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Cryptocurrency Crash Analysis: Bitcoin Plunges Below $70K on February 5, 2026 - Can the Market Recover?

2026/02/06 16:30

Key Takeaways

📉 Bitcoin crashed over 10% on February 5, 2026, falling below $70,000 for the first time in 15 months

💰 Total crypto market cap evaporated by 6.4% in a single day, shrinking to $2.49 trillion

🏦 Institutional investors fled en masse, with U.S. spot Bitcoin ETFs posting $545 million in outflows

📊 Fear and Greed Index plummeted to 11, entering "extreme fear" territory - the lowest in two months

⚠️ Over $800 million in leveraged positions were liquidated, affecting approximately 165,000 traders

🔮 Analysts warn Bitcoin could drop further to $60,000 or even $38,000

Crypto Market Bloodbath on February 5

Thursday, February 5, 2026, witnessed one of the most dramatic selloffs in the global cryptocurrency market. Bitcoin (BTC) price crashed over 10%, briefly breaking below the $64,000 mark and touching an intraday low of $70,052 - the lowest level since November 2024. This decline marks a staggering 50% drop from Bitcoin's all-time high of $126,000 reached in October 2025.

Meanwhile, Ethereum (ETH) wasn't spared either, plunging over 9.9% to around $2,097 - its lowest price since May 2025. The total cryptocurrency market capitalization evaporated by over 6.4% within 24 hours, plummeting from $2.65 trillion to $2.49 trillion.

More alarmingly, 92 of the top 100 cryptocurrencies by market cap recorded price declines, with XRP leading the losses with a devastating 12.6% drop to $1.24, down over 19% on the day.

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Five Core Reasons Behind Bitcoin's Crash

Hawkish Federal Reserve Continues to Apply Pressure

Treasury Secretary Scott Bessent made it crystal clear during this week's Congressional hearing that the U.S. government lacks the authority to bail out cryptocurrencies in the event of a crash. This statement extinguished any hopes investors had of a government rescue.

Simultaneously, robust U.S. PMI data exceeded expectations by 4 points, signaling strong economic activity. This intensified market concerns that the Federal Reserve would maintain high interest rates for longer. The U.S. Dollar Index (DXY) surged above 97.5, making risk assets like Bitcoin significantly less attractive to investors.

Mass Institutional Exodus

According to CryptoQuant data, institutional demand has reversed materially. In 2026, U.S. ETFs - which were a major source of capital into the Bitcoin market last year - have become net sellers.

On February 4 alone, U.S. spot Bitcoin ETFs recorded net outflows of $544.9 million, with BlackRock alone withdrawing $373.4 million and Fidelity pulling $86.44 million. Ethereum ETFs also saw net outflows of $79.48 million.

Whale Selling Triggers Chain Reaction

Large-scale selling by whales exacerbated market panic. The Royal Government of Bhutan moved over $22 million in Bitcoin out of sovereign wallets over the past week, triggering speculation about potential large-scale sell-offs.

Arkham Intelligence noted that "from our observations, Bhutan periodically sells BTC in clips of around $50M, with a particularly heavy period of selling around mid-late September 2025."

Leverage Liquidations Amplify the Drop

According to Coinglass data, over $800 million in leveraged positions were forcibly liquidated in the past 24 hours, impacting approximately 165,000 traders, with the majority coming from long positions. This followed the February 1 "Black Sunday II" event that saw $2.2 billion liquidated in 24 hours - the largest single-day wipeout since October 2025.

The futures market has entered a forced deleveraging phase. According to Glassnode analysts, "the largest long liquidation spikes of the drawdown amplified volatility and downside continuation."

Extreme Market Panic

The Crypto Fear and Greed Index plunged from 14 to 11, entering "extreme fear" territory - the lowest level since November 22, 2025. This panic sentiment among market participants reflects market instability, volatility, and increasing general uncertainty.

Expert Analysis: Bitcoin in "Full Capitulation Mode"

Coin Bureau's Perspective

Nic Puckrin, investment analyst and co-founder of Coin Bureau, commented: "As Bitcoin continues its slide toward the psychological barrier of $70,000, it's clear the crypto market is now in full capitulation mode. If previous cycles are anything to go by, this is no longer a short-term correction, but rather a transition from distribution to reset – and these typically take months, not weeks."

Puckrin expects Bitcoin to fight to defend the $70,000 threshold. If it breaks below, it could be heading for its bear market low around $55,700-$58,200.

