 ▲ Bitcoin (BTC) plunge / Gemini-generated image |
The digital asset market is facing a liquidity crisis in which psychological support levels have broken down amid a combination of macroeconomic uncertainty and large-scale capital outflows by institutional investors.
On February 10 (local time), according to cryptocurrency-focused media outlet BeInCrypto, the broader digital asset market, including Bitcoin (BTC), is experiencing a steep downturn due to concerns over the U.S. Federal Reserve maintaining a high interest rate stance and changes in former President Donald Trump’s tariff policies. After recently losing the $70,000 level, Bitcoin briefly plunged below $64,000 during intraday trading, heightening investor anxiety, while Ethereum (ETH) and XRP also fell in tandem, posting declines of more than 33% and 37%, respectively. Trump’s hawkish moves have fueled risk-off sentiment among investors, rapidly draining liquidity from the digital asset market.
Massive capital outflows by institutional investors are a decisive factor behind the current downturn. Since the start of the year, approximately $2.9 billion in net inflows has exited spot Bitcoin ETFs, weakening downside resilience in the market. In particular, forced liquidations driven by risk management triggered a wave of asset sales, accelerating the price decline. As additional Bitcoin buying by major corporations such as Strategy has also slowed, the market appears to have lost momentum.
Market sentiment indicators have frozen at record-low levels. According to data from Santiment, the positive sentiment index for digital assets on social media has fallen to its lowest point in six months, while the Fear and Greed Index has dropped to 5, a level signaling extreme fear. This suggests that retail investors have depleted their capital and are entering a phase of exiting the market. The surge in gold prices and a stronger U.S. dollar are driving funds toward safe-haven assets, further diminishing Bitcoin’s appeal, while trading volumes for major altcoins, including XRP, are also contracting.
Indicators from the futures market are also pointing in a negative direction. Open interest in the Bitcoin derivatives market has declined sharply over the past 24 hours, indicating that investors have closed a large number of positions. On higher time frames, Bitcoin is testing key levels such as the 23.6% Fibonacci retracement, and if the $60,000 support level collapses, there is a high risk of additional capitulation selling. Experts note that concerns over a slowdown in the AI technology sector have spilled over into the digital asset market, exacerbating the contraction in liquidity.
Ultimately, a recovery in the digital asset market is likely only after greater clarity emerges around the Federal Reserve’s interest rate policy. As the market prices in the hawkish leanings of Kevin Warsh, who has been named as a potential next Fed chair, all eyes are on his remarks. Some analysts, including those at Bernstein, view the current correction as a healthy restructuring process and maintain a long-term bullish outlook, but in the short term, investors must endure heightened volatility. Investors should focus on cautious risk management while closely monitoring whether the $60,000 support level holds.
*Disclaimer: This article is for investment reference only, and no responsibility is assumed for investment losses arising from reliance on its contents. The information should be interpreted solely for informational purposes.*