Introduction (Current Reality):
The markets awakened today, February 5, 2026, to a continuation of the panic selling wave that hit cryptocurrencies last night. The fear and greed index sits in the "extreme fear" zone (15/100), a level we haven't seen in a long time. After Wall Street closed in "blood" as we mentioned in yesterday's update, we see today desperate attempts from the bulls to defend key support areas.
The question on every investor's mind right now: Why did this collapse happen? Has the worst ended, or are we facing a new bottom?
First: Why did cryptocurrencies collapse? (Economic and political reasons)
Based on the reading of the complex economic landscape, the causes of this sharp decline can be summarized into three main points pressuring the market:
1. Shock from economic data (inflation and interest):
It seems that the markets were pricing in "excessive optimism" regarding central bank policies. Recent data indicates that inflation remains "sticky," raising concerns among investors that interest rates may stay elevated longer than expected into 2026. This has pulled liquidity from risk-on assets like crypto in favor of bonds and the dollar.
2. Geopolitical tensions and their impact on energy:
Any global political tension immediately affects risk appetite. The current political uncertainty has led major financial institutions to reduce their exposure to volatile markets and hedge with gold and cash, resulting in intense sell-offs in exchange-traded funds (ETFs).
3. Breaking technical levels (Domino effect):
Bitcoin's loss of levels at $78,000 followed by the threat to the $75,000 level triggered thousands of "stop-loss" orders and algorithmic trading bots, creating mechanical selling pressure that crushed prices dramatically.
Second: Will the collapse continue? (Technical outlook)
We are now at a very critical crossroads for Bitcoin (BTC) and Ethereum (ETH):
Bear scenario (negative): If the daily close is below $74,200 (a true break of the psychological support at $75K), then the way will be open to visit the $70,000 - $71,500 area. This scenario is likely if the dollar index (DXY) continues to rise.
Bull scenario (positive): A rebound from here is only possible if "whales" enter to buy at this bottom (Buy the Dip). We need to see a daily close above $76,500 to calm fears.
Third: What should you do now? (Advice for traders)
In the face of "extreme fear," emotions are the number one enemy of your portfolio. Here is a roadmap to deal with the situation:
Don't catch the falling knife: Do not enter long positions with all your capital now. Wait for price stability and the appearance of reversal candles on the 4-hour frame.
Opportunity for enhancement (DCA): For long-term investors, these areas (around $75K) have historically been good accumulation zones and not areas to sell at a loss.
Watch Ethereum (ETH): A drop in Ethereum of nearly 5% indicates weakness in alternative coins (Altcoins). Avoid speculating on small coins (Low caps) until Bitcoin stabilizes.
Summary:
The market is going through a "shakeout" phase for shaky hands. The news is negative, yes, but always remember Warren Buffett's saying: "Be greedy when others are fearful." Watch the daily close carefully, as the coming hours are crucial to determining the entire path for February.
📢 Share your opinions with us: Do you think $75K will hold or are we heading to visit $70K?
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