#加密市场观察 “Death Spiral” continues to intensify! Bitcoin’s extreme bearishness once caused it to fall below 73,000, entering a bear market trading pattern?

(On February 4), Bitcoin hovered around $76,700 after a sharp decline yesterday, stabilizing broadly after a turbulent start, showing signs of a slight improvement in overall risk appetite, but traders remain cautious about the short-term trend direction.
Yesterday, Bitcoin briefly dropped 7% to $72,877, the lowest since November 6, 2024, then recovered some of the losses and is now back around $76,000. Year-to-date, Bitcoin has fallen nearly 14%, reaching its lowest level since President Donald Trump returned to the White House more than a year ago, erasing all gains recorded by this “bellwether” digital asset after his election victory. FalconX senior derivatives trader Bohan Jiang said, “Many traders have been buying the dip, betting that Bitcoin will rebound above $80,000. As Bitcoin continues to decline, many of these positions have been forcibly liquidated, putting downward pressure on the price.”
Despite the White House’s pro-cryptocurrency stance and soaring institutional adoption, the market has already plummeted about 40% since reaching a record high in early October. This decline followed a heavy liquidation wave on October 10, triggered by further comments from Trump on tariