The digital asset market is grappling with a profound crisis of confidence as Bitcoin (BTC) entered February 2026 by breaching critical support levels, erasing months of institutional gains in a single weekend of ‘extreme fear.’ Following a period of relative stability, the world’s largest cryptocurrency plummeted to a nine-month low of $75,709 (£55,300) on Sunday, 1 February, as a ‘perfect storm’ of hawkish US monetary policy and domestic political instability triggered a massive deleveraging event.
The primary catalyst for the weekend ‘nuke’ was the Friday evening announcement that President Trump had nominated Kevin Warsh to succeed Jerome Powell as Chair of the Federal Reserve. Markets, which had largely priced in a more dovish or ‘pro-crypto’ leadership, reacted with immediate volatility to Warsh’s known hawkish stance on inflation and balance sheet reduction. This policy pivot, combined with the onset of a partial US government shutdown early Saturday, prompted a rapid exit from ‘risk-on’ assets, according to analysis from IndexBox.
The $1.6bn Margin Trap
The price collapse was exacerbated by the thin liquidity characteristic of weekend trading. As Bitcoin slipped below the psychological $80,000 (£58,400) threshold, it triggered a cascade of forced liquidations across major exchanges. According to data from market tracker Coinglass, approximately $1.6 billion (£1.17 billion) in leveraged positions—predominantly long bets—were wiped out within a 24-hour window, with over $111 billion (£81.0 billion) in total market capitalisation evaporating from the crypto sector.
Analysts have noted that this particular crash feels fundamentally different from the ‘panic flushes’ of 2024. Market observers describe a ‘palpable disinterest’ from retail investors, with the Fear & Greed Index plunging to a score of 14—a level of ‘Extreme Fear’ not seen since the aftermath of the FTX collapse. InteractiveCrypto observed that the institutional ‘Trump Trade’ which once drove Bitcoin to £87,600 has now lost its force.
ETF Outflows and the ‘Safe Haven’ Divorce
The weekend’s technical breakdown followed a week of sustained institutional retreats. Nearly $1.5 billion (£1.10 billion) left US spot Bitcoin ETFs in the five days preceding the crash, marking a significant shift in sentiment among Wall Street participants. This ‘de-risking’ was further highlighted by Bitcoin’s failure to act as a hedge during last week’s historic volatility in gold and silver; while precious metals saw trillion-dollar swings, capital did not rotate into digital assets, instead fleeing to the relative safety of the US dollar, as reported by IndexBox.
Industry leaders are now pointing to ‘bruised market structure’ as a primary concern. The lingering trauma from the ’10/10′ liquidation event in late 2025—which saw a $19 billion (£13.9 billion) wipeout—has left order books thin and market depth patchier than in previous cycles. As noted by Fundstrat analysts, the current $76,000 (£55,500) region aligns closely with the cost basis of major corporate holders like MicroStrategy, making this a pivotal ‘line in the sand’ for the remainder of the quarter.
The Road to $70,000?
With the options market shifting heavily bearish, the outlook for February remains precarious. Deribit data shows a massive surge in ‘put’ options (bets on further price declines) at the $75,000 (£54,800) and $70,000 (£51,100) strike levels, with bearish bets now outnumbering the once-dominant $100,000 (£73,000) ‘calls.’
As the US government shutdown continues to cloud the macro environment, the crypto market’s hope for a ‘V-shaped’ recovery rests on the potential passage of the long-delayed market structure bill. Until regulatory clarity arrives, Bitcoin appears destined to remain at the mercy of the Fed’s hawkish new direction.