On February 6, 2026, the cryptocurrency market experienced a 'century crash.' In just 24 hours, over 580,000 investors were forced to close their positions, with a total liquidation amount reaching $2.665 billion.
But the cliff-like drop in the price chart is merely the surface turbulence. The real undercurrents lie in the unfathomable data on the blockchain.
When the market crashes, we often hear emotional terms like 'panic' and 'sell-off.' There is an accurate 'deep-sea thermometer' that can objectively measure the pain level of the entire market—it's the loss ratio of Bitcoin supply.
It calculates how many Bitcoins are currently 'floating losses' held by analyzing the price of each Bitcoin's last movement on-chain compared to the current market price. Simply put, it looks at how many coins people are 'trapped' with.
In early February 2026, Glassnode data showed that about 8.9 million Bitcoins were in a loss state, while approximately 11.1 million Bitcoins were in profit. This means that over 44% of the circulating supply (counting 20 million coins) holders are suffering from paper losses.
When the price rebounds to near the cost line of some holders, a huge 'unwinding' sell order will emerge, becoming a heavy resistance for continuous price increases.
In early February 2026, a well-known institution named Trend Research conducted a textbook-like panic operation.
According to data from on-chain monitoring platforms like Arkham Intelligence, Trend Research staged an intense ETH sell-off in February 2026. From February 1 to 5 alone, the institution allegedly sold over 191,000 ETH, totaling approximately $442 million. These ETH were continuously transferred to Binance, with a clear purpose: to sell for cash, repay debts, and reduce leverage.
Imagine this scenario: Trend Research holds over $1 billion in high-leverage ETH positions. When the market starts to drop, the value of collateral shrinks, facing liquidation risk. To keep the position from being liquidated, it must add margin or sell assets. Clearly, it chose the latter—massively selling ETH for stablecoins.
Whale sell orders hit the market, accelerating the drop in ETH prices. The decline in ETH further triggers more risks for leveraged positions relying on ETH as collateral, forcing them to join the selling ranks as well. On-chain data tracking shows that by February 8, only a small amount of ETH remained on the associated addresses of Trend Research, nearly liquidated.
Trend Research is by no means an isolated case. During the crash on February 6, a single massive liquidation order worth $25.635 million in ETH appeared on Binance. Meanwhile, the total liquidation amount across the network reached a staggering $2.314 billion from long positions, starkly revealing how frenzied and concentrated the previous market leverage was.
The logical chain of on-chain short selling is as follows:
Initial price decline: triggering the liquidation of some high-leverage contracts.
Liquidation triggers sell-offs: exchanges sell assets in the market to close positions, exacerbating the decline.
The decline threatens whales: large institutions like Trend Research face risks due to the drop in collateral value, beginning to actively sell to deleverage.
Whale sell-offs create larger declines: large sell orders further suppress prices, forming negative feedback.
Panic spreads and comprehensive short selling: the price crash and news of whale escape spread, triggering panic selling among small and medium investors, while also triggering more leveraged positions to cascade into liquidation.
Thus, a death spiral driven by leveraged liquidations and institutional deleveraging was formed. Every large transfer record on-chain represents an acceleration within this spiral. Ultimately, $2.6 billion in wealth evaporated within 24 hours, becoming a cold footnote to this on-chain short-selling tragedy.
After such a brutal decline, a key question arises: has the market already entered the so-called 'surrender' phase? That is, investors' confidence has completely collapsed, indiscriminately selling assets regardless of cost.
On-chain data gives some contradictory signals.
On one hand, signs of surrender are indeed clear. The supply of losses is at a high level, showing that many holders are in pain. The market sentiment indicator has once dropped to 'freezing point'. The liquidation actions of institutions like Trend Research itself are a form of institutional 'surrender'.
But on the other hand, true 'surrender' is often accompanied by some extreme data, such as a surge in Bitcoin reserves on exchanges during panic (people throwing coins into exchanges to prepare to sell). However, data shows that Bitcoin is flowing from exchanges to private wallets, which means long-term holders may be buying on dips or at least not panic selling. Glassnode also pointed out that when the supply of losses reaches a certain level, it sometimes marks the turning point of a bear market cycle.
