Bitcoin (BTC) has experienced a significant decline, dropping from its October 2025 peak of over $126,000 to approximately $68,876 as of February 7, 2026—a decrease of nearly 45%. This downturn is attributed to a combination of factors impacting the cryptocurrency market.
1. Institutional Sell-Offs and ETF Outflows
Institutional investors have been reducing their exposure to Bitcoin, leading to substantial outflows from U.S. spot Bitcoin exchange-traded funds (ETFs). Notably, these ETFs saw outflows of more than $7 billion in November, around $2 billion in December, and over $3 billion in January alone. This trend indicates a waning interest from traditional investors, contributing to the downward pressure on Bitcoin's price. �
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2. Derivatives Market and Leverage Unwinding
The derivatives market, including futures and options, has played a significant role in Bitcoin's price decline. A sharp decrease in open interest—from $61 billion to $49 billion in just one week—suggests a massive deleveraging event. This unwinding of leveraged positions has led to forced liquidations, exacerbating the price drop. �
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3. Geopolitical and Macroeconomic Uncertainty
Global geopolitical tensions, such as conflicts involving Russia and Ukraine, as well as U.S. threats against Iran, have heightened market uncertainty. Additionally, economic indicators like a slowing labor market and persistent inflation above the Federal Reserve's target have made investors more risk-averse, leading to a sell-off in risk assets, including cryptocurrencies. �
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4. Regulatory Concerns and Governance Issues
The nomination of Kevin Warsh as the next Federal Reserve Chair, known for favoring higher interest rates and a smaller Fed balance sheet, has unsettled markets. Furthermore, governance concerns have emerged, particularly regarding the Trump family's crypto firm, World Liberty Finance, which sold a significant stake to UAE-linked investors. These developments have contributed to a loss of confidence in the crypto market. �
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5. Market Sentiment and Liquidity Challenges
The Crypto Fear and Greed Index has plummeted to levels associated with "extreme fear," reflecting deteriorating market sentiment. This negative sentiment, coupled with reduced liquidity and trading volumes, has made it more challenging for Bitcoin to find support levels, leading to further price declines. �
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In summary, Bitcoin's recent price decline is the result of a complex interplay of institutional behavior, derivatives market dynamics, geopolitical tensions, regulatory uncertainties, and shifting market sentiment. While these factors have contributed to the current downturn, some analysts believe that the market may stabilize once these pressures subside, potentially setting the stage for a future recovery.
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