Why Is Bitcoin Dropping? Reasons for 47% Crash from All-Time Highs

Bitcoin crashed below $66,000 for the first time since November 2024. It’s a brutal 47% free fall from October 2025’s peak of $126,000. Over $200 billion in market value evaporated in just a few weeks, which triggered $2 billion in forced liquidations and dragged down every major cryptocurrency in the process.

If you’re watching your portfolio bleed and wondering what happened, you’re not alone. Even experienced traders are searching for concrete answers. Because this crash raises serious questions about Bitcoin’s role in portfolios and whether the “digital gold” narrative holds any water when markets get volatile.

Here’s what’s driving this collapse and where Bitcoin might be headed next. Although no one can predict the future, we want you to be prepared for what’s coming next.

What Caused Bitcoin’s Price to Drop from $126,000?

Bitcoin’s crash didn’t start in February. It started back in October when Bitcoin hit $126,000, and everything looked perfect.

Then the cracks appeared.

Four major factors triggered the collapse:

• Microsoft earnings miss – Tech stocks cratered when Microsoft missed its late January earnings. Nasdaq dropped 2%, Microsoft fell 10%, and Bitcoin got caught in the selloff because it trades like a volatile tech stock now, unlike gold.
• MicroStrategy stopped buying aggressively – The company owns 671,268 BTC and provided consistent demand for months. When their buying spree slowed in late 2025, Bitcoin lost a critical support mechanism. Traders noticed immediately.
• Federal Reserve uncertainty – Kevin Warsh replacing Jerome Powell as Fed chair created questions about monetary policy direction. Mix that with tariff debates and geopolitical tensions, and you see why everyone wants to dump risky assets.
• Forced liquidations created a death spiral – Over $2 billion in leveraged positions got liquidated since late January. Saturday, February 1, saw $2.56 billion in forced closures. It was the 10th-biggest liquidation day in crypto history.

Yuya Hasegawa from Bitbank summed it up: “rising geopolitical risk, a decline in tech equities triggered by Microsoft, and a breakdown in precious metals” all hit at once.

What Do Bitcoin’s Technical Indicators Show?

The charts tell a brutal story. Right now, they’re all pointing in the same direction: Bitcoin is going down.

Multiple timeframes confirm the bearish trend:

• Monthly MACD flipped bearish in November – Eric Crown, a former NYSE Arca options trader, notes this usually signals months of downward pressure, not weeks. When this indicator has flipped in the past, Bitcoin faced extended downturns lasting quarters.
• Weekly moving averages crossed bearish – The 21-week exponential moving average dropped below the 55-week moving average in January. Crown’s analysis shows this pattern “typically precedes multi-month losses.”
• 2025 closed as a shooting star – The entire year’s price action formed a bearish reversal pattern, confirming what other indicators are showing.
• 50-day moving average breakdown points to $58,000 – Galaxy’s Alex Thorn notes that in the last three bull markets, breaking below this level led to further declines toward the 200-week moving average, currently sitting around $58,000.

Support levels keep breaking faster than expected:

$80,000 broke on January 19th. Then $75,000 failed to hold. Now Bitcoin’s testing $66,000.

Till the last week, the scary part was, each support level was breaking faster than the one before it. That pattern strongly suggested forced selling and liquidations rather than normal price discovery. Now, on 6th of February, Bitcoin has recovered more than $3,500 in one day, finally showing a sign of recovery. Still, the MoM dynamic is not looking good: 29% drop compared to January.

As mentioned above, liquidations affected this decline too, making it less natural and more forced decline. Let’s see how.

How Are Liquidations Accelerating Bitcoin’s Decline?

Leverage turned a manageable correction into a full-blown disaster.

Here’s how the liquidation death spiral works:

1. Bitcoin drops 5%
2. Traders using leverage hit their liquidation price
3. Exchanges automatically sell their Bitcoin to pay back loans
4. That selling pushes Bitcoin down another 3%
5. More traders hit liquidation thresholds
6. More forced selling happens
7. Bitcoin drops another 4%
8. The cycle repeats

The cascading effect is why Bitcoin can crash 15% in just a few hours. It’s not tens of thousands of people suddenly deciding to sell. Its positions getting automatically closed out in waves, with each wave triggering the next one.

