Major Crypto Market Correction Hits Key Support Levels Amid Regulatory Uncertainty and Liquidity Concerns - February 03, 2026

Market Overview

The cryptocurrency market experienced a significant correction over the weekend, with Bitcoin falling below $80,000 and testing critical support levels around $74,500-$75,000. This decline represents Bitcoin's lowest price in nearly 10 months and has triggered widespread concern about the sustainability of the current bull market. The selloff was precipitated by Donald Trump's nomination of Kevin Warsh as Federal Reserve chair, which markets interpreted as a potentially hawkish monetary policy shift.

The broader market downturn has been particularly harsh on altcoins, with Ethereum dropping 19% in three days below $2,400, Solana breaking below the psychological $100 level, and XRP experiencing significant volatility around key support zones. Trading volumes have collapsed dramatically, with centralized crypto spot volumes falling from $2.3 trillion in October to approximately $120-150 billion in January 2026, putting severe pressure on crypto exchange stocks.

Institutional sentiment has turned increasingly cautious, with crypto ETFs experiencing $2.8 billion in outflows over two weeks and several major treasury companies showing substantial unrealized losses. BitMine faces nearly $7 billion in paper losses on its Ethereum holdings, while Strategy's Bitcoin position briefly traded underwater for the first time in years. Despite these challenges, some analysts argue the current weakness stems from temporary liquidity constraints rather than fundamental crypto market breakdown.

The market correction has also coincided with increased regulatory scrutiny, particularly around stablecoin regulations and the controversial GENIUS Act. Security concerns have escalated with $370 million stolen in January alone and a 75% increase in physical "wrench attacks" targeting crypto holders, highlighting growing safety risks in the ecosystem.

Major Negative News

• Bitcoin Plunges to 10-Month Low: Bitcoin crashed to $74,500, marking its lowest price since early 2025, with the decline accelerating after the Warsh Fed nomination and raising questions about whether the bull market cycle is ending.

• Crypto Exchange Stocks Collapse 60%: Trading volumes have evaporated from $2.3T to $120-150B, causing exchange stocks like Coinbase to fall 40% in six months while others like Bullish dropped over 50%.

• Ethereum Treasury Firms Face Massive Losses: BitMine approaches $7 billion in unrealized losses while other Ethereum treasury firms experience severe pressure, with Trend Research forced to sell $77 million in ETH at a loss.

• Strategy's Bitcoin Bet Goes Underwater: Michael Saylor's company saw its Bitcoin holdings briefly trade below average cost for the first time since 2023, representing approximately $900 million in unrealized losses during market lows.

• Crypto Security Breaches Surge: Criminals stole $370 million in January alone (quadrupling year-on-year), while "wrench attacks" increased 75% resulting in $41 million losses, highlighting escalating physical security risks.

• Major Altcoins Hit Critical Support: Solana broke below the psychological $100 level for the first time in 10 months, while Shiba Inu crashed to 3-year lows, raising concerns about broader altcoin market stability.

• Regulatory Pressure Intensifies: New York prosecutors slammed the GENIUS Act, claiming Tether and Circle profit from fraud, while India retained harsh crypto tax policies despite industry pleas for relief.

• ETF Investments Turn Negative: Bitcoin and Ethereum ETF investments flipped negative for 2026 as crypto funds shed $1.7 billion amid sustained institutional outflows.

Major Positive News

• Major Institutions Buy the Dip: Both Binance and Strategy made significant Bitcoin purchases during the correction, with Binance starting a $1 billion SAFU fund conversion and Strategy adding $75.3 million in BTC.

• Analysts See Fire-Sale Opportunity: Multiple analysts suggest Bitcoin has hit a "fire-sale" value with historical data pointing to potential 10% rebound rally despite current weakness.

• XRP Bulls Identify Accumulation Pattern: Analysts argue XRP's consolidation between $1.50-$3.00 mirrors previous accumulation phases that preceded major rallies, with potential targets of $9-$15 if key levels hold.

• Hyperliquid Hits Revenue Records: The decentralized exchange achieved new daily revenue highs, demonstrating strong fundamentals that could enable it to potentially overtake Solana in market positioning.

• Regulatory Progress on Multiple Fronts: White House officials met with crypto and banking leaders to advance stablecoin legislation, while Hong Kong plans to issue first stablecoin licenses in March 2026.

• AI Integration Advances Market Surveillance: South Korea expanded AI systems to track crypto manipulation, representing positive developments in market integrity and regulatory technology adoption.

• Strategic Treasury Conversions Continue: BitMine disclosed substantial ETH holdings of 4.285 million tokens with $374 million projected annual staking rewards, showing continued institutional crypto adoption.

• UK Crypto Environment Improving: Despite popular criticism, analysts argue the UK is experiencing a significant positive shift and accelerating crypto evolution beneath regulatory surface tensions.

Key Risk Factors

• US Liquidity Drought: Potential tightening of monetary policy under Kevin Warsh's Fed leadership could further constrain crypto market liquidity and institutional investment flows
• Regulatory Uncertainty: Ongoing disputes over stablecoin regulations and the controversial GENIUS Act create compliance risks and market access concerns
• Geopolitical Tensions: Iran-related tensions and potential government shutdown scenarios add macro volatility that typically pressures risk assets including crypto
• Technical Breakdown Risk: Bitcoin's failure to hold key support levels around $75,000 could trigger deeper corrections toward $50,000-$60,000 range
• Institutional Confidence Erosion: Epstein file revelations linking crypto figures and massive treasury losses may undermine institutional adoption momentum
• Security Escalation: Rising physical attacks and cyber theft rates create operational risks for crypto holders and exchanges

Conclusion and Outlook

The cryptocurrency market stands at a critical inflection point following the recent correction that pushed Bitcoin to 10-month lows and triggered widespread altcoin weakness. While the immediate price action appears concerning, several analysts argue this decline stems from temporary macroeconomic factors rather than fundamental crypto market breakdown. The Kevin Warsh Fed nomination and resulting liquidity concerns may represent a short-term headwind that could resolve as policy clarity emerges.

Institutional behavior during this correction provides mixed signals, with some major players like Strategy and Binance aggressively buying the dip while others reduce exposure or face mounting paper losses. The dramatic collapse in trading volumes and corresponding pressure on exchange stocks suggests the market may be experiencing a natural consolidation phase rather than permanent structural damage. However, the sustainability of recent institutional adoption trends faces its first major test as treasury companies grapple with significant unrealized losses.

Regulatory developments present both risks and opportunities, with positive progress on stablecoin legislation and international licensing frameworks offset by prosecutorial concerns about fraud enablement and tax policy resistance. The escalating security threats including both cyber attacks and physical violence represent genuine operational risks that the industry must address to maintain credibility with institutional investors.

Looking forward, the market's ability to hold current support levels around $75,000 for Bitcoin and corresponding altcoin zones will likely determine whether this correction represents a healthy pullback within an ongoing bull market or the beginning of a more prolonged bear phase. The resolution of US liquidity constraints and clarity on Fed policy direction could catalyze a recovery, while failure to maintain technical support could open pathways to significantly lower price targets.

*Key Monitoring Points*: Watch Bitcoin's ability to hold $75,000 support, progress on US stablecoin legislation, institutional ETF flow trends, resolution of liquidity drought concerns, and any escalation in regulatory enforcement actions against major crypto firms.

※ 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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