Stifel's Bearish Prediction

Barry Bannister, chief equity strategist at Stifel, wrote in a research note that Bitcoin could ultimately bottom out around $38,000 - down about 70% from current levels. This prediction is based on Bitcoin's performance during previous "super-bears": 2011 (93%), 2014 (84%), 2018 (83%), and 2022 (76%) declines.

Interactive Brokers' Observation

Steve Sosnick, chief strategist at Interactive Brokers, told the media: "Crypto is now for normies." As average investors began seeing it as a necessary part of their portfolios, its drivers changed. Broad investors who wanted to own crypto as a form of diversification lost faith in its benefits as it dipped, rotating into gold instead.

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Bitcoin vs. Gold: The Safe Haven Divergence

A puzzling phenomenon is that amid escalating geopolitical tensions, traditional safe haven asset gold recently broke through $5,500 per troy ounce, hitting record highs with a 24% gain. However, Bitcoin - once touted as "digital gold" - has plummeted 44%.

Renowned investor Michael Burry (the "Big Short" guy) recently wrote on his Substack that he believes gold and silver's extreme volatility in recent days is because Bitcoin bulls are selling off their metal positions to save face from crypto's slide.

Technical Analysis: Key Support and Resistance Levels

Bitcoin Technicals

At the time of writing, Bitcoin was trading at $70,884. The price saw a gradual decrease from the intraday high of $76,472 to the intraday low of $70,119.

Key Support Levels:

First support: $68,400 (critical floor)
Second support: $65,500
Extreme support: $60,000 or even $55,700-$58,200

Key Resistance Levels:

First resistance: $72,000
Second resistance: $83,598 (support-turned-resistance)
Breakout resistance: Above $88,000

A fall below $68,400 would lead to $65,500. If it manages to reclaim $72,000 and the support-turned-resistance at $83,598, Bitcoin could shift to a more bullish path.

Ethereum Technicals

Ethereum was trading at $2,097, having decreased from $2,278 to $2,077 in a single day, dangerously close to dropping below the $2,000 mark.

Key Support Levels:

First support: $1,990
Second support: $1,930
Third support: $1,850

Key Resistance Levels:

First resistance: $2,250
Second resistance: $2,320
Breakout resistance: $2,500 and higher

Another day of pullbacks would take ETH to the $1,990 level, followed by $1,930 and $1,850. Should it manage to reclaim the $2,250 and $2,320 levels, it could negate the bearish trend and move towards $2,500 and higher.

Can the Crypto Market Rebound?

Potential for Recovery

Despite the doom and gloom, several factors could help turn things around:

Oversold Indicators: Many major cryptocurrencies now show extreme oversold conditions on momentum oscillators. The Relative Strength Index (RSI) for Bitcoin and others has dipped into territory that often precedes bounces.

Monetary Policy Shift: If central banks continue easing or hold rates steady, risk assets - including crypto - tend to benefit. Lower borrowing costs make speculative investments more appealing over time.

Historical Cycle Patterns: Long-term holders have grown accustomed to big price swings, part of what many call Bitcoin's "four-year cycle." Three previous cycles have seen Bitcoin crash roughly 80% from its highs, only to rebound and drive even higher.

Technical Support: The 200-week Exponential Moving Average (EMA) provides critical support around $68,000. If this level holds, it could trigger a technical bounce.

Risks of Continued Decline

However, analysts also warn of the following risks:

Regulatory Uncertainty: Despite the Trump administration's crypto-friendly stance, Congress has made slow and uneven progress on crypto-related legislation. Critical market structure rules remain stalled.

Lack of Utility: Some economists point out that cryptocurrency's revolutionary promises haven't materialized in meaningful ways for everyday use.

Declining Institutional Confidence: Bloomberg data shows that while Bitcoin ETFs are seeing negative flows, the majority of ETF holders are sitting on paper losses, while Bitcoin OGs are doing most of the selling.

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What Should Investors Do?

Financial Advisors' Recommendations

Members of the CNBC Financial Advisor Council offer the following advice:

Control Position Size: Certified Financial Planner Carolyn McClanahan suggests, "To me, no one should hold more than 5% in any concentrated asset."

Long-term Perspective: If you're optimistic about Bitcoin long term, this drop could be a buying opportunity.

Clear Strategy: "Even with a small stake in crypto, you should 'have a process for investing and understanding when to buy and sell,'" said Ivory Johnson, CFP, founder of Delancey Wealth Management.

Risk Management: Know why you own cryptocurrency and adjust your position based on your risk tolerance.

Global Regulatory Environment's Impact

U.S. Position

Despite broad support for cryptocurrency from the Trump administration, regulatory progress has been slow. Citi analysts wrote: "Although there has been progress on crypto legislation, the pace has been slow and uneven."

