period that previously coincided with a local bottom. The most aggressive dip buying has come from mid-sized wallets holding between 10 and 100 BTC, stepping in as prices fell toward $60,000.

The shift from negative premium to potential stabilization is critical. It suggests that the brutal capitulation event may be evolving into a more synchronized accumulation phase. While the early data shows broadening buying, the market's ability to hold above the $60,000 level will depend on whether this mid-sized wallet buying can be sustained and eventually validated by a reversal in the institutional flow that drove the initial sell-off.

Liquidity Metrics: Stablecoin Yields and Basis Trade Activity

The underlying liquidity conditions reveal a market where capital has been exiting, not just rotating. The most telling sign is the loss of nearly $14 billion in stablecoin market cap from December through February. This isn't just a shift between crypto assets; it represents a significant outflow of capital from the ecosystem as investors redeemed stablecoins for dollars. The scale of this exit underscores the severity of the capitulation.

This capital flight was directly tied to the collapse of a major hedge fund strategy. The basis trade-buying spot Bitcoin via ETFs and shorting futures to capture the price difference-saw its annualized yield plunge from 17% to less than 5%. When the math stopped working, the arbitrage opportunity vanished, prompting funds to unwind their positions. This exodus of sophisticated, low-risk capital created a vacuum that the earlier institutional selling on Coinbase only deepened.

The key watchpoints for a sustained recovery are now clear. First, the price must hold above the critical $70,000 level, which it briefly broke earlier this week. Second, the market must see a narrowing of the negative Coinbase premium as institutional selling pressure eases. These two metrics-price stability and a reversal in the institutional flow-will confirm whether the broad-based accumulation now underway is the start of a durable bottom or just a temporary pause in a deeper capitulation.