Bitcoin Crash 2026: $2 Trillion Crypto Market Wipeout – Biggest One-Day Drop Since 2022 Explained, Triggers, and Outlook

Global cryptocurrency markets endured severe turbulence on February 5, 2026, as Bitcoin experienced its most dramatic single-session decline in over a year, dragging the entire sector lower amid widespread risk aversion.

The leading digital asset tumbled as much as 12.6% intraday, reaching lows near $63,300—its weakest point since October 2024—before partial recovery attempts. This move erased substantial portions of the advances seen following Donald Trump’s 2024 election victory and pro-crypto rhetoric.

Total crypto capitalization has shed approximately $2 trillion from its early October 2025 high of around $4.38 trillion, with roughly $800 billion vanishing in the prior month alone. Bitcoin now sits down roughly 28% year-to-date, while Ethereum has shed nearly 38% in the same timeframe.

Cascading Liquidations Fuel Panic Selling

Forced position closures played a central role in amplifying the downturn. Data from tracking platforms showed nearly $1 billion in Bitcoin leveraged bets liquidated within 24 hours, as cascading price breaches triggered margin calls. This created a feedback loop of intensified selling, pushing values lower and ensnaring more traders.

The broader altcoin space followed suit, with many tokens posting double-digit losses and heightening overall market stress.

Broader Risk-Off Environment Hits Hard

The crypto rout unfolded against a backdrop of retreating appetite for high-volatility assets. Technology equities, particularly those tied to artificial intelligence narratives, faced sharp corrections, spilling over into digital tokens that have increasingly correlated with Nasdaq performance.

Precious metals exhibited unusual swings, with silver dropping significantly in leveraged unwinds, adding to the sense of market fragility.

Monetary Policy Uncertainty Looms Large

Investor nerves were further strained by President Trump’s nomination of Kevin Warsh—a former Fed governor known for hawkish leanings—to lead the Federal Reserve. Markets interpreted this as a potential signal for balance sheet reduction and tighter conditions, reversing the liquidity abundance that historically buoyed crypto rallies.

Experts noted that diminished central bank support removes key tailwinds for speculative assets like cryptocurrencies.

Institutional Flows Turn Negative

Sustained pressure has emerged from traditional finance channels. Spot Bitcoin exchange-traded funds in the US recorded massive redemptions—exceeding $3 billion in January 2026 alone, following billions in prior months. This trend reflects waning enthusiasm among professional allocators, who appear to be de-risking amid prolonged weakness.

Analysts from major banks attribute much of the ongoing slide to these ETF exits, signaling deeper pessimism in mainstream circles.

Tech Correlation and Miner Vulnerabilities

Bitcoin’s alignment with growth-oriented stocks has become pronounced, meaning AI and software sector pullbacks directly exacerbate crypto declines. Observers warn that persistent low prices could strain mining operations, potentially forcing asset sales or shutdowns that feed further downward pressure.

Retail-heavy ownership adds fragility, as everyday participants often react swiftly to volatility.

Expert Views: Capitulation or Prolonged Reset?

Nic Puckrin of Coin Bureau described the environment as “full capitulation mode,” suggesting this phase extends beyond brief corrections into multi-month resets based on historical patterns. He highlighted whale selling and institutional retreats as dominant forces.

Other voices caution that without renewed liquidity or positive catalysts, downside risks remain elevated, with some technical targets pointing toward $55,000–$60,000 zones if key supports fail.

Looking Ahead

With over half of Bitcoin’s October 2025 peak value erased and sentiment at multi-year lows, the sector faces questions about whether this marks a deeper bear phase or eventual base-building. Upcoming Fed developments, macroeconomic data, and potential policy shifts will likely dictate near-term direction.

For now, heightened caution prevails as participants navigate one of the most challenging periods since major 2022 disruptions.

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.