The recent sharp declines in Bitcoin and Ethereum are the result of deteriorating macro expectations, the contagion from the flash crash in gold, ETF capital outflows, high leverage liquidations, and the collapse of regulatory and narrative confidence. As of February 1, Bitcoin briefly fell below $78,000, Ethereum dropped over 17% at one point, and approximately $1.6 billion was liquidated across the entire network.

Key Reasons Overview

Deteriorating macro expectations: The Fed's rate cut expectations have cooled, dollar liquidity tightening expectations have risen, institutions are reducing holdings of high-risk assets, shifting to cash and US Treasuries.

Gold flash crash contagion: On January 31, the gold "flash crash" triggered a global sell-off of risk assets. Bitcoin did not exhibit safe-haven properties; instead, it amplified the decline, accelerating the collapse of the "digital gold" narrative.

ETF capital outflows: Bitcoin spot ETFs continue to see net outflows, institutional buying is weak, and the market lacks support from buyers.

High leverage liquidations: When prices break below key support levels (such as Bitcoin at $80,000, Ethereum at $2,500), it triggers forced liquidations of leveraged longs, creating a negative feedback loop of "decline—liquidation—further decline," sharply increasing short-term selling pressure.

Regulatory and policy uncertainty: The implementation of new regulations for the US crypto industry has been delayed, regulatory expectations are unclear, undermining institutional confidence and further prompting capital withdrawal.

Market confidence collapse: Bitcoin failed to be supported during USD weakness and gold rallies, safe-haven and inflation-hedging narratives have failed, and investor confidence in its asset allocation value has declined.

Key Timeline (1.29-2.1)

• 1.29: Bitcoin drops below $85,000, Ethereum falls over 8%, and weakness in tech stocks and liquidity concerns spill over into the crypto market.

• 1.31: Gold flash crash occurs, risk appetite plunges, and selling pressure in the crypto market intensifies.

• 2.1: Bitcoin falls below $80,000, Ethereum's decline widens, widespread liquidations across the network, and the total market cap evaporates approximately $111 billion.