Bitcoin slumped below the $79,000 mark on the morning of February 1st Beijing time, trading as low as $75,687 intraday and settling around $78,848.5 at the time of reporting — its weakest level since April 2025. The rout erased roughly $111 billion from the wider crypto market in 24 hours and, according to CoinGlass, forced liquidations of more than 420,000 positions, totaling about $2.56 billion.
The sell-off exposes how fragile recent gains have been. Despite a weaker dollar for much of January and a spike in gold to record highs, investors did not rotate into digital assets; spot bitcoin exchange-traded funds have seen net outflows and trading volumes in crypto remain subdued. A dramatic gold-and-silver unwinding late last week failed to redirect safe‑haven capital toward bitcoin, underscoring a weakening correlation between the flagship token and traditional macro hedges.
Market structure and policy uncertainty in the United States have compounded the malaise. New regulatory frameworks for the crypto industry that might have provided clearer trading plumbing or institutional confidence have stalled, leaving market participants cautious. Analysts cited by local media say retail interest is “extremely” depressed and predict low trading volumes could persist for another quarter or two, a condition that magnifies price moves when leveraged positions unwind.
Geopolitics added another layer of ambiguity. Comment by former U.S. president Donald Trump suggesting negotiations with Iran, and a simultaneous Iranian statement by senior adviser Ali Larijani that a negotiation framework was emerging, produced mixed signals about regional risk. Investors who might look to bitcoin as a geopolitical hedge did not flood in, while heavy U.S. military deployments to the Gulf kept headline risk elevated.
The mechanics of the crash — a clustered unwind of leveraged bets and derivatives — highlight structural vulnerabilities in crypto markets. Rapid price drops force margin calls, which then feed further selling into already thin markets. That dynamic, together with persistent ETF outflows and muted institutional demand, challenges bitcoin’s twin narrative as both a trend asset and an inflation hedge; for now, it has failed to play either role convincingly.
Looking ahead, the most important variables to watch are ETF flows, U.S. regulatory decisions and macro drivers such as the dollar and interest-rate expectations. A return of sustained institutional buying or a clear escalation in geopolitical risk could revive prices, but absent those catalysts the market faces continued volatility and the prospect of further capital evaporation. Crypto firms and leveraged retail traders will be most exposed in the near term.