 ▲ Bitcoin plunge / image generated by ChatGPT |
As Bitcoin (BTC) plunged more than 30% in just one week amid large-scale sell-offs by whales and institutions, the market is being diagnosed as having entered a so-called phase of “full capitulation.”
According to crypto-focused outlet CoinGape on February 6 (local time), Bitcoin intraday fell as low as $60,000, chalking up a devastating report card with roughly $1.2 trillion in market capitalization wiped out from its peak recorded last October. On-chain analytics firm Santiment analyzed that whales and large investors holding between 10 BTC and 10,000 BTC sold 81,068 BTC over the past eight days alone, driving their share of total supply to a nine-month low. By contrast, the share held by small investors owning less than 0.01 BTC rose to a 20-month high of 0.249%, signaling a classic transfer of hands typical of a bear market.
Heightened volatility in the derivatives market is also fueling the price decline. As around $2.1 billion worth of Bitcoin options expired on crypto options exchange Deribit, bearish put option volume overwhelmed bullish call option volume, sending the put/call ratio soaring to 1.40. Total crypto liquidations over 24 hours reached about $2.6 billion, with $1.35 billion in forced closures coming from Bitcoin alone. In particular, more than $1.1 billion in long positions were liquidated, creating a vicious cycle in which falling prices triggered further liquidations.
Fading demand from institutional investors is further drying up market liquidity. In the U.S. spot Bitcoin ETF market, approximately $1.2 billion in net outflows occurred over the past three trading days, including $175.3 million exiting BlackRock’s IBIT in a single day. Bloomberg analyst Eric Balchunas noted that while IBIT’s trading volume surpassed $10 billion to hit an all-time high, this reflected panic selling. Concurrent sell-offs across products from major issuers such as Fidelity, Grayscale, and 21Shares also increased downward pressure on Bitcoin prices.
The external economic environment is also unfavorable for the crypto market. Amid earnings concerns for AI-related tech stocks pushing the Nasdaq and S&P indexes lower day after day, Amazon shares plunged more than 10%, stoking risk-off sentiment. In addition, expectations that Kevin Warsh, named by U.S. President Donald Trump as the next Federal Reserve chair, would take a hawkish stance heightened tightening fears. Treasury Secretary Scott Bessent’s firm statement that there would be no government bailout in response to Bitcoin’s crash further dampened investor sentiment.
The crypto market is now undergoing a painful process in which speculative froth is being rapidly squeezed out amid a confluence of headwinds. As Bitcoin mining firm Marathon Digital deposited 1,318 BTC to exchanges, opening the door to additional selling, prices of gold and silver also fell in tandem, roiling global asset markets overall. Experts warned that extreme volatility is likely to persist until Bitcoin recovers the $65,000 level.
*Disclaimer: This article is for investment reference only, and no responsibility is accepted for investment losses incurred based on it. The content should be interpreted solely for informational purposes.*