Weekend timing made everything worse:

Bitcoin crashed through $70,000 on Saturday when trading volume was thin. Weekends are when crypto markets are most vulnerable because institutional trading desks are closed and liquidity dries up.

By Monday, when institutional buyers returned, Bitcoin had recovered slightly. But the damage was done, with the low of $64,307 setting a new floor dramatically lower than just weeks before.

Why Is Bitcoin Price Dropping While Gold Is Rising?

The performance split between Bitcoin and gold completely destroys the “digital gold” narrative.

Since October:

• Bitcoin: down 47%
• Gold: up 26% (despite the recent drop)
• S&P 500: up 5%

Bitcoin didn’t act as a hedge, and didn’t store value. And it fell harder than stocks while gold rallied.

Here are the two main reasons why they act differently despite being scarce and valuable:

1. Bitcoin and gold play different roles in the financial system

Gold is a mature defensive asset. Bitcoin is a high-beta speculative asset with a scarcity narrative. That difference matters when markets get shaky.

• Gold is held by central banks, used as a reserve asset, and traded primarily for capital preservation with low volatility relative to risk assets.
• Bitcoin is held mostly by retail investors who buy Bitcoin with a bank account. funds, and traders. It is treated as a growth or asymmetric-return asset with high volatility and frequently traded with leverage.
• When markets become nervous, capital behaves predictably: preserve first, speculate later. Money flows out of Bitcoin and into gold, even if both are theoretically “hard assets.”

2. Risk-off environments favor gold, not Bitcoin

Markets always move between risk-on (seeking returns) and risk-off (seeking safety). During risk-off periods, investors reduce exposure to volatile assets. So liquidity becomes more valuable than upside, and capital moves toward assets with long trust histories.

• Gold benefits because it has thousands of years of price memory, performs well during currency stress, recession fears, or geopolitical tension. It also doesn’t depend on market infrastructure functioning perfectly.
• Bitcoin, despite its design, still behaves like a leveraged bet on future monetary systems. It makes it vulnerable during de-risking cycles.

When markets get nervous, investors buy gold and Treasury bonds. They sell Bitcoin aggressively. Here’s a price breakdown recently:

Bitcoin clearly lives in the risk-on bucket now, not in the safe haven bucket where gold sits.

What Needs to Happen for Bitcoin to Stop Falling?

Several factors need to align before Bitcoin finds a sustainable bottom.

Required conditions for a real bottom:

• A technical floor needs to hold for weeks, not days – Every support level that looked promising broke within days of being tested. Until Bitcoin holds somewhere for multiple weeks without breaking down further, traders will remain cautious.
• Macro conditions need to calm down – Fed uncertainty, geopolitical tensions, and recession fears all weigh heavily on risky assets. Bitcoin won’t rally sustainably while stocks are selling off and investors are rushing into Treasury bonds.
• Long-term holders need to finish selling – Thorn’s data shows 2024 and 2025 saw “more profit-taking in dollar terms by long-term holders than any other time in Bitcoin’s history.” That distribution finally started slowing, which could signal we’re approaching a real bottom.
• Bitcoin ETF inflows need to sustain and grow – After two weeks of outflows, U.S. spot Bitcoin ETFs pulled in $562 million on February 3. If those inflows continue accelerating, they could provide sustained buying pressure.
• A positive catalyst would help – Right now, there’s a “scarcity of near-term catalysts”. What might work? Mainly, Fed policyis shifting toward easing, or geopolitical tensions cooling.

The problem is, none of these factors is guaranteed soon. Bitcoin could easily chop sideways or drift lower for months while the market waits.

How Does This Drop Compare to Previous Crashes?

Bitcoin has crashed before, multiple times. Each cycle had different characteristics but similar emotional patterns.

Historical context:

• 2017-2018: 84% decline – Bitcoin fell from $19,783 to $3,122 over about a year. Retail-driven parabolic rally fueled by ICO mania. Recovery to new highs took almost three years.
• 2021-2022: 78% decline – Bitcoin dropped from $69,000 to $15,476 over roughly 13 months. Rising interest rates, Terra/Luna collapse, and contagion through crypto lenders caused it. Recovery took two years.
• 2025-2026 (current): 47% decline so far – Bitcoin down from $126,000 to $66,000 over about four months. Similar pattern: parabolic rally from institutional adoption, euphoric top, sharp correction as leverage unwinds.

