What is the crypto market experiencing as liquidity dries up amid a macro storm?
1. Heart-stopping moment: Bitcoin's "free fall"
On the first trading day of February 2025, the cryptocurrency market experienced a textbook panic sell-off.
On January 29th at 9 AM Eastern Time, Bitcoin began to decline from around $87,000, dropping over 7% within 24 hours and breaking through the $81,000 mark. As of the morning of February 2nd, Bitcoin had temporarily fallen below $75,000, down about 40% from its peak in 2025. This is the worst single-week performance since November 2024.
CoinGlass data shows that on February 1 alone, over 420,000 people globally were liquidated, with a total liquidation amount exceeding $2.5 billion, over 90% of which were long positions. On February 2, another over 160,000 people were forcibly liquidated. This "bloodbath" came suddenly yet was also within reason.
II. Triple Whammy: The Straw That Broke the Camel's Back.
The first layer: The chain reaction of the AI bubble burst.
It all started with Microsoft's earnings report.
On January 29, Microsoft's fourth-quarter earnings report fell short of market expectations, reigniting investor concerns about excessive bubble in AI investments. The Nasdaq index plummeted in response, and risk assets faced widespread sell-offs.
But the truly fatal point is the price level that Bitcoin has lost—$87,000 active realized price.
The active realized price excludes long-term "sleeping" positions and only calculates the average cost of tokens currently circulating in the market. It is the breakeven point for current active investors. Once it falls below, it means that most trading investors are simultaneously in a loss.
Bitcoin has decisively pierced this lifeline.
The second layer: "Warsh Shock" triggers liquidity panic.
At 8 PM on January 29, the second round of sell-offs hit.
Bloomberg and Reuters reported that President Trump is preparing to nominate Kevin Warsh as the next chairman of the Federal Reserve. On January 30, Trump officially announced this nomination on social media, stating that Warsh "will go down in history as one of the greatest Federal Reserve chairmen."
Why is the market so panicked?
During his tenure as a Federal Reserve governor from 2006 to 2011, Warsh was a staunch opponent of quantitative easing. When the Federal Reserve initiated its second round of quantitative easing in 2011, he immediately resigned in protest. In the eyes of the market, he is a true "hawk."
Trump hopes to lower interest rates to around 1%, while Warsh’s policy stance presents subtle tension. Although Warsh recently proposed a compromise framework of "limited rate cuts + balance sheet reduction" in a Wall Street Journal column, attempting to find a balance between inflation discipline and policy flexibility, the market is more concerned about: tightening liquidity.
Cryptocurrencies have historically performed well when liquidity is abundant. Warsh’s leadership at the Federal Reserve has added further pressure to the already tight liquidity expectations in the market.
The third layer: The magnifying effect of liquidity black holes.
A common underlying reason behind the two rounds of declines is the continuous shrinkage of trading volume in the Bitcoin spot and futures markets.
When market liquidity is low, even small shocks can trigger excessive price fluctuations. A stark contrast is that stocks and commodities quickly rebound after brief adjustments, while Bitcoin has failed to follow suit.
Currently, the market is "avoiding" Bitcoin. Trading volume continues to shrink, and selling pressure persists, making price rebounds increasingly difficult. As analysts have said, this sell-off is not driven by panic, but by a lack of buyers, momentum, and confidence.
III. Technical Breakdown: Key Support Levels Have Been Breached.
From a technical analysis perspective, Bitcoin is facing a severe test:
• $84,000: Key structural support has been lost.
• $80,000: The level where buyers concentrated last November has been breached.
• $75,000: The low point during the tariff storm in April 2025 has been tested.
John Glover, Chief Investment Officer of Ledn, believes this adjustment may be a normal process of Bitcoin retreating from the historical high of $126,000 in October, with the bottom possibly probing down to $71,000, which is a 43% drop from the previous high. Russell Thompson, CIO of Hilbert Group, is more pessimistic, believing that there is a lack of support in the short term, and prices are likely to drop to $70,000.
What worries the market more is that the 50-day moving average has crossed below the 200-day moving average, forming a medium-term bearish signal known as the "death cross".
