Mixed Signals Emerge as Bitcoin Faces Liquidations While Institutional Interest Shows Resilience - February 01, 2026

Mixed Signals Emerge as Bitcoin Faces Liquidations While Institutional Interest Shows Resilience - February 01, 2026

Market Overview

The cryptocurrency market experienced significant turbulence this week, with Bitcoin experiencing a sharp decline below $80,000 following what appears to be a major liquidation cascade. The flagship cryptocurrency fell to a nine-month low of around $76,000-$77,000, triggering over $2.5 billion in total liquidations across the market. This dramatic price action was accompanied by substantial outflows from spot Bitcoin ETFs totaling approximately $1.5 billion over five trading days, while Ethereum ETFs saw additional outflows of $327 million.

Despite the bearish price action, several technical indicators and market analysts suggest the current conditions may represent extreme fear levels that historically precede market rebounds. The Bitcoin MVRV Z-Score has reached record lows on a rolling two-year basis, indicating the cryptocurrency is more undervalued than at previous bear market bottoms. Additionally, sentiment platform Santiment views the current extreme negativity as a strong bullish signal, suggesting that widespread fear often marks potential turning points.

Regulatory developments provided mixed signals, with Trump's nomination of crypto-friendly Kevin Warsh as the new Fed Chair offering potential long-term positive implications for digital assets. However, immediate market concerns were amplified by U.S. Treasury sanctions on Iran-linked crypto exchanges and ongoing regulatory pressure in various jurisdictions. The market also faced headwinds from a dramatic collapse in precious metals, with silver plunging a record 36% and gold falling over 12%, which initially appeared to benefit traditional safe havens over crypto assets.

Institutional adoption continued to show resilience in select areas, with XRP ETFs setting record trading volumes despite market volatility and significant whale accumulation patterns emerging across major cryptocurrencies. The underlying infrastructure development also progressed, with notable launches like Optimism's OP Enterprise for institutional blockchain deployment and continued growth in Solana's active addresses, which spiked 115% due to AI-enabled memecoin creation tools.

Major Negative News

  • Bitcoin Crashes Below $76K in $2B Liquidation Event: Bitcoin experienced a sudden weekend liquidity cascade that pushed prices to near $75,000, marking the first time since April 2025 that BTC reached such levels. The crash was accompanied by over $2.5 billion in total market liquidations.
  • Crypto Funds Hemorrhage $1.80 Billion in Outflows: US-based spot Bitcoin ETFs saw approximately $1.5 billion in outflows over five trading days, while Ether ETFs experienced $327 million in withdrawals, driven by investor profit-taking and shifting market sentiment.
  • BitMine Faces $6B Paper Loss Amid Ether Sell-off: The company is confronting massive unrealized losses as Ethereum's price decline deepens, highlighting the significant risks associated with crypto treasury strategies during market downturns.
  • Bitcoin Options Turn Bearish as BTC Flirts with $80K Drop: Options markets are flashing extreme fear signals with increased ETF outflows, as the probability of Bitcoin dropping below $80,000 has significantly increased according to derivatives positioning.
  • XRP Faces $70M Liquidations Testing $1.70 Support: XRP experienced substantial futures liquidations while testing the critical $1.70 support level, with analysts focusing on potential further declines to $1.64 and $1.60 if current support fails.
  • Precious Metals Suffer Historic Collapse: Silver recorded its largest intraday drop in history at 36% while gold plunged over 12%, wiping out $15 trillion in market value following Trump's Fed Chair nomination, creating broader market uncertainty.
  • US Treasury Sanctions Iran-Linked Crypto Exchanges: For the first time, Washington has directly targeted digital asset platforms with sanctions, sanctioning two UK-registered crypto exchanges tied to Iran's financial system, signaling increased regulatory enforcement.

