Bitcoin has experienced a significant price drop, resulting from the confluence of multiple negative factors including deteriorating macroeconomic conditions, reversed capital flows, fragile market structure, and the breakdown of its narrative logic. This also directly reflects the increasing interconnectedness between the cryptocurrency market and global financial markets.
Global financial markets witnessed a rare, cross-asset collective selling frenzy. With multiple bearish factors converging, market risk appetite plummeted to a freezing point. Precious metals, U.S. stocks, the AI sector, and cryptocurrencies declined simultaneously. Among them, the market bellwether Bitcoin saw an especially severe drop, falling nearly 50% from its historical high.
During the U.S. trading session on February 5th Eastern Time, the sell-off in global risk assets spread. The cryptocurrency market led the way into a deep correction, after which risk sentiment quickly transmitted to stock markets, precious metals, and crude oil markets, forming a pattern of synchronized decline across all markets.
According to Coinbase data, Bitcoin's decline widened to 12.81% that day, hitting a low of $63,860.8 per coin. On February 6th, Bitcoin once fell to $60,033, setting a new low for 2024 and accumulating a drop of over 52% from its historical high of $126,000 recorded in October 2025. Although Bitcoin had rebounded slightly to $65,605 at the time of writing, market panic had not been effectively alleviated, and the overall downtrend continued.
Bitcoin's decline directly triggered a collective slump across the entire cryptocurrency market. Major tokens all experienced significant drops: Ethereum fell 13.1% intraday, Dogecoin dropped over 14%, and BNB declined over 12%. All major cryptocurrencies saw declines exceeding 10%, with more niche tokens experiencing even sharper adjustments. Accompanying the sharp price drop, the total market capitalization of the crypto market shrank from a peak of $2.48 trillion to $1.27 trillion, evaporating over $1.2 trillion within four months—a record loss in market value.
High leverage acted as a significant amplifier for this decline, leading to a concentrated release of accumulated leverage risk. Data from CoinGlass showed that within 24 hours from February 5th to 6th, over 430,000 traders globally faced liquidations, with total liquidation amounts reaching $2.069 billion, approximately RMB 14.4 billion. Over 90% of these were leveraged long positions.
The downturn in the crypto market also quickly spread to related listed companies and financial products. MicroStrategy Inc., which holds a substantial amount of Bitcoin, saw its stock price fall over 17% in a single day. The company reported a net loss of $12.4 billion in the fourth quarter of 2025 due to the decline in its Bitcoin holdings' market value. The Bitcoin price also fell below the company's cumulative cost basis for its holdings for the first time since 2023. Simultaneously, crypto-themed ETFs experienced large-scale capital outflows. Bloomberg data indicated that over $740 million flowed out of more than 140 crypto-themed ETFs on February 5th alone, with cumulative net outflows nearing $4 billion over the past three months. Data from CryptoQuant showed that the average cost basis for U.S. spot Bitcoin ETF holders is approximately $84,100 per coin, meaning a large number of investors are currently holding unrealized losses at the current price level.
"We are witnessing the end of an old era for the Bitcoin market and the difficult beginning of a new one," said Tang Bo, Director of the Financial Research Institute at the Hong Kong University of Science and Technology. He suggested that Bitcoin's sharp decline is not merely a technical correction but a signal of an important shift in the market's internal structure. Superficially triggered by changes in macro policy expectations and cascading liquidations of leveraged positions, the deeper cause is that institutionalization via ETFs has locked capital into Bitcoin, leading to decreased market vitality and fragile support. Combined with selling pressure from holdings acquired at high levels, this is the inevitable growing pain of the market transitioning towards an institution-dominated model.
Regarding Bitcoin's identity as "digital gold," Tang Bo believes it stems from its fundamental characteristics of being immutable, permissionless, and globally transferable. In the long run, volatility might be a necessary path for Bitcoin to shed its dependence on metaphors from traditional finance and establish its own independent value proposition.
Ding Yuan, Dean of the Newfire Research Institute, also stated that this decline resulted from the resonance of multiple factors including macro conditions, capital flows, and technical aspects. The future market trend will depend on key support levels and core signals from capital flows.
Why did Bitcoin fall so sharply?
This round of Bitcoin's near 50% decline is not a short-term fluctuation caused by a single factor. It is the result of multiple bearish factors resonating: a worsening macroeconomic environment, a reversal in capital flows, a fragile market structure, and the collapse of its narrative logic. It also directly reflects the strengthened linkage between the crypto market and global financial markets.
Ding Yuan pointed out that the collective turbulence in global risk assets set the tone for the crypto market's adjustment. Against the backdrop of a significant drop in silver, sharp declines in the Korean stock market and the Nasdaq index, shifting expectations regarding Federal Reserve policy triggered capital flight from high-volatility assets, putting synchronous pressure on the crypto market. Internally within the crypto market, continuous net outflows from spot ETFs, and the Bitcoin premium index on Coinbase turning negative and widening further, reflect a significant retreat in institutional liquidity and buying power. Forced liquidations triggered by leveraged "whale" positions on the Ethereum blockchain, combined with the concentrated triggering of programmed stop-loss orders, created a chain reaction driving the decline. Technically, after Bitcoin broke below the key support level of $74,000, the decline accelerated. It is currently in a severely oversold state in the short term, suggesting a potential technical rebound. The primary support level is at the $60,000 mark, with the long-term core support at $58,000. A break below this level could open further downside.