IV. Institutional Withdrawal: ETF Capital Outflow Sounds the Alarm.
The Bitcoin ETF of 2024, full of potential, is currently experiencing a winter.
Data shows that the net outflow of Bitcoin ETFs in December 2025 reached $3.5 billion, the worst performance since February. This sharply contrasts with your previous sharing that "spot Bitcoin ETFs had a net inflow of $6.63 billion in the past five weeks, and BlackRock's crypto investment portfolio exceeded $100 billion"—institutional funds are quietly withdrawing.
This withdrawal is not without signs. When Bitcoin fails to respond substantively to geopolitical tensions, a weakening dollar, or rising gold, it indicates that market correlations are decoupling, and funds are seeking safer havens.
V. Policy Aspect: Regulatory Friendly but Urgent Issues Difficult to Resolve
Despite market pressure, positive signals from regulators are still being released:
• The SEC and CFTC's friendly policies towards cryptocurrencies are gradually being implemented.
• The gateway for 401(k) retirement accounts to include cryptocurrency investments is about to open, with potential inflows reaching $1 trillion.
• Legislation on the digital asset market structure is progressing rapidly.
However, these medium- to long-term positives are difficult to hedge against short-term macro uncertainties. Bitcoin is likely to continue following the ups and downs of the stock market in the short term. With $80,000 already lost, further downside risks cannot be ignored.
VI. Historical Perspective: Is it a Bull Market Correction or the Start of a Bear Market?
In the face of a sharp drop, a key question is: Is this a healthy correction in a bull market, or the beginning of a new bear market?
Evidence supporting the "Bull Market Correction Theory" includes:
• Global liquidity is still expanding.
• Institutions' strategic stance on cryptocurrencies remains firm.
• The Bitcoin network itself has not encountered any operational issues.
• Long-term holders (HODLers) have not fled on a large scale.
But some analysts warn that if Bitcoin's price falls below $75,000, it may trigger a more severe sell-off. Derek Lim, head of research at Caladan, points out that Bitcoin is more likely to consolidate between $83,000 and $95,000 rather than enter a one-sided upward trend.
Reflecting on your previous analysis of the $91,000 and $3,000 (Ethereum) technical levels, the current trend indeed constitutes a validation of this judgment—markets are seeking a new equilibrium price, and this process is bound to be full of volatility.
VII. Outlook: Finding Anchor Points Amid Uncertainty.
Short term (1-3 months): Uncertainty remains high. Bitcoin may continue to follow the fluctuations of the U.S. stock market, with the $75,000-$80,000 range becoming a critical battleground. If the U.S. stock market stabilizes, Bitcoin may see a technical rebound; if the macro environment continues to deteriorate, the $70,000 level will be tested.
Medium term (3-6 months): Once the stock market enters a consolidation phase, Bitcoin may once again become a beneficiary of fund rotation. Historical experience shows that whenever tech stocks stagnate due to bubble concerns, funds often flow into alternative assets.
Long term (more than 6 months): The truly unchanging factors are more important. Global liquidity expansion, institutional strategic allocation, and supply scarcity post-halving—these structural supports have not wavered. The current correction is merely a short-term excessive volatility created by thin liquidity.
Conclusion: Anchoring in the Storm
From $87,000 to $75,000, Bitcoin brutally taught the market a lesson in 72 hours: in a liquidity-strapped market, there is no absolute margin of safety.
But if you agree with the previous strategy of "using gold as a risk control anchor to allocate 30%-40% of the position, with the remaining funds invested in Bitcoin and high-quality mainstream coins," then this moment may be the right time to test this asset allocation framework.
Markets always breed opportunities in extreme emotions. When 420,000 people are liquidated, and the fear and greed index falls into the "extreme fear" zone, the value of contrarian thinking becomes apparent.
What do you think of Bitcoin's recent plunge? Is it a good opportunity to buy the dip or just a continuation of the decline? Feel free to share your views in the comments!
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Disclaimer: This article is for reference only and does not constitute investment advice. The cryptocurrency market is highly volatile; please make decisions cautiously based on your own risk tolerance.#爱泼斯坦案烧向币圈 #BTC何时反弹？ #贵金属巨震 #加密市场回调 #CZ币安广场AMA $BTC