What’s different this time:

• Regulated Bitcoin ETFs exist
• Major corporations hold Bitcoin in treasury
• Traditional finance is directly involved

These institutional participants could provide support that didn’t exist before. But they can also accelerate selling if risk management forces them to reduce exposure.

Historical patterns suggest the current 56% drop could extend to 60-70% based on previous cycles. But the institutional infrastructure surrounding Bitcoin today is completely different than 2018 or 2022.

Could Bitcoin Recover Quickly?

While the technical damage is severe, Bitcoin has proven remarkably resilient in previous cycles. The correction might actually set up conditions for the next major rally.

Historical recovery patterns suggest potential upside:

• Average recovery time is getting shorter – The 2017-2018 crash took three years to recover. The 2021-2022 crash took two years. Institutional infrastructure and ETF adoption could accelerate the next recovery cycle.
• Institutional buying resumed at $75,000 – As we mentioned above, U.S. spot Bitcoin ETFs pulled in $562 million on February 3 when Bitcoin tested $75,000. FBTC led with $153.3 million, IBIT added $142 million. This suggests institutions view current prices as attractive entry points.
• Long-term holder accumulation zones create floors – Bitcoin’s realized price sits around $56,000, representing the average cost basis of all coins. Historically, when Bitcoin drops to or below realized price, it marks major accumulation opportunities that precede strong rallies.
• Bitcoin has never failed to set new all-time highs after crashes – Every single previous crash, no matter how severe, eventually led to new all-time highs. The 84% crash in 2017-2018 was followed by a rally to $69,000. The 78% crash in 2021-2022 was followed by a rally to $126,000.

Potential recovery scenarios:

If Bitcoin bottoms around $56,000-$60,000 as analysts predict, a return to $126,000 represents a 110% gain from those levels. Historical patterns show Bitcoin typically gains 150-300% from bear market lows to new all-time highs.

Some bullish analysts point to catalysts that could accelerate recovery:

• Clearer crypto regulation in major markets
• Corporate treasury buying resuming (MicroStrategy, others)
• Fed policy shifting toward rate cuts
• Weakening dollar driving alternative asset demand
• Bitcoin halving effects continuing to reduce supply pressure

Standard Chartered analyst Geoff Kendrick maintains a $200,000 Bitcoin price target for 2026, suggesting the current crash represents a 63% discount to where Bitcoin could trade by year-end.

The reality is, nobody rings a bell at the bottom. If you’re sitting on losses right now, you’re probably feeling sick. If you sold near the top, you’re wondering whether to buy back in. If you’re on the sidelines, you’re trying to time the perfect entry.

All of those feelings are completely normal during crashes like this.

Whether current prices represent an opportunity or a falling knife depends entirely on whether you believe Bitcoin’s long-term trajectory remains intact despite short-term chaos. That’s a decision only you can make based on your own research, risk tolerance, and time horizon.

The Bottom Line

The question you probably have is, “Is Bitcoin dying?” Perspective matters. Bitcoin has crashed 40%+ multiple times in its history, and every previous crash eventually led to new all-time highs. The difference this time is regulated ETFs, corporate treasury adoption, and traditional finance involvement that didn’t exist in previous cycles.

The crypto market continues evolving. Whether Bitcoin finds support at current levels or keeps falling depends on factors mostly outside crypto’s control. Fed policy, economic conditions, geopolitical stability, and whether risk appetite returns to financial markets are just some of them.

But one pattern has held true across every Bitcoin cycle: panic creates the best buying opportunities for those with conviction and patience.

Written by

Nurlan Suleymanov

Nurlan is a crypto journalist with six years of experience simplifying blockchain and digital finance topics for mainstream audiences. He focuses on beginner-friendly education, helping new users understand how crypto works in real life. At Paybis, he writes practical guides and explanations designed to make digital assets more accessible and less intimidating.