Everyone wants to ask, why? What exactly triggered this epic sell-off?
It is not the crash of a certain giant whale, nor is it some black swan event, but merely a statement by U.S. Treasury Secretary Scott Bessent during a congressional hearing. A calm, restrained yet utterly decisive remark has become the last straw that broke the camel's back.
The bubble of fantasy: What did the statement 'no bailout' puncture?
Since the Trump administration took office, despite its fluctuating stance on cryptocurrencies, the generally 'friendly' signals it has released have created a subtle expectation in the market. Many investors, especially newly entering institutions and retail investors, harbor a deep-seated belief: the government will not stand idly by.
It reduced the perceived risk for investors, encouraged the use of leverage, and allowed the market's valuation bubble to continue to inflate in a false sense of security.
However, this congressional hearing in early February 2026 mercilessly burst this beautiful bubble.
In response to questions from lawmakers, Bessent, the 'head' of the U.S. Treasury, stated unequivocally in legal terms that the U.S. government 'will not intervene to rescue the cryptocurrency market.' He firmly pointed out that neither he nor the Financial Stability Oversight Council (FSOC) has the authority to instruct private banks to increase their Bitcoin holdings, let alone plan to use taxpayers' money to 'rescue' or support this emerging but volatile market.
Domino effect: when the psychological defense line collapses
The first to collapse was the psychological defense line of investors. The real risks that had long been masked by the expectation that 'the government will provide support' are now fully exposed.
Immediately following, the market's technical indicators and sentiment index plummeted. The 'Fear and Greed Index,' which measures market sentiment, dropped to single digits—9 or even 10—in just a few hours, entering the 'extreme fear' zone that represents extreme market despair. This is the lowest point since the depths of the bear market in 2022, symbolizing a complete freeze of market sentiment.
Subsequently, what we saw was a sell-off. A large number of traders relying on high leverage were forced to close their positions, and their liquidation orders further exacerbated the market decline, creating a vicious cycle of death spiral. The price of Bitcoin dropped nearly 20% in just one week from near its historic high, with a market value evaporating by hundreds of billions of dollars.
In the past, investors might have believed that even if the market fell by 30% or 40%, there would always be an 'invisible hand' to support it. But now, Bessent has made it clear to everyone: there is no such hand. This fundamental shift in expectation is the root cause of the market's cost-ignoring sell-off.
The regulatory vacuum: moving forward alone in the fog
The much-anticipated (Cryptocurrency Market Structure Bill) (CLARITY Act) has been repeatedly delayed in Congress and remains mired in a quagmire. The core disputes over the division of regulatory authority between the SEC and CFTC, the regulatory details for stablecoins, and even the responsibilities of DeFi developers have yet to reach a consensus.
