Crypto Market Faces Significant Correction with $2.5B in Liquidations as Bitcoin Tests Critical Support Levels - February 02, 2026

Market Overview

The cryptocurrency market experienced a severe downturn over the weekend, with Bitcoin dropping to as low as $75,000-$77,000, marking its first visit to these levels since April 2025. This dramatic price action triggered one of the most violent liquidation events in crypto history, with over $2.5 billion wiped from the market. The selloff was particularly notable for occurring during a weekend, breaking the typical pattern of quiet weekend trading that has characterized previous market cycles.

Bitcoin's breakdown below $80,000 represents a critical technical failure, as this level served as both the Spot ETF realized price and a key support zone that had been defended multiple times since late 2025. The breach of this level has pushed many institutional investors into unrealized losses and triggered significant outflows from Bitcoin ETFs, with $817 million in outflows recorded as BTC hit nine-month lows. Ethereum also suffered substantial losses, falling below $2,500 and experiencing nearly 20% decline over the past week.

The broader market sentiment has turned extremely bearish, with analysts noting that Bitcoin's active addresses have fallen to 2020 lows following the failure to maintain the $83,000 level. Mining operations faced additional pressures from US winter storms, causing Bitcoin's hashrate to drop 12% in its sharpest setback in four years. Despite the carnage, some analysts view the current extreme fear in the market as a potentially bullish contrarian indicator.

Major altcoins were not spared from the selloff, with XRP testing $1.70 after $70 million in liquidations, Solana sinking to April 2025 lows, and various DeFi protocols experiencing security breaches, including a $30 million exploit at Step Finance and a $3 million attack on CrossCurve protocol.

Major Negative News

• Bitcoin Breaks Key $80,000 Support: Bitcoin crashed below the critical $80,000 level, which served as the Spot ETF cost basis, triggering massive liquidations and pushing institutional investors into unrealized losses for the first time since ETF launch.

• $2.5 Billion Market-Wide Liquidation Event: The crypto market experienced one of its most violent liquidation cascades, with Bitcoin falling to $76,000 and over $2.5 billion wiped from the market in a rare weekend volatility event.

• Bitcoin Mining Disrupted by Winter Storms: US winter storms caused Bitcoin's hashrate to fall 12%, marking the sharpest setback in four years as large mining operators were forced to scale back production due to grid stress.

• Ethereum Plunges Below $2,500: ETH suffered intense bearish pressure, losing nearly 20% of its value in the past week and breaking through multiple support levels with potential targets at $1,881 representing a 60% correction from cycle highs.

• Major DeFi Protocol Exploits: Step Finance disclosed a $30 million breach of treasury wallets containing SOL tokens, while CrossCurve protocol suffered a $3 million exploit, adding to January's $370 million in total crypto losses.

• Bitcoin ETF Outflows Accelerate: Bitcoin ETFs shed $817 million as BTC hit nine-month lows, with aggregate returns for IBIT investors turning negative based on dollar-weighted flows.

• BitMine Faces $6B Paper Loss: The Tom Lee-linked firm faces massive unrealized losses on its Ether reserves as the crypto market downturn deepens, highlighting risks of crypto treasury strategies.

• XRP Tests Critical Support Levels: XRP fell to $1.57 and faces potential transition to macro bear structure if it fails to close above the 33-month exponential moving average, with analysts warning of further downside.

Major Positive News

• Vitalik Buterin's Strategic ETH Withdrawal: Ethereum co-founder withdrew $44.7 million in ETH to support network growth through "mild austerity," funding an aggressive roadmap to strengthen Ethereum's position as a decentralized world computer.

• UAE Invests $500M in Trump-Linked Crypto Startup: An Abu Dhabi investment vehicle backed by the UAE's national security adviser agreed to buy 49% of World Liberty Financial, signaling major institutional confidence in the crypto sector.

• Crypto Funding Shows Signs of Recovery: Venture capital funding is cautiously returning to crypto as institutions focus on infrastructure and real-world use cases, with onchain finance gaining particular attention.

• Alternative Inflation Data Shows Cooling: Real-time Truflation data indicates sharp cooling in US inflation, potentially reshaping Fed policy expectations and creating a more favorable environment for risk assets like cryptocurrencies.

• Long-Term Bitcoin Holders Accumulate: Despite bearish market dynamics, Bitcoin's Long-Term Holders are adding approximately 186,000 BTC monthly, suggesting growing conviction among seasoned investors during the correction.

• Solana Network Activity Surges: Active Solana addresses spiked 115% as new AI technology makes memecoin launches easier, while 40% of merchants now accept Bitcoin payments, indicating growing adoption.

• SoFi Reports Record Revenue: The fintech bank achieved record Q4 revenue of $1 billion while reintroducing crypto trading and launching blockchain-based services, demonstrating successful crypto integration.

• Sentiment Indicators Flash Bullish Signals: Crypto sentiment platform Santiment views current "extreme fear" as a strong bullish contrarian indicator, suggesting potential market reversal from oversold conditions.

Key Risk Factors

• Technical breakdown below critical support levels with Bitcoin failing to defend $80,000 and analysts projecting targets as low as $60,000-$73,000
• Massive liquidation cascades creating additional selling pressure and potential for further capitulation events
• ETF outflow acceleration as institutional investors face unrealized losses and may trigger panic-driven redemptions
• Macroeconomic uncertainty surrounding Federal Reserve policy and Kevin Warsh's nomination as Fed chair
• Infrastructure vulnerabilities exposed by winter storm disruptions to mining operations and ongoing DeFi protocol exploits
• Regulatory pressure with European Commission demanding crypto tax implementation and US Treasury sanctions on Iran-linked exchanges

Conclusion and Outlook

The cryptocurrency market is currently experiencing its most significant correction since the 2025 bull run began, with Bitcoin's failure to defend $80,000 marking a critical inflection point. The breakdown below this key level, which served as the Spot ETF cost basis, has shifted market structure from bullish to potentially bearish, with analysts identifying air pocket zones down to $73,000. However, the severity of the current selloff, combined with extreme fear sentiment and Long-Term Holder accumulation, suggests the market may be approaching oversold conditions that historically precede major reversals.

Infrastructure developments continue to show promise despite price volatility, with significant institutional investments like the $500 million UAE backing of World Liberty Financial and growing merchant adoption of Bitcoin payments. The 115% surge in Solana activity and renewed focus on real-world use cases in venture funding indicate underlying ecosystem strength that may support future recovery.

The market now faces a critical juncture where sustained trading below $80,000 could trigger additional institutional redemptions and drive prices toward the $60,000-$73,000 zone identified by multiple analysts. Conversely, a decisive reclaim of $80,000 and subsequent break above $90,000 would signal potential trend reversal and could reignite bullish momentum toward previous highs above $100,000.

*Key Monitoring Points*: Watch for Bitcoin's ability to reclaim and hold above $80,000, ETF flow patterns for signs of institutional re-entry, mining hashrate recovery post-winter storms, and broader market sentiment indicators for potential reversal signals. Additionally, monitor regulatory developments and any further DeFi protocol vulnerabilities that could impact market confidence.

※ 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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