The recent sharp decline in Bitcoin over the past few days is the result of a combination of factors including deteriorating macroeconomic expectations, a flash crash transmission in gold, ETF capital outflows, high leverage liquidations, and collapsing regulatory and narrative confidence. As of February 1, Bitcoin briefly fell below $78,000, Ethereum dropped over 17%, and approximately $1.6 billion was liquidated across the network.

Key Reasons Overview

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

Gold flash crash transmission: On January 31, a "flash crash" in gold 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 have continued to experience net outflows, institutional buying has been weak, and the market lacks support from buyers.

High leverage liquidations: When prices break below key support levels (such as Bitcoin at $80,000), it triggers forced liquidation of many 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 accelerating capital withdrawal.

Market confidence collapse: Bitcoin has failed to be supported during periods of US dollar weakness and gold price increases. The safe-haven and inflation-hedging narratives have failed, leading to a decline in investor confidence in its asset allocation value.

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 transmit to 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, network liquidations surge, and the total market cap evaporates about $111 billion.