Bitcoin plunged through the $65,000 mark on 6 February, accelerating a deleveraging cycle that has gripped the digital-asset market for months. The slide follows a more gradual deterioration after BTC fell below $80,000 a week earlier; compared with the early-October peak near $126,000, the coin has now surrendered almost half its value. Traders and investors described the move as a classic forced-liquidation episode: crowded long positions met tightening market liquidity, producing a sharp, self-reinforcing sell-off.
The fallout has not been limited to bitcoin. Ether dropped more than 15% to about $1,846 — its lowest level since last May — as the broader crypto complex registered heavy losses. On exchanges and derivatives venues, funding rates and margin calls flipped rapidly, and retail and leveraged accounts were swept out of positions. Industry trackers reported north of 180,000 liquidations in the most intense sessions, an indicator of how concentrated leverage remains across futures and margin desks.
Several structural factors help explain why a price wobble turned into a rout. After a prolonged bullish run in late 2024 and early 2025, many market participants adopted sizable leverage, betting on continued momentum and a stabilising macro backdrop. That positioning makes the market intrinsically fragile: when price moves break critical technical thresholds, automatic deleveraging and stop-loss cascades reduce available buyers exactly when sellers dominate. At the same time, elevated correlations between cryptocurrencies and other risk assets mean that periods of stress can transmit into equities and commodity markets, narrowing the pool of buyers willing to absorb distressed selling.
The immediate consequences are plain. Retail portfolios have been heavily hit, derivatives desks face elevated counterparty risk, and lending platforms may see an uptick in defaults or forced liquidations if volatility persists. For miners and service providers, lower spot prices compress margins and can alter investment timetables for hardware and power contracts. For long-term institutional holders and new entrants, the rout tests risk-management practices and the resilience of product structures such as leverage ETFs and custody arrangements.
Looking ahead, the market faces two plausible paths. If deleveraging continues and liquidity remains thin, prices could test materially lower levels before a durable base is found; that scenario would likely invite renewed regulatory scrutiny and a re-pricing of risk across crypto-linked products. Alternatively, a rapid absorption of forced selling by long-term buyers or a return of risk appetite in global markets could stabilise prices and set the stage for a recovery, albeit with higher dispersion and less crowding than before. Key variables to watch are margin requirements on major exchanges, ETF and institutional flows, funding rates in futures markets, and macro liquidity conditions that influence risk-taking more broadly.