Lawmakers have advanced pieces of crypto-related legislation in recent months, including efforts to clarify how digital assets are regulated and how stablecoins should be overseen. But broader rules on market structure, seen as critical for bringing more certainty to the sector, remain stalled in Congress.

Stablecoin Compromise

Regarding the much-anticipated Clarity Act, rumors suggest crypto firms are discussing a stablecoin compromise involving community banks. Puckrin comments: "This is no longer an 'us versus them' situation."

For a global stablecoin ecosystem to thrive, banks must be part of it. Therefore, "involving community banks is a smart move – both politically and economically."

Frequently Asked Questions (FAQ)

Q1: Why did Bitcoin crash on February 5, 2026?

A1: The main reasons include the Federal Reserve's hawkish stance, mass institutional investor withdrawals, whale selling, over $800 million in leveraged position liquidations, and extreme market panic. The surging Dollar Index also made risk assets less attractive.

Q2: How low could Bitcoin go?

A2: Analyst predictions vary. Key support levels are at $68,400 and $60,000. Stifel analysts warn that in a worst-case scenario, Bitcoin could fall to $38,000 (a 70% decline), though this represents an extreme bearish outlook.

Q3: Is now a good time to buy Bitcoin?

A3: It depends on your investment goals and risk tolerance. Some financial advisors believe that if you're optimistic about Bitcoin's long-term prospects, this could be a buying opportunity. However, other experts warn of potential further declines. It's recommended not to allocate more than 5% of your portfolio to cryptocurrency.

Q4: What's the outlook for Ethereum?

A4: Ethereum faces similar pressures as Bitcoin, having fallen to its lowest level since May 2025. Key support levels are at $2,000 and $1,850. If it can reclaim above $2,250, the technical picture may improve.

Q5: When can the crypto market rebound?

A5: No one can accurately predict market bottoms. History shows that Bitcoin has rebounded after multiple declines of around 80%. Catalysts for a rebound could include Fed policy shifts, regulatory clarity, or technical support levels holding.

Q6: Will the U.S. government bail out the crypto market?

A6: No. Treasury Secretary Scott Bessent clearly stated that the U.S. government lacks the authority to bail out cryptocurrencies in the event of a crash. Investors should not count on government rescue.

Q7: Why is there such a divergence between gold and Bitcoin performance?

A7: Despite being called "digital gold," Bitcoin behaves more like a high-risk asset than a safe haven. Amid geopolitical uncertainty, traditional safe haven gold rose 24% while Bitcoin fell 44%, showing the fundamental difference between the two.

Q8: How do I start trading on MEXC?

A8: Visit the MEXC official website, click register, complete KYC verification, and you can start trading. MEXC offers zero-fee trading and a wide selection of cryptocurrencies - the ideal platform for market participation.

Conclusion

The cryptocurrency crash of February 5, 2026, marks a dramatic cooldown from last year's euphoria. Bitcoin's plunge from its all-time high of $126,000 to below $70,000 - a nearly 50% decline - reflects the combined impact of institutional withdrawals, regulatory uncertainty, macroeconomic pressures, and deteriorating market sentiment.

While the market may continue to face pressure in the short term, long-term holders view this as a normal part of Bitcoin's "four-year cycle." The key question is whether support at $70,000 and $68,400 can hold. If they hold, a technical rebound could emerge; if they break, lower levels may be tested.

For investors, it's important to remain rational, control position sizes, and understand your investment objectives and risk tolerance. The high volatility of the cryptocurrency market presents both risks and opportunities - the key is knowing how to navigate them.

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Disclaimer

The content of this article is for informational purposes only and does not constitute investment advice. Cryptocurrency investment carries high risks and extreme price volatility. Investors should make prudent decisions based on their financial situation and risk tolerance. Past performance does not guarantee future results. Please consult a professional financial advisor before making any investment decisions. The author and MEXC Exchange assume no responsibility for any losses resulting from the use of information in this article.

The cryptocurrency market is not comprehensively regulated by traditional financial regulatory authorities. Investors should fully understand the associated risks. Only invest funds you can afford to lose.

About the Author

The author is a seasoned expert with years of deep involvement in the cryptocurrency industry, possessing extensive experience in blockchain technology and digital asset investment. The author has long tracked global cryptocurrency market dynamics, with in-depth research on mainstream digital assets like Bitcoin and Ethereum, and unique insights into market cycles, technical analysis, and macroeconomic trends.

Through deep analysis of historical data and comprehensive examination of current market conditions, the author is committed to providing investors with objective, professional market analysis and investment references, helping readers make informed decisions in the rapidly changing cryptocurrency market.

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