Bitcoin’s Turbulent Start to 2026: A Crash and Its Aftermath
The dramatic crash of Bitcoin at the beginning of 2026 abruptly ended the euphoria in the crypto market. Within months, record gains evaporated, billions in market value were wiped out, and core narratives surrounding the largest cryptocurrency faltered. But is this a temporary setback in a familiar cycle – or a signal of deeper, structural problems in the crypto sector?
The recent Bitcoin plunge continued a downward trend that began in October, after the digital asset had been largely supported throughout 2025 by a crypto-friendly US presidential agenda. Increasing geopolitical tensions and their impact on financial markets recently dampened investor risk appetite, favoring safe havens like gold – to the detriment of the cryptocurrency, according to a Bloomberg report.
How Serious is the Situation?
The February crash pushed Bitcoin down to around $60,000, more than 50% below its record high of $126,251 reached just four months prior. As the largest cryptocurrency, others typically follow Bitcoin’s movements. The total value of all cryptocurrencies in circulation has also roughly halved since the October high – a loss of more than $2 trillion (1.7 trillion euros).
The magnitude of the recent losses is unusual, even for one of the most volatile asset classes. The 13% slide on February 5th was the largest daily loss since November 2022, when the FTX exchange of Sam Bankman-Fried collapsed – considered one of the most impactful events in crypto history.
Spot ETFs, which track the Bitcoin price, experienced three consecutive months of net outflows – the longest streak since their introduction in early 2024. These funds had previously been considered a key support for the cryptocurrency, driven by investors who didn’t desire to hold Bitcoin directly.
What’s Driving the Downturn?
It’s unclear what exactly is behind the recent crash – as is the abrupt counter-movement, where Bitcoin gained more than 10% on February 6th. In previous years, sudden price drops were usually triggered by clearly identifiable events. The FTX collapse in 2022 followed a chain of insolvencies and crypto fraud scandals that shook confidence in digital assets as an investment.
In 2026, there isn’t such a clear catalyst. The retreat from the record high began in October, when a series of threats from former President Trump rocked the markets and wiped out billions in crypto trading positions within a day. The aftermath of this shock has dampened investor willingness to trade and made it tricky for Bitcoin to sustainably regain lost ground.
Impact on Crypto’s Image
Traditional markets have also been highly volatile in recent months. Stocks, gold, and other assets have reacted sharply to geopolitical developments, including attempts to pressure allies. In past market cycles, Bitcoin has been alternately seen as an inflation hedge, a hedge against dollar devaluation, or a proxy for tech stocks.
This time, all these narratives have disappeared. What remains is crypto without a clear fundamental anchor – apart from those convinced investors who continue to see it as the future of digital money. From their perspective, it’s worth enduring the volatility in the hope of a renewed recovery – as Bitcoin has experienced multiple times since its inception.
Who are the Losers?
2025 was the year of Digital Asset Treasury Companies (DATs) – publicly traded companies that hold large amounts of cryptocurrencies as an investment, regardless of their core business. These firms suffered greatly from falling crypto prices, contradicting their promise to grow in value in line with the coins they held.
Strategy, a major Bitcoin investor who popularized the model when it first purchased Bitcoin in 2020, is among the companies with the greatest exposure to the recent crash. In a press release on February 5th, Strategy reported a net loss of $12.4 billion for the fourth quarter, triggered by the decline in value of its extensive holdings. Market turbulence in early February is likely to bring further losses. The value of the company’s Bitcoin holdings is now below the average purchase price for the first time since 2023.
Risks for the Industry
With increasing volatility, some customers may endeavor to sit out the turbulence by shifting their crypto investments into calmer asset classes. Others may transfer their tokens to larger platforms that they consider a safe haven. During the crypto crash of 2022, several exchanges struggled to fulfill withdrawal requests in a timely manner, leaving some investors unable to exit during the turbulence.
So far, most major crypto platforms have seen customer inflows in February, according to data from DefiLlama. Many providers are also better prepared for potential consequences, having learned from the collapse of FTX. Nevertheless, the liquidity shortage observed since October has amplified strong price movements. For the price to stabilize, sufficient Bitcoin must be available for buying and selling – a metric known as market depth. Companies traditionally providing liquidity, such as market makers, have largely held back since the crash. Their return is crucial for a sustainable recovery.
FAQ
- What caused the Bitcoin crash in early 2026? Geopolitical tensions and a lack of clear catalysts contributed to the downturn, following a previous decline triggered by political events in late 2025.
- How much value has the crypto market lost? Over $2 trillion (1.7 trillion euros) has been wiped out since the October high.
- Are Bitcoin ETFs still attracting investment? No, spot Bitcoin ETFs have experienced three consecutive months of net outflows.
- What is a Digital Asset Treasury Company (DAT)? A publicly traded company that holds large amounts of cryptocurrencies as an investment.
FMW/Bloomberg
