Bitcoin is spiraling through one of the most brutal single-day selloffs in its history, plunging below $61,000 on February 5 as a cascading wave of forced liquidations tears through leveraged positions across the cryptocurrency market. The flagship cryptocurrency is now down nearly 30% for the week alone, erasing all gains accumulated since the post-election rally that followed President Donald Trump’s re-election in November 2024.
TL;DR
- Bitcoin drops below $61,000, marking a 50% decline from its October 2025 all-time high of $126,272
- $2.56 billion in leveraged positions liquidated in a single day, with longs accounting for 93% of the carnage
- Forced deleveraging, not fundamental capitulation, is driving the selloff according to VanEck analysts
- Companies holding Bitcoin on their balance sheets see stock prices tumbling alongside crypto
- Crypto Fear and Greed Index plunges to 11 — Extreme Fear — its lowest sustained reading since mid-2022
The Cascade Begins: How Leveraged Unwinding Fueled the Crash
The events of February 5 are not unfolding in isolation. The selloff that is devastating crypto markets actually began on January 31, triggered by hawkish sentiment surrounding the nomination of a new Federal Reserve Chair and large-scale forced selling by institutional crypto funds. What started as a correction has rapidly morphed into a full-blown liquidation spiral that traders are already calling “Black Sunday II” — a reference to the devastating weekend that produced $2.56 billion in single-day liquidations.
According to data from CoinGlass cited by Reuters, leveraged long positions are being wiped out at an extraordinary pace. Long traders account for approximately 93% of all liquidated positions, with Bitcoin and Ethereum bearing the brunt of the damage. Bloomberg reports that the unwinding of leveraged bets is accelerating the selloff, creating a self-reinforcing cycle where falling prices trigger more margin calls, which in turn drive prices even lower.
The mechanism is brutally simple and has played out before in crypto history. Traders who borrowed to amplify their Bitcoin positions are being forcibly liquidated when the price drops below their margin maintenance requirements. These automated sell orders flood the market with supply, pushing prices down further and triggering yet another round of liquidations. On this day, the cycle is spinning with terrifying speed.
From $126K to $61K: A 50% Plunge in Four Months
The magnitude of the decline is staggering when viewed from the perspective of Bitcoin’s all-time high. Just four months ago, on October 6, 2025, Bitcoin reached a record price of $126,272, capping off an extraordinary bull run fueled by the approval of spot Bitcoin ETFs, institutional adoption, and post-election euphoria. Now, at $61,000, the world’s largest cryptocurrency has lost more than half its value — a drawdown that exceeds 50% from peak to current levels.
The decline is erasing entire chapters of crypto market history. All gains accumulated since Trump’s election victory in November 2024, which had set off a speculative rush into cryptocurrencies, have been wiped clean. Bitcoin is now trading at levels not seen since before that pivotal political moment, leaving investors who bought during the euphoria facing significant unrealized losses.
Corporate Bitcoin Holders Feel the Pain
The fallout is not contained to individual traders and crypto-native funds. According to a Reuters report published on February 5, turbulence in the cryptocurrency market is dragging down shares of companies that hold Bitcoin and other digital assets on their balance sheets. These corporate crypto treasuries, once celebrated as forward-thinking strategic moves, are now sparking concerns over potential broader strains in the sector.
Publicly traded companies that embraced the Bitcoin treasury strategy during the bull run are watching their stock prices correlate increasingly with Bitcoin’s declining value. The concern among analysts is that continued crypto weakness could trigger margin calls or force these companies to sell their Bitcoin holdings at a loss, creating another source of selling pressure in an already fragile market.
Orderly Deleveraging or Capitulation? Analysts Disagree
Not all market observers view the current crash as a sign of impending doom. VanEck’s head of digital assets research, Matthew Sigal, characterizes the February selloff as “orderly deleveraging rather than capitulation.” In analysis published on February 5, VanEck notes that despite a roughly 20% year-to-date decline, leverage has normalized and volatility remains below prior bear-market levels. The firm argues that the current correction is driven primarily by leverage reduction rather than broad-based capitulation of the long-term spot holder base.
This interpretation is supported by on-chain data showing that long-term Bitcoin holders — addresses that have held their coins for more than 155 days — are not selling in significant quantities. The selling pressure is concentrated among short-term holders and leveraged traders, suggesting that the market’s structural foundation remains intact even as the leverage layer is violently scrubbed clean.
However, the psychological impact is undeniable. The Crypto Fear and Greed Index has plunged to 11, registering “Extreme Fear” at its lowest sustained reading since the depths of the 2022 bear market. Social media is filled with declarations that the bull market is over, and retail investors who entered during the late-2024 euphoria are experiencing their first genuine crypto winter.
ETF Outflows Add Fuel to the Fire
Spot Bitcoin ETFs, which had been the darling of the 2024-2025 bull run and attracted tens of billions in institutional capital, are now contributing to the downside pressure. After a sustained streak of $3.8 billion in net outflows, the ETFs have flipped from being net buyers to net sellers, creating a structural headwind that was absent during previous market downturns. The ETF channel, which once provided a steady bid under the Bitcoin market, is now acting as a conduit for institutional selling.
This dynamic represents a fundamental shift in Bitcoin’s market structure. For the first time, a significant portion of Bitcoin’s price discovery is mediated through regulated, exchange-traded products that respond to traditional equity market sentiment. When tech stocks sell off and risk appetite diminishes in equity markets, Bitcoin ETFs experience outflows that translate into direct selling pressure on the underlying asset.
Why This Matters
The events of February 5, 2026, represent a critical stress test for Bitcoin and the broader cryptocurrency market. The speed and violence of the selloff — a 30% weekly decline, $2.56 billion in liquidations, and a sub-$61,000 price point — are testing the conviction of every market participant. What makes this moment particularly significant is the debate over whether this is a healthy deleveraging that resets the market for its next leg up, or the beginning of a deeper bear market that could see Bitcoin test even lower levels.
The answer likely depends on what happens next. If VanEck’s thesis of orderly deleveraging proves correct, and long-term holders maintain their positions while leverage is purged from the system, Bitcoin could be establishing a cycle bottom in the $60,000 range. Bernstein analysts are already projecting a bottom in this zone during the first half of 2026, with recovery expected later in the year. But if the liquidation spiral continues and triggers forced selling from corporate treasuries and ETF outflows, the path lower remains open. For now, the market holds its breath and watches whether $60,000 holds as support or gives way to even deeper losses.
Disclaimer: This article is for informational purposes only and does not constitute financial advice. Cryptocurrency investments carry significant risk, including the potential loss of principal. Past performance is not indicative of future results. Always conduct your own research and consult with a qualified financial advisor before making investment decisions.
$2.56B liquidated, 93% longs. been there, felt that. never again leveraging more than 3x on BTC
calling it Black Sunday II is accurate. this felt exactly like the cascading liquidation events from 2021 but worse because the macro backdrop is so hostile
^ the tariff stuff is the real driver here. forced deleveraging is just the mechanism
50% from ATH and Fear Index at 11. if you have dry powder this is where the conviction trade happens or you sit out
93% longs getting rekt is just leverage market working as designed. no sympathy