What caused the crypto market to plummet again? Where is the bottom?

Deng Tong, Jinse Finance

February 5, 2026, the cryptocurrency market experienced another sharp decline.

As of press time, BTC was trading at $70,625.34, down 7.6% in the last 24 hours; ETH was trading at $2,091.91, down 7.9% in the last 24 hours; BNB was trading at $690.47, down 9.5% in the last 24 hours; XRP was trading at $1.43, down 10.6% in the last 24 hours; and SOL was trading at $90.64, down 6.9% in the last 24 hours.

I. Analysis of the Reasons for the Crypto Market Crash

1. Market Participation is Far Lower Than Before

According to CryptoQuant's latest weekly report, the institution attributes Bitcoin's weakness to structural rather than cyclical factors, with its bullish rating index at zero, and Bitcoin's trading price far below its October peak. The report believes that the market is no longer digesting gains, but is facing a shrinking buyer base and tightening liquidity. Glassnode's data also confirms this, indicating weak spot trading volume, a demand vacuum, and selling pressure that has not been sustained. In fact, the problem is not panic, but market participation. Liquidity conditions are also turbulent. The expansion of stablecoins, which usually stimulate risk appetite and trading activity, has stalled, and USDT's market capitalization has experienced negative growth for the first time since 2023.

2. Severe Selling Pressure

1) BTC

Coinbase Premium Gap (a metric for measuring institutional investor demand for Bitcoin relative to retail investor demand) has fallen to its lowest level in over a year—an analyst says this suggests that professional investors may be selling off Bitcoin.

(Coinbase Premium is the price difference between Coinbase's BTC/USD trading pair and Binance's BTC/USDT trading pair.) Analyst Darkfost believes: "Selling pressure from institutional investors is intensifying; in other words, increased selling pressure from institutional investors is causing prices to fall and creating a negative gap." Coinbase Premium's volume-weighted hourly price has fallen to a yearly low. Source: CryptoQuant

According to CryptoQuant data, the Coinbase premium gap is currently at -167.8, the lowest level since December 2024. The downward trend indicates that whales are continuing to sell tokens at a lower premium. The Coinbase premium gap has been narrowing since the market downturn in mid-October, and the rate of decline has accelerated in the past week.

Coinbase Premium Gap has fallen to its lowest level since 2024.

Onchain analyst Boris points out that Cumulative Volume Difference (CVD) data shows that sell orders continue to dominate the market, especially on Binance, where derivatives CVD has approached -$38 billion over the past six months.

Analyst Axel Adler Jr. notes that exchange reserves have increased from 2.718 million Bitcoins to 2.752 million Bitcoins since January 19th. The analyst warns that if reserves continue to grow and exceed 2.76 million Bitcoins, it could exacerbate selling pressure. He also states that a full-blown market crash has not yet occurred, and this could happen at lower price levels.

It's not just whales; ETF selling pressure is also intensifying.

CryptoQuant points out: "Institutional demand has substantially reversed." US spot ETFs that bought over 46,000 Bitcoins last year will become net sellers in 2026, selling 10,600 Bitcoins, creating a "56,000 Bitcoin demand gap by 2025 and exacerbating ongoing selling pressure." In the past week, spot Bitcoin ETFs saw outflows of $1.2 billion.

CryptoQuant points out: "Institutional demand has substantially reversed."

2) ETH

Misfortune never comes singly. Just when ETH seemed to have reached its lowest point, Vitalik was still selling tokens… According to Onchain Lens monitoring, in the past three days, Vitalik Buterin (0xfEB0...03B2) sold 2,779 ETH at $2,238 each, for a total value of $6,220,000, possibly as part of a “donation program.”

On February 3rd, Vitalik posted that “L2 is no longer a necessity,” and that L2 should be repositioned, no longer merely pursuing scaling, but providing unique additional functions, such as privacy-dedicated virtual machines, application-specific efficiency, extreme scaling, non-financial application design for social/identity/AI, and low latency or built-in oracles. This has cast a shadow over the future prospects of many L2 projects.

3) Yi Lihua no longer insists on being bullish

On February 2nd, Yi Lihua, founder of Liquid Capital (formerly LD Capital), posted on social media: As the person under the most pressure on the entire internet right now, I must first admit that it was indeed a mistake to be bullish on ETH too early after clearing out my positions at the top, because BTC was around 100,000 while ETH was consistently around 3,000, which we believed was undervalued. Currently, the previous round of profits has been retraced, and position size determines strategy. Under the premise of controlling risk, we will continue to wait for the market to move upward.

On February 5th, Yi Lihua posted again: I entered the cryptocurrency circle in 2015, mining BTC, buying ETH, and investing in projects, catching up with that golden age. This is the reward for continuously going long. However, the subsequent bear market resulted in huge investment losses, and I couldn't withstand the bear market, so I cleared out my BTC positions prematurely, ultimately missing the bull market after March 12th. This is the consequence of being bearish. We have experienced two bull markets after bear markets, so this time, after escaping the top, I am relatively confident that buying the dip too early is wrong. Under the premise of controlling risk, we will continue to wait.

