Bitcoin and Ethereum are enduring their worst start to a calendar year in over a decade, as a relentless selloff driven by tariff uncertainty, institutional ETF outflows, and forced liquidations continues to punish crypto markets with no clear end in sight.
Bitcoin is currently trading around $67,000, down nearly 24% since January 1, while Ethereum has cratered approximately 34% to roughly $2,000. According to analysis of CoinGecko data dating back to 2013, these represent the worst year-to-date performances on record for both assets. Despite notching modest gains on Thursday, the two largest cryptocurrencies by market cap remain mired in what many analysts are now openly calling a new Crypto Winter.
TL;DR
- Bitcoin is down ~24% YTD to ~$67,000; Ethereum has fallen ~34% to ~$2,000
- These are the worst starts to a year in over a decade for both assets
- Crypto has diverged from equities — the S&P 500 is up 0.4%, gold has surged 17%
- Institutional ETF outflows, tariff chaos, and leverage liquidations are driving the selloff
- Crypto lender BlockFills suspended withdrawals with $75M in losses
A Stunning Divergence From Traditional Markets
What makes this downturn particularly striking is how dramatically crypto has decoupled from traditional financial markets. While Bitcoin and Ethereum have been bleeding, equities have nudged upward. The S&P 500 is up approximately 0.4% year-to-date, and the Dow Jones has risen 2.3%. Precious metals, which experienced a brief correction in late January, have roared back — gold has rocketed roughly 17% to start 2026, and silver has jumped about 14%.
This divergence has left many market participants scratching their heads. Previous crypto bear markets followed explicit catalysts — the collapse of FTX in November 2022, the Terra/Luna implosion in May 2022, or China’s crypto ban in 2021. This time, there has been no single catastrophic event to point to. Instead, the selloff has been a slow, grinding bleed fueled by a combination of macro headwinds and crypto-specific factors.
The Tariff Overhang and Geopolitical Risks
President Trump’s escalating tariff threats have cast a long shadow over risk assets. The administration’s unpredictable trade policy has kept investors on edge, with the Supreme Court yet to issue a ruling on the legality of several tariff measures. Polymarket odds of U.S. military strikes on Iran before mid-March have topped 50%, adding another layer of geopolitical uncertainty that has traders fleeing from risk-on assets.
On February 5, Bitcoin registered a -6.05 standard deviation move on the rate-of-change Z-score, placing it among the fastest single-day crashes in crypto history. Over $3 to $4 billion in total liquidations swept through the market in the following week, with an estimated $2 to $2.5 billion concentrated in Bitcoin futures alone, according to VanEck analysis. The magnitude was orderly relative to past leverage events, but the speed was extreme.
ETF Outflows Deepen the Pain
Institutional investors have been heading for the exits through spot Bitcoin ETFs, which have seen sustained outflows since late January. The average Bitcoin ETF investor now sits on a 20% paper loss, according to Wintermute, leaving the market vulnerable to further capitulation selling if prices slide below current levels. Bitcoin ETFs bled over $1.1 billion in a three-day stretch in early January, and the outflows have continued intermittently since.
Interestingly, European crypto ETF investors have shown more resilience. Morningstar data indicates European crypto ETF flows were positive in the last two weeks, suggesting investors across the Atlantic are undeterred by Bitcoin’s dramatic February declines and may view the selloff as a buying opportunity.
Casualties Mounting
The downturn is beginning to claim victims beyond just price charts. Chicago-based crypto lender BlockFills suspended customer withdrawals earlier this month and is now exploring a sale after suffering more than $75 million in lending losses, as CoinDesk reported. The firm, backed by Susquehanna, is one of the more high-profile casualties of the current cycle.
Crypto exchanges Coinbase and Gemini reported poor fourth-quarter results, and the broader industry sentiment has shifted decidedly negative. Danny Nelson, a research analyst at Bitwise, captured the mood succinctly: “We’re certainly in a Crypto Winter. You can tell by how investors react to good news. They don’t.”
Reasons for Cautious Optimism
Despite the bleak picture, some analysts see light at the end of the tunnel. The crypto industry currently enjoys unprecedented regulatory acceptance in the United States, with the White House actively hosting talks on digital asset market structure legislation. Wall Street continues to deepen its involvement in the asset class, and the structural foundations of the crypto ecosystem are arguably stronger than at any previous point in history.
Tom Lee, co-founder of Fundstrat and a well-known crypto bull, stated in a recent interview that “we’re really close to the end” of the current downturn. Bitwise’s Nelson echoed the sentiment, noting that “crypto’s reality is getting stronger” and that recent institutional and regulatory changes “are going to last well beyond the current downturn.”
Why This Matters
For investors, the current environment presents a classic risk-reward dilemma. Bitcoin has fallen more than 46% from its October all-time highs, and the technical picture remains fragile. However, the structural tailwinds for crypto — regulatory clarity, institutional adoption, and growing mainstream acceptance — have never been stronger. The divergence from equities and gold suggests that crypto-specific factors, not just macro conditions, are driving the selloff, which could mean a faster recovery once sentiment shifts. The key risk remains further ETF capitulation: if the average ETF investor’s 20% loss deepens significantly, forced selling could push Bitcoin toward the $60,000 level that options traders are heavily hedging against.
Disclaimer: This article is for informational purposes only and does not constitute financial advice.
no single catastrophic event and yet we are down 24% on btc and 34% on eth. sometimes the market just bleeds with no narrative attached
blockfills suspending withdrawals with 75M in losses feels like the kind of thing that kicks off a bigger cascade. seen this movie before
the divergence with gold is what really gets me. gold up 17% and crypto cant catch a bid. tells you where the flight to safety is actually going