Bitcoin's Crash in February 2026: From "Super Cycle" Illusions to a Harsh 40% Cut

An Unexpected "Crypto Winter"

In 2025, Bitcoin briefly surged above $126,000, with markets filled with grand narratives like the "Trump Super Cycle," "National Strategic Reserves," and the "Digital Gold Era." Institutional inflows via spot ETFs surged, and leverage players shouted "to the moon." However, from late January to early February 2026, Bitcoin's price plummeted nearly 40%-50% within just a few weeks, halving from its high, and as of the morning of February 6, 2026, it has fallen to the $62,000-$64,000 range, even touching lower intraday. This correction resembles a replay of the 2022 "crypto winter," yet it occurred after a "pro-crypto" government took power, which is shocking.

Why did the "good news" fail? Why did Bitcoin not serve as a hedge but instead become the "high beta scapegoat" for risk assets? This article analyzes the causes of this crash from macro, institutional, leverage, narrative, and technical perspectives, and offers short-term bottom and long-term insights.

1. Macro Main Cause: Sharp Reversal in Risk Appetite and Liquidity Tightening as Killers
The core driver of this crash was not an internal "black swan" in the crypto world but the synchronized collapse of global risk assets.

Continued Hawkish Signals from the Fed: Despite market hopes for dovish policies after Trump took office, the Fed maintained high interest rates (3.50%-3.75%), with Chair Powell stating "not in a rush to cut rates." The new Fed Chair nominee Kevin Warsh is seen as a "hard currency hawk," reinforcing QT and tightening expectations. The dollar index rebounded, and liquidity concerns intensified.
Risk Assets Dropped in Unison: Nasdaq, tech stocks, and AI sectors fell over 4.8% weekly, with growth stocks heavily hit. Bitcoin completely lost its "digital gold" status and followed risk assets downward. Meanwhile, gold surged (up 11%-24% year-to-date), and silver rebounded from a flash crash, indicating capital was flowing out of high-risk crypto into traditional safe havens.

Geopolitical Uncertainty Amplifies Safe-Haven Flows: Tensions between the US and Iran, the arrest of the Venezuelan president, and Trump's comments on Greenland increased uncertainty, but funds did not flow into BTC—instead, they moved into gold and USD.

Result: Bitcoin, once touted as an "inflation hedge," became a "high beta risk asset," indiscriminately sold off in risk-off environments.

2. Institutional Capital Reversal: From Net Buying to Massive Net Outflows

In 2025, spot Bitcoin ETFs were the main driver of price increases, with institutional inflows totaling hundreds of billions of dollars. But in January-February 2026, the situation changed dramatically:
Multiple days of net outflows totaling over $1.5-$1.7 billion (some single days over $500 million), with giants like BlackRock and Fidelity seeing significant redemptions.
Institutions shifted from "net buyers" to "net sellers," with whales and long-term holders starting to reduce positions or cash out at lows.
Some public funds and pension funds indirectly exposed to BTC via MicroStrategy and others suffered billions in paper losses after the crash, raising concerns about secondary selling pressure.
After the fading of "paper enthusiasm," retail investors' suffering was fully exposed. The previously hidden "brutal winter" became fully apparent.

3. Leverage Liquidation Spiral: The Direct Accelerator of the Death Spiral

Excessive leverage in the futures market led to overleveraged longs, and once key support levels (70k→67k→65k→62k) were broken, chain reactions of liquidations became inevitable:
Daily liquidations easily exceeded $1-2 billion, totaling tens of billions overall.
Extreme negative funding rates (persistently over -0.1%) indicated overcrowded short positions.
Weekend and Asian session liquidity was thin, and sell orders hitting "air pockets" caused rapid price drops, forming a classic "liquidity spiral."
This was not a "fundamental breakdown," but a forced deleveraging driven by macro headwinds and excessive leverage.

4. Narrative Collapse: The Demise of the Trump "Pro-Crypto" Myth

After Trump took office, he signed multiple executive orders (strategic Bitcoin reserves, White House crypto framework, etc.), igniting market enthusiasm. But reality fell far short:
The Treasury explicitly stated it would not buy large amounts of BTC or provide bailouts.
Projects linked to Trump's family, like World Liberty Financial, raised conflicts of interest (e.g., $500 million investment from the Abu Dhabi royal family), and Democrats used this to block industry-friendly legislation.
Narratives like "National Strategic Reserves" and "Super Cycle" failed, revealing BTC's fragility in crises rather than strength.
Fear & Greed index dropped to single digits, social media filled with "Crypto is over" and "All-in is dead" messages, and Polymarket bets on BTC dropping below $60k surged.

5. Technical and On-Chain Extreme Signals: Late-Stage Capitulation
Price broke below the 200-week moving average and the energy cost zone ($58k-$60k), but classic "selling climax" signals (massive volume + long lower shadows) have yet to appear.

On-chain Long-Term Holders (LTH) are slowing their sell-offs but not stopping entirely, with whales partially absorbing at lows.
Coinbase premium turned extremely negative, indicating institutional demand dried up.
Patience is needed to wait for real bottom signals.
This crash proves: the crypto market remains highly dependent on macro liquidity and risk appetite. Any "narrative-driven bull market" cannot withstand genuine tightening. Trump’s pro-crypto policies are a long-term positive, but in the short term, "good news is ineffective, bad macro is deadly."