From February 1 to February 5, 2026, the cryptocurrency market experienced a rare and severe correction, with a total market capitalization retracting by approximately $900 billion in just a few days, erasing the gains accumulated earlier. During this period, Bitcoin saw a maximum drawdown of about 38% from its peak, while ETH fell nearly 32% over eight days. The contract market experienced about $850 million in liquidations within 24 hours, with long positions being systematically wiped out. In such extreme market conditions, one side saw whales withdrawing large amounts of cryptocurrency from exchanges and choosing to calmly hoard, while the other side saw aggressive shorts being forced to close positions and then chase long positions after the crash, while sovereign funds quietly adjusted their holdings. What appeared to be a single crash evolved into three completely opposing paths in the hands of different capital.
A Week of $900 Billion Market Capitalization Evaporation: A Panic Replay
● The timeline of market capitalization retraction did not happen overnight. Since October 2025, the total cryptocurrency market capitalization had begun to oscillate at high levels and gradually retract, shrinking by approximately $900 billion, with the real panic erupting from February 1 to February 5, 2026: during these five days, sentiment shifted from "normal correction" to "panic selling," as high-leverage funds that could previously withstand floating losses were forced to exit collectively when key price levels were continuously breached.
● In terms of price trajectory, Bitcoin's drawdown from its peak expanded to about 38%, with multiple instances of rapid fluctuations of over a thousand dollars during trading, and the candlestick patterns showed a cliff-like drop from high levels; ETH, on the other hand, accumulated a decline of about 32% over nearly eight days, with multiple intraday rebounds quickly crushed, and the technical overselling did not bring timely capital support, instead exacerbating the narrative of "every rebound is an opportunity to escape."
● On the contract side, the $850 million in liquidations data vividly presented the brutality of this adjustment: a large number of long positions were forcibly liquidated during the decline, triggering further price drops and igniting a chain reaction of cascading liquidations nested with high leverage. Once key support was heavily breached, even medium to large players with considerable capital were forced to make painful choices between liquidation and margin calls, rapidly thinning the market depth amid panic selling.
● This panic was not an isolated script of the cryptocurrency market. During the same period, silver spot prices plummeted about 16% in a single day, and the extreme volatility in traditional commodities amplified concerns about "cross-market risk linkage"—the rhythm of macro funds seeking safety and deleveraging, once it spreads from major asset classes to cryptocurrency assets, could be magnified into a story of "systematic sell-off," laying the emotional groundwork for subsequent different capital games in the cryptocurrency market.
The Silent Bet of 80,000 ETH Withdrawn
● Amid the spreading panic, a starkly different scene emerged on-chain: approximately 80,000 ETH were withdrawn from Binance, estimated to be about $167 million at the post-crash market price. Against the backdrop of 24-hour liquidations and significant market capitalization shrinkage, such a clearly visible large withdrawal on-chain was like a spotlight shining in the chaos, forcing the market to reassess "who is positioning themselves amid the panic."
● Interpretations of this operation quickly diverged: some viewpoints suggested that such a large withdrawal was more likely to be transferred to cold wallets, representing an intention for long-term holding and risk isolation, serving as a dual hedge against exchange risks and short-term volatility; others speculated that it might involve the settlement or delivery of over-the-counter large trades, being "moved out of sight" from public trading depth to reduce direct impact on market prices. Both interpretations point to one fact—this was not a passive liquidation, but an active asset migration.
● Considering ETH's nearly 32% decline, the core of such whale operations lies in betting on the "cycle": between liquidity and security, they clearly chose to sacrifice immediate selling convenience in exchange for certainty in controlling private keys and long-term holding. This strategy of reverse absorption during a correction is often based on judgments of medium to long-term fundamentals and macro liquidity cycles, rather than on short-term fluctuations of a few hundred dollars.
● More intriguingly, these large withdrawal addresses are widely seen as extensions of Bitcoin OGs and Ethereum whales—they are using the method of reducing exchange risk and increasing self-custody on-chain to "hedge and hoard," forming a stark contrast to the short-term panic at the market level: while some capital perceives risk and chooses to cut losses and exit, another part chooses to quietly lock their chips on-chain during the tightest liquidity and most pessimistic sentiment.
The Emotional Explosion of DASH's Largest Short Position Going Long
● In contrast to the calm withdrawals of whales amid panic, another type of high-leverage player experienced an "emotional explosion." After this round of sharp declines, multi-currency short positions were forced to liquidate massively during the rapid price drop and subsequent rebound, completing a dramatic path of "getting the direction right but the result wrong," typically reflecting the chain reaction of emotion-driven decision-making in extreme volatility.
● Among them, the fate of DASH's largest short position drew significant attention: during the intense market fluctuations, its cumulative floating loss once expanded to about $15.8 million, facing immense margin pressure and additional funding pressure. Originally betting on a decline, the position initially gained paper profits but failed to decisively take profits and exit, ultimately being squeezed into a forced liquidation during the reverse fluctuations, and then being pressured to chase the price upward, intertwining risk exposure and psychological stress.
● The behavior of switching from shorting to going long reflects twofold misjudgments in trend assessment: first, misreading short-term liquidity shocks as a sustainable trend, treating a sudden drop as the starting point of a long-term collapse; second, failing to adhere to their trading system during market reversals, instead being driven by floating losses and FOMO, turning to follow price rather than logic in "adding to the trend," ultimately transforming their positions into a gamble on volatility rather than a game of value.