Major Positive News

  • XRP Capital Inflows Position for Multi-Millionaire Creation: Capital is rotating back into high-potential crypto assets with XRP emerging as the primary beneficiary, as liquidity floods back into the market positioning the altcoin for a powerful upside move.
  • Crypto Fear Gauge Signals Potential Rebound Opportunity: Social and on-chain sentiment has dropped to yearly lows, which analysts interpret as positive since historical patterns show extreme fear often precedes significant price rebounds.
  • Prominent XRP Critic Reverses Stance, Calls It "Global Currency": A well-known crypto pundit retracted previous criticisms of XRP, acknowledging his error and now referring to it as "the global currency," citing developments like Ripple's new bank charter.
  • Bitcoin MVRV Z-Score Indicates Bear Market Nearing End: The metric has printed record lows on a rolling two-year basis, making Bitcoin more undervalued than at previous bear market bottoms, suggesting the current downturn may be concluding.
  • Tether Breaks Records with $10B Profit and $186B Circulation: The stablecoin issuer reported record-breaking results with over $10 billion in net profits and USDT reaching $186 billion in circulation, demonstrating strong financial health with substantial excess reserves.
  • Trump Nominates Pro-Crypto Kevin Warsh for Fed Chair: The nomination of the crypto-friendly former Fed Governor represents a potentially positive shift for digital assets, as Warsh has previously expressed that Bitcoin is "an important asset" that can help inform policymakers.
  • SoFi Posts Record Q4 Revenue After Crypto Reentry: The fintech bank achieved record quarterly revenue of $1 billion after reintroducing crypto trading, launching a stablecoin, and rolling out blockchain-based remittances.
  • Vitalik Buterin Withdraws $44.7M ETH for Ethereum Growth: The co-founder's strategic withdrawal supports an "aggressive" roadmap to strengthen Ethereum's position as a decentralized world computer through enhanced development funding.

Key Risk Factors

  • Extreme Leverage Buildup: Bitcoin's Estimated Leverage Ratio has spiked to critical levels, indicating the market is positioned for potentially violent liquidation cascades that could drive prices significantly lower.
  • Technical Breakdown Signals: Multiple cryptocurrencies are testing critical support levels, with Bitcoin's failure to hold $80,000 potentially triggering further declines toward $72,000-$75,000 range.
  • Macroeconomic Policy Uncertainty: Growing concerns about U.S. government shutdown possibilities and shifting Federal Reserve policies are creating broader market volatility affecting risk assets including crypto.
  • Regulatory Enforcement Escalation: Increased sanctions on crypto platforms and ongoing legal challenges, including the advancing Coinbase insider trading lawsuit, signal heightened regulatory scrutiny.
  • Institutional Outflow Momentum: Sustained ETF outflows and weakening sentiment among large investors could create additional selling pressure if the trend continues.
  • Liquidity Concerns: Bitcoin mining profitability hitting 14-month lows and reduced trading volumes suggest underlying liquidity challenges that could amplify price movements.

Conclusion and Outlook

The cryptocurrency market finds itself at a critical inflection point where extreme bearish sentiment collides with historically significant oversold conditions. While the immediate price action has been dominated by massive liquidations and institutional outflows, several underlying indicators suggest this may represent a capitulation phase rather than the beginning of a prolonged bear market. The convergence of record-low MVRV Z-scores, extreme fear readings, and contrarian analyst views points to potential accumulation opportunities for patient investors.

Regulatory developments present a mixed but increasingly constructive backdrop for the medium term. Trump's nomination of crypto-friendly Kevin Warsh as Fed Chair represents a potentially transformative shift in monetary policy approach toward digital assets, even as near-term enforcement actions create temporary headwinds. The continued institutional infrastructure development, evidenced by Nubank's national bank approval and Optimism's enterprise blockchain solutions, demonstrates that fundamental adoption continues despite price volatility.

The resilience shown in certain segments, particularly XRP ETFs maintaining record volumes and whale accumulation patterns, suggests sophisticated investors are positioning for recovery rather than capitulating. However, the market remains vulnerable to further liquidations given elevated leverage ratios and weak short-term sentiment. The upcoming period will likely be characterized by high volatility as leveraged positions unwind and the market seeks to establish a sustainable base.

Technical analysis indicates that Bitcoin's ability to reclaim and hold above $85,200-$86,200 will be crucial for confirming any sustainable reversal, while failure to do so could lead to tests of the $72,300-$75,300 range. The broader cryptocurrency ecosystem appears to be undergoing a healthy deleveraging process that, while painful in the short term, may establish stronger foundations for the next growth phase.

*Key Monitoring Points*: Watch for Bitcoin's ability to reclaim $85,000+ levels, continued ETF flow patterns, resolution of leverage imbalances, Kevin Warsh's Senate confirmation progress, and any signs of institutional re-entry following the current shakeout period.

※ This report is provided for informational purposes only and is not investment advice or a recommendation. Investment decisions should be made at your own discretion and risk.

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