Specifically, increased uncertainty in the global macroeconomic environment served as the core trigger for this cross-market selling frenzy. Persistent uncertainty surrounding the Federal Reserve's policy direction significantly intensified market concerns about liquidity. Comments from former President Trump, nominating Kevin Warsh—known for a hawkish stance prioritizing "balance sheet reduction over interest rate cuts"—for Fed Chair, and stating that a Fed Chair advocating rate hikes would not get the position, not only weakened market optimism about central bank independence but also cooled previous expectations for rate cuts. This fueled expectations for tighter global liquidity, putting valuation pressure on all kinds of risk assets.
Bitcoin's price movement is highly correlated with U.S. financial market liquidity. Citigroup research data shows its price is highly correlated with changes in U.S. bank reserves and the Fed's balance sheet. Concerns about Fed balance sheet reduction directly suppressed the valuation of high-risk assets like cryptocurrencies, becoming a key macro driver for this Bitcoin decline.
A substantive reversal in capital flows is the core internal factor pressuring Bitcoin's price. The continued withdrawal of institutional capital from the crypto market has become a major source of selling pressure. Deutsche Bank data shows that U.S. spot Bitcoin ETFs saw outflows of $7 billion, $2 billion, and $3 billion in November-December 2025 and January 2026 respectively, with a single-week outflow of $1.2 billion in the past week. U.S. ETFs, which bought 46,000 Bitcoins in the same period last year, have turned into net sellers in 2026.
A simultaneous decline in retail participation has further exacerbated the market's liquidity drought. A Deutsche Bank survey showed the U.S. consumer cryptocurrency adoption rate dropped from 17% in July 2025 to 12% currently. The departure of retail investors further weakened buying power. Glassnode data indicates persistently weak spot trading volume in the crypto market, creating a demand vacuum where existing selling pressure cannot be continuously absorbed. Concurrently, the expansion of stablecoins, which usually stimulates market risk appetite, has stalled. The market capitalization of USDT has seen negative growth for the first time since 2023, tightening market liquidity and further amplifying the decline.
The inherent structural fragility of the crypto market was magnified during this crash, with forced liquidations of leveraged positions becoming a significant driver. Before the crash, the market had accumulated a large number of leveraged long positions. As Bitcoin successively broke below key support levels at $74,000, $70,000, and $65,000, it triggered layered stop-loss orders in the market, ultimately forming a cascading sell-off where longs were forced to sell.
"The current shrinkage in crypto market liquidity and activity has shaken the foundation of the traditional retail-driven bull market. Institutions are also net sellers of Bitcoin at this stage, but this is a tactical risk control operation, not a denial of Bitcoin's long-term value. There are no signs of systemic industry risk; this decline is just a squeeze of泡沫 after the liquidity recedes. The long-term trend of institutionalization remains unchanged," Tang Bo stated.
What lies ahead for the cryptocurrency market?
Bitcoin's significant decline in 2026, coupled with the synchronized downturn in global risk assets, has created divergence regarding the future direction of the crypto market. Debate over whether the market has entered a bear phase is intensifying.
Some analysts and institutions believe the crypto market has formally entered a bear market, with a substantial rebound unlikely in the short term. Other views suggest the market has entered oversold territory and may see a technical rebound shortly, although the bottoming process will still require time. The $60,000 level has become a key short-term threshold for Bitcoin. Its subsequent trajectory will depend on deleveraging, capital returning, regulatory developments, and marginal changes in the macro environment. Stabilization in global risk assets will also provide crucial support for the crypto market.
Citigroup Research issued a warning of a potential crypto market winter. Its data indicates that 20% corrections in Bitcoin are relatively common, but the current 52% drop from its high is approaching levels critical for a crypto winter. Historically, corrections exceeding this level have been accompanied by bear markets lasting years with substantial losses. While this is not Citigroup's base case scenario, historical precedent keeps investors highly vigilant.
Some institutions and analysts maintain a cautiously optimistic stance, believing Bitcoin is now oversold and may experience a technical rebound in the short term. Although the bottoming process requires time, they argue the long-term investment logic for cryptocurrencies has not fundamentally changed. Once deleveraging is complete, ETF outflows slow, and spot demand begins to absorb market supply, selling pressure will gradually subside, potentially paving the way for a rebound.
Ding Yuan provided a phased outlook for the crypto market. In the short term (one to two weeks), a technical rebound is possible, with resistance expected between $65,000 and $68,000. However, without the return of institutional capital and full clearance of leverage risks, the sustainability of any rebound would be weak. In the medium term (one to three months), $58,000 will be a critical level for market stabilization. Holding above this level could allow the market to enter a bottoming phase, while a break below might trigger a second leg down. Future market movements need to be closely tracked through ETF flow data, Federal Reserve policy动向, and on-chain liquidation volumes. Changes in global macro liquidity and regulatory progress in the crypto industry will be core factors determining the long-term trend of the crypto market.