Between January 29 and 30, Bitcoin plunged from around $87,000 to $81,000 in less than 24 hours—a drop of roughly 7%.
The anticipated rebound never materialized. Instead, the market continued to slide on February 2. According to the latest data from Gate, BTC briefly fell to around $74,500 earlier today before recovering slightly to $77,000.
01 Market Overview: More Than Just a Price Correction
The cryptocurrency market in early February 2026 experienced turbulence far beyond a typical correction. Based on early trading data from February 2, Bitcoin dipped below $75,000 before bouncing back to around $77,746.86.
This decline represents a roughly 40% drop from Bitcoin’s 2025 peak. More concerning, there was no sign of panic buying; instead, the market suffered from persistent liquidity shortages.
During this period, more than 160,000 traders worldwide faced liquidations. The previous day saw an even higher figure—420,000 traders—with total contract liquidations exceeding $2.5 billion across the market. The sell-off wasn’t limited to Bitcoin; Ethereum, the second-largest cryptocurrency, also plunged over 11%, briefly touching $2,256.
Market trackers report that since the October 2025 peak, Bitcoin has lost about $800 billion in market capitalization, slipping out of the global top ten assets by value.
02 Liquidity Vacuum: The Amplifier Behind the Sell-Off
Unlike the downturn in October 2025, this Bitcoin crash wasn’t triggered by a single systemic shock. The market lacked enough buyers to absorb the selling pressure, creating a classic liquidity vacuum.
Tiger Research highlighted in its report that trading volumes for both spot and futures Bitcoin markets have been shrinking. In a low-liquidity environment, even moderate shocks can cause excessive price swings.
Traditional markets like equities and commodities often rebound quickly after an initial drop, but Bitcoin failed to follow suit. Analysts point out that Bitcoin is simultaneously suffering in terms of price, market correlations, and investor confidence.
A critical technical indicator was breached—Bitcoin fell below the "active realized price" near $87,000. This metric represents the average cost basis of active market participants. Once broken, most active traders are underwater, intensifying selling pressure.
03 Dual Shocks: The Combined Impact of Traditional Finance and Policy Uncertainty
This sell-off was fueled by two interrelated shocks that amplified market volatility.
First, weakness in tech stocks spilled over into crypto. Microsoft’s disappointing Q4 earnings raised concerns about overheated AI investments, causing the Nasdaq to tumble.
As a high-risk asset, Bitcoin reacted sharply. This underscores how Bitcoin’s correlation with traditional tech stocks strengthens during periods of stress.
Second, policy uncertainty arose from changes at the Federal Reserve. Rumors circulated that President Trump is preparing to nominate Kevin Warsh as the next Fed Chair.
Warsh is viewed as a hawk, having consistently opposed quantitative easing during his tenure as a Fed governor from 2006 to 2011. The market fears that, if appointed, Warsh could tighten financial system liquidity.
04 Leverage Liquidations: Fueling the Downward Spiral
Excessive leverage in the market further intensified the decline. According to Coinglass, over $2.5 billion in crypto contracts were force-liquidated on February 1 alone, with more than 90% being long positions.
This forced selling creates a vicious cycle: price drops trigger liquidations, which lead to further selling, causing even more liquidations. Glassnode data shows Bitcoin has now fallen below its "True Market Mean" (currently at $80,500)—the first time in 30 months.
Historically, losing this key technical level often signals a transition from a bull market to a mid-term bear phase.
05 Institutional Perspectives: Short-Term Pressure and Long-Term Divergence
Amid the turmoil, investor behavior varies sharply by scale. Glassnode data reveals that small investors holding fewer than 10 BTC have been selling steadily for over a month.
In contrast, "super whales" holding more than 1,000 BTC have quietly accumulated coins, absorbing the panic selling from retail traders. However, these large purchases haven’t been enough to drive prices higher, highlighting weak buying interest in the current market.
Some analysts warn that the current downturn echoes the crypto winter of 2022, and if the speculative bubble bursts completely, further declines may follow. The CEO of CryptoQuant notes that buyer liquidity for Bitcoin has dried up, and the flattening realized market cap confirms that the fresh capital needed to sustain a bull run has vanished.
06 Outlook: Recovery Paths and Potential Turning Points
Despite short-term challenges, certain structural factors continue to support Bitcoin’s long-term prospects. Tiger Research points out that crypto-friendly regulatory policies are becoming more concrete.
Allowing cryptocurrency investments in 401(k) retirement accounts could unlock up to $10 trillion in potential inflows. Additionally, rapid progress in digital asset market structure legislation is a positive sign.
From a monetary policy perspective, even if Warsh becomes Fed Chair, the central bank is expected to maintain a gradual easing bias. In his Wall Street Journal columns, Warsh has advocated for a middle ground: limited rate cuts combined with balance sheet reduction.
For market participants, patience may be essential at this stage. The CryptoQuant CEO suggests that the market may be forced into a "wide consolidation range" until a new bottom is established.
Outlook
When the Bitcoin price briefly fell below $75,000 on February 2, "super whales" holding more than 1,000 BTC quietly started accumulating, absorbing the coins panic-sold by retail investors. These large-scale purchases act like deep ocean currents—while they haven’t immediately calmed surface volatility, they hint at a fundamental repositioning beneath the waves.
Meanwhile, winter storms in the US caused daily Bitcoin mining output to plunge from 70–90 coins to just 30–40, with hash rate and price fluctuations resonating in tandem across the energy markets. The market is searching for a new equilibrium, and when liquidity finally returns, those who held firm through the storm may define the next cycle’s landscape.