● In contrast, those whales and professional funds that quietly transferred assets during the crash seemed to be engaged in "balance sheet management," rather than simple directional speculation. The former are typical "retail-like large holders"—with substantial capital but highly emotional and short-sighted behavior patterns; the latter, during the same round of declines, made structural adjustments in a low-frequency, large-scale manner, delineating clear layers of risk preference and time perspective.
Bhutan's Sovereign Wallet Transfers 184 BTC with Cautious Reallocation
● Beyond the individual and institutional games, sovereign funds were also active. According to on-chain monitoring, wallets associated with Bhutan-related government entities transferred approximately 184 BTC during this correction, equivalent to about $1.4 million at the time. Compared to the operations of whales withdrawing tens of thousands of coins, this figure is not exaggerated, but its sovereign nature makes this transfer particularly sensitive—this is no longer just a single fund's risk management but is interpreted by the market as a "micro-adjustment of national-level asset allocation."
● Considering Bitcoin's drawdown of about 38% from its peak, the operations of such sovereign institutions may involve various internal considerations: including reallocation during the correction, optimizing balance sheets through collateral or lending tools, or merely short-term adjustments to meet domestic currency liquidity needs. In the absence of public explanations, any single narrative is difficult to substantiate, and it can only be viewed as "prudent liquidity management" around the volatility range.
● There are currently no clear policy documents or official announcements defining this transfer as "reduction" or "increased holdings." In the absence of information, directly interpreting this behavior as a shift in official stance is clearly an overextension. A more reasonable understanding is that sovereign wallets, as long-term asset managers, are making structural adjustments amid volatility, rather than casting directional votes on short-term price fluctuations.
● From a market structure perspective, sovereign funds play a role as longer-term investors in cryptocurrency assets: their entry and reallocation do not directly change the market depth like whales, but they can marginally influence market confidence—once more national-level institutions are seen as long-term participants, the narrative of "systematic abandonment" during crashes will be weakened, replaced by a new round of discussions on "how to price long-term risks and regulations."
The Shadow of the 10·10 Crash and Binance's Liquidity Anxiety
● The current round of declines has amplified panic largely due to the evocation of historical trauma. The October 10, 2025 "10·10 crash" event still lingers in the memories of many traders, as extreme volatility led to large-scale liquidations. Afterward, Binance admitted responsibility for some abnormal situations and announced compensation of about $283 million, which somewhat alleviated the controversy, but the cracks in trust regarding the exchange's risk control and liquidity mechanisms have never truly healed.
● There is still controversy in the market regarding how many liquidations during the 10·10 event should be attributed to the exchange's mechanisms. There were claims of about $19 billion in liquidations, but the precise allocation of responsibility and details lack authoritative public statistical standards, making it difficult to be seen as a conclusion. What can be confirmed is that the event amplified the market's collective unease regarding "the boundaries of strong liquidations and responsibilities under extreme conditions," and this unease was reactivated during the crash in February this year.
● Adding to the unease of some investors was the news that Binance plans to delist ten trading pairs, including AUDIO/BTC, on February 6, 2026, which was seen as another heavy negative signal amid the aftermath of the crash. Although the delisting was more a comprehensive consideration of liquidity and compliance, under the emotional magnifying glass, it was interpreted as a risk warning that "trading pairs could disappear at any time," exacerbating holders' triple anxiety regarding asset pricing, liquidity, and security.
● In terms of price, several analysts still emphasize that Bitcoin has significant support in the $60,000 to $68,000 range, believing this area will become the next key battleground for bulls and bears. However, the existence of technical support has not automatically translated into confidence restoration: one side firmly believes that historically validated support zones will attract medium to long-term capital to bottom-fish; the other side worries that the combination of regulatory uncertainty and exchange mechanism risks may render any support meaningless amid panic, with the shadow of "will there be another repeat of 10·10" continuing to pull confidence and fear.
The Next Steps for Whales, Gamblers, and Sovereign Funds
In this round of declines, three types of capital have shown distinctly different risk profiles: first, whales chose to withdraw large amounts of cryptocurrency for hoarding during price crashes and emotional turmoil, sacrificing short-term liquidity for long-term chips and self-custody security; second, aggressive shorts suffered massive losses, liquidated, and then went long, treating market volatility as casino chips, amplifying losses amid continuous misjudgments and emotional chasing; third, sovereign wallets engaged in small-scale reallocations and cautious transfers for medium to long-term asset management, attempting to control operations at the technical and risk control levels rather than at the policy declaration level.
This round of price flash crashes is not an isolated event but rather a result of the convergence of historical trauma memories, cross-market volatility, and internal leverage liquidations: the shadow of 10·10 has not dissipated, the 16% drop in silver has spilled the tense emotions of macro deleveraging into the cryptocurrency market, while the history of exchange delistings, liquidations, and compensations is replayed in every sharp decline, deepening the psychological expectations of "systematic risk."
In the upcoming battle around the $60,000 to $68,000 support zone, the capital structure is likely to further tilt towards low leverage, long cycles, and diversified asset allocations: more participants will retreat from high-leverage contracts to spot and low-leverage derivatives, reallocating some chips to different public chain ecosystems, mainstream assets, and off-chain asset combinations to mitigate the impact of a single systematic event. Meanwhile, the participation of sovereign and institutional funds will also compel the market to continuously evolve in terms of compliance, transparency, and custody security.
For individual participants, more dangerous than the price itself is the overconfidence in specific bottom prices and policy directions: attempting to precisely bottom out at a certain price point or being certain that the next regulatory action will inevitably be positive/negative often turns into catastrophic risk when reality deviates from expectations. What truly needs to be adhered to is self-discipline in managing positions, leverage, and liquidity, as well as a common-sense vigilance regarding the premise that "the system can fail at any time."
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