On the morning of February 2nd, Bitcoin, the world's largest cryptocurrency, plummeted below $76,000 per coin, marking a decline of approximately 40% from its 2025 peak. As of this writing, Bitcoin had slightly recovered to $77,746.86.
Market tracking data from Coinglass revealed that over 160,000 traders globally were liquidated during the same period.
The cryptocurrency market experienced a severe "bloodbath" on the 1st. Bitcoin led the decline with an intraday drop exceeding 7%, briefly touching a low of $76,000. Ethereum, the second-largest cryptocurrency, plunged over 11%, reaching a low of $2,256. The total value of liquidated contracts across the crypto market surpassed $2.5 billion, impacting a staggering 420,000 traders, with over 90% of these being long positions.
Brian Jacobsen, Chief Economist at a US wealth management firm, suggested that we might witness further cryptocurrency selling in the coming days.
Crucially, unlike the downturn in October of last year, this sharp Bitcoin decline was not triggered by an obvious catalyst or systemic shock. Instead, it stemmed from weakening demand, thin liquidity, and its decoupling from broader markets. Previously, Bitcoin failed to react substantively to geopolitical tensions, a weaker US dollar, or rallies in traditional safe-haven assets. Even amid significant volatility in gold and silver prices in recent weeks, Bitcoin did not attract capital inflows. In other words, this sell-off was not driven by panic but by a lack of buyers, momentum, and confidence. Analysts summarized that Bitcoin is currently being hit hard on three fronts: price, (market) correlation, and confidence.
Simultaneously, market concerns arose following the nomination of Wash as the next Federal Reserve Chair, fearing he might tighten cash within the financial system, thereby pressuring the crypto market. The Fed's decisions are critically important for cryptocurrencies, which often exhibit "risk-on" characteristics. When interest rates are high, safer-yielding assets like US Treasuries become more attractive, diverting funds away from volatile assets like crypto. Conversely, lower rates increase system liquidity and encourage a shift towards higher-risk investments. Furthermore, a stronger US dollar, typically associated with Fed tightening, has historically pressured Bitcoin prices.
Shadi El Damaty, CEO and Co-founder of Holonym, pointed out that Wash is widely perceived as more hawkish than the incumbent Chair Powell and has previously criticized quantitative easing and the expansion of the Fed's balance sheet. "This has sparked concerns that he could take more aggressive action on interest rates if inflation rises again," Damaty stated, adding that the biggest issue for crypto currently is "uncertainty."
Marcus Thielen, Founder of Singapore-based 10x Research, noted that market expectations of a "hawkish" monetary policy stance from Wash have led cryptocurrencies to be viewed not as a "hedge against currency debasement" but as a "speculative excess asset." Once loose monetary policy concludes, the associated speculative rally tends to recede.
Richard Hodges, Founder of the Ferro BTC volatility fund, also believes the Bitcoin market faces stiff capital competition. Hodges mentioned that he has warned some major Bitcoin holders to be patient. "I explicitly told them not to expect to see Bitcoin reach new all-time highs within the next 1,000 days," Hodges explained, adding that the resurgence in AI-related stocks and the precious metals market is capturing significant attention. "Bitcoin seems like old news from three years ago."