4. Policy Direction Remains Uncertain
Trump has long been dissatisfied with Powell and has consistently hesitated on his choice for the next Federal Reserve chairman. These political factors further complicate the policy direction. Trump recently spoke to the media about his Fed chairman nominee, Kevin Warsh, stating that if a Fed chairman wanted to raise interest rates, "he simply wouldn't get the job." This statement undermined previous optimism about the central bank's independence. Trump stated that the Fed is theoretically an independent institution, but he also implied that the Fed should follow his guidance because he believes he understands the economy better than almost anyone else. There is little doubt that Trump believes interest rates will soon be lowered. When pressed on why he was so certain, he said, “I just think interest rates will go down. I mean, they’re supposed to be lower.” “Our interest rates are too high, you know?” Trump said. “Our interest burden is too heavy. Now, with me—I’ve always been good at handling money—plus a steady stream of money flowing into our country, we’re a rich country again. We do have debt, but we also have growth, and growth will soon make the debt seem insignificant.” 5. The US Stock Market is in a Slump The US stock market is experiencing an identity crisis, attracted by strong earnings expectations on one hand, and plagued by fears of an artificial intelligence bubble on the other. John Praveen, managing director and co-chief investment officer of Paleo Leon in Princeton, New Jersey, points out, “People are genuinely worried that AI investments will eat into the market share of software companies,” hitting the core of the tech stock sell-off. People fear that massive capital expenditures will become a bottomless pit. Fawad Razaqzada of Forex.com points out that people are worried that "the AI ​​theme may not bring the expected immediate profits." Even strong profit performance cannot quell market panic. For example, the stock prices of companies like AMD, despite exceeding expectations, still plummeted by more than 12%, again indicating that their valuations are overvalued. The sharp decline in US tech stocks became a "catalyst" for the decline in the crypto market, while the leverage liquidation in the crypto market further amplified the volatility of global risk assets. II. What do analysts say? Matt Hougan, Chief Investment Officer of Bitwise, points out that the "crypto Twitter circle" has only just realized that cryptocurrencies are in the midst of a "full-blown crypto winter." “We’ve been in a cryptocurrency winter since January 2025. It’s quite possible we’re closer to the end of the winter than it began.”

K33 Analysis indicates that Bitcoin has fallen about 40% from its all-time high, a pattern resembling the downward phases of the past four years, raising concerns about a repeat of the bear market.

Ethereum reverse cup and handle pattern. Source: TradingView

• Georgii Verbitskii, founder of the cryptocurrency investment application TYMIO: "One of Bitcoin's core tenets—its ability to reliably hedge against fiat currency inflation—is being questioned in the short term. While gold and other precious metals continue to rise, Bitcoin's price action is the opposite, and this divergence is significant." This has led long-term Bitcoin holders to reassess their positions.

Ethereum reverse cup and handle pattern. Source: TradingView

• Georgii Verbitskii, founder of the cryptocurrency investment application TYMIO: "One of Bitcoin's core tenets—its ability to reliably hedge against fiat currency inflation—is being questioned in the short term. While gold and other precious metals continue to rise, Bitcoin's price action is the opposite, and this divergence is significant." This "This doesn't mean Bitcoin's long-term investment logic has failed, but it does indicate a weakening of confidence in Bitcoin's role as an inflation hedge." The current downtrend "still has room to fall further: if this pullback continues, the possibility of prices dropping to the $60,000 area cannot be ruled out. This would make this year more like a correction phase like in 2018 or 2022, rather than a continuation of a strong uptrend." Market analyst Scient: Bitcoin is unlikely to form a bottom in a day or a week. A sustained market bottom may require two to three months of consolidation near major support areas, and longer-term indicators should be consulted for confirmation. Scient points out that it's unclear whether this structure will form in the high-$60,000 range or the low-$50,000 range, and analysts emphasize that these scenarios are hypothetical, not predictions. Bitcoin trader Mark Cullen believes that from a broader macro perspective, Bitcoin prices could fall to $50,000, but after Bitcoin broke below its weekly low of $74,000 on Tuesday, a short-term rebound to a local support level ($89,000 to $86,000) is expected. Cryptocurrency education resource Coin Bureau CEO Nic Puckrin: "Our current trading price is in line with our strategy cost price, close to the April low of $74,400. If it breaks below that level, the next key level is $70,000, slightly above the previous all-time high of $69,000. A break below this level would mean we're hitting a bear market low. The area to watch is $55,700 to $58,200. This area lies precisely between the average trading price of all cryptocurrencies and the 200-week moving average. This should be the bottom." Trader BitBull: "Currently, the 200-week moving average is at... "$68,000 is likely to be tested again. Once that happens, you can start building a long position." Cryptocurrency analyst BitcoinHabebe: Bitcoin's head and shoulders pattern target of $60,000 is "obvious" due to numerous macroeconomic headwinds. Analyst 0xLanister: "Bitcoin will fall to $40,000." Analyst Merlijn Trader: "Bitcoin bear flag pattern confirmed" as the last support level of $78,000 failed to hold. "The next support level is $65,500." John Haar, Managing Director of Bitcoin financial services firm Swan Bitcoin, stated that this decline is a "common" characteristic of the digital asset. "Just less than four months ago, Bitcoin hit an all-time high of $125,000, and nothing has changed our long-term investment logic for Bitcoin." He attributed the sell-off to macroeconomic factors, including President Trump's nomination of Kevin Warsh as Federal Reserve Chairman, the impact of the elimination of leveraged traders, and geopolitical tensions. Tiger Research Senior Analyst Ryan Yoon: “The current situation is clearly unfavorable. Bitcoin has reacted negatively to both macroeconomic tailwinds and headwinds and seems to be increasingly marginalized.” Bitcoin has “entered oversold territory, and its value as an alternative asset will emerge once liquidity truly returns to the market. February is expected to be a challenging month.” Kronos Research Chief Investment Officer Vincent Liu: Even a dip below $72,000, even if only temporarily, will not break the more bullish view, but it would prolong the pullback and push the market into a phase requiring patience rather than an immediate continuation of the upward trend. The sell-off is likely to “gradually subside” as leverage “tightens without further declines, ETF outflows slow, and spot demand absorbs supply.” Signs of this shift include leverage stabilizing and price stability during sell-offs or negative news releases.