Bitcoin bounced back above $70,000 over the weekend after one of the most violent selloffs in recent memory drove prices to 16-month lows near $60,000. The bitcoin recovery comes amid historic fear - the Crypto Fear and Greed Index touched 5, a reading so extreme it has only been matched a handful of times in the index's history.
The past week will go down as one of the most turbulent in crypto markets since the FTX collapse. Between cascading liquidations totaling billions of dollars and macro headwinds from U.S.-China trade tensions, traders were left scrambling for exits. But the bounce off those lows has been swift, raising the question every crypto investor is asking: is the worst over, or is this a dead cat bounce before another leg down?
What Triggered the Crash
The selloff didn't come from a single event. It was a confluence of macro pressures that hit risk assets across the board. China's directive for its banks to reduce holdings of U.S. Treasuries rattled global bond markets, sending yields higher and triggering a risk-off wave that spilled into equities and crypto alike.
Bitcoin dropped below $70,000 on February 5, eventually sliding to roughly $60,000 before finding a floor. The "Black Sunday II" crash earlier in the week had already shaken confidence, with over $2.5 billion in leveraged positions liquidated across major exchanges. Coinbase recorded its 8th largest trading day ever by USD volume, processing approximately $3.34 billion in a single session - a sign of genuine capitulation rather than just leveraged longs getting wiped out.
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Ethereum fared even worse on a percentage basis, losing up to 40% from its recent highs in just 10 days and touching levels not seen since May 2025. ETH dropped as low as $1,824 before recovering above $2,000.
Fear Index Hits Single Digits
The Crypto Fear and Greed Index plunged to 5 on February 6 - a reading that screams capitulation. For context, the index hit 6 during the Terra/Luna collapse in 2022 and 10 during the COVID crash in March 2020. Single-digit readings are historically rare, and they tend to mark significant bottoms.
Bitcoin implied volatility (BVIV) surged to 88.55, approaching the FTX-collapse peak of 105. That kind of volatility spike typically signals that the worst of the selling pressure is exhausting itself, though it doesn't guarantee an immediate recovery. The broader crypto market cap shed roughly $2 trillion from its peak, wiping out months of gains in days.
The contrarian read is straightforward: extreme fear has historically been one of the most reliable buy signals in crypto. Warren Buffett's famous advice about being greedy when others are fearful applies here, though the timing of any recovery remains uncertain. Understanding liquidation cascades is critical for navigating these conditions.
The Recovery: Real or Relief Rally?
Bitcoin's bounce back above $70,000 was driven by several factors. Technology stocks stabilized on Friday, with the Nasdaq recovering from its worst week in months. Precious metals rallied alongside crypto, suggesting that the broader risk-off trade was losing steam.
Japan's political developments added unexpected tailwind. Trade policy signals from the Takaichi administration boosted sentiment in Asian markets, with XRP gaining nearly 2% on the news. The broader altcoin market followed Bitcoin higher, though most tokens remain well below their pre-crash levels.
Institutional signals were mixed but leaned slightly bullish. Citigroup reiterated its "buy" rating on Strategy (formerly MicroStrategy) with a $325 price target, even as the company reported $12.4 billion in net losses for Q4 2025. CEO Michael Saylor and President Phong Le reaffirmed their commitment to buying more Bitcoin, signaling that at least one major institutional buyer sees current prices as attractive. Meanwhile, BitMine made headlines by purchasing a large block of Ethereum during the dip, betting that the charts point toward recovery.
On-Chain Data: Who's Buying the Dip?
The on-chain picture is more nuanced than price alone suggests. While retail traders panicked and sold, large wallet addresses (commonly called "whales") were accumulating during the drawdown. This divergence between retail selling and institutional buying has preceded major recoveries in previous cycles.
Exchange outflows picked up significantly during the crash, with substantial Bitcoin moving from centralized exchanges to cold storage. When investors pull coins off exchanges, it typically signals a long-term holding mentality rather than speculative trading. For those building positions during downturns, dollar-cost averaging remains one of the most effective approaches.
The derivatives market has also cooled substantially. Open interest across major futures platforms dropped by over 30% during the liquidation cascade, effectively resetting the leverage that had built up during the previous rally. Lower leverage means fewer forced sellers, which tends to create a more stable base for any recovery.
Macro Outlook: What Comes Next
The macro backdrop remains uncertain. China's Treasury selloff directive introduces a new variable that markets haven't fully digested. If Chinese banks follow through aggressively, rising U.S. yields could put continued pressure on risk assets including crypto.
On the flip side, Nouriel Roubini's "crypto apocalypse" call on February 4 might actually be a positive contrarian indicator. Roubini has been consistently bearish on crypto since its inception, and his most vocal bearish calls have historically coincided with major bottoms rather than the start of sustained downtrends.
Keeping your holdings secure during volatile periods is more important than ever. If you haven't reviewed your security practices recently, a wallet security checkup is worth the time.
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The Bottom Line
The crypto market just went through a stress test that rivals some of the most severe drawdowns in its history. Bitcoin's recovery above $70,000 is encouraging, and the fear index reading of 5 may prove to be one of 2026's most significant buy signals. But the road ahead depends heavily on whether macro conditions stabilize and whether institutional buyers continue to step in at these levels.
For long-term holders, single-digit Fear and Greed readings have historically been excellent entry points. For active traders, the reset in leverage and cooling of derivatives markets suggests the most aggressive selling is likely behind us - though volatility will remain elevated as markets digest the geopolitical uncertainty.
The next major test comes this week as U.S. markets fully process the China Treasury news and traders watch whether Bitcoin can hold above the psychologically important $70,000 level.
Related Reading
- Bitcoin Crashes to $74,674 in 'Black Sunday II' as $2.5B in Positions Liquidated
- Crypto Liquidation Cascades: Complete Prediction and Trading Guide
- Bitcoin Drops Below $82,000 as $1.6 Billion in Liquidations Shake Crypto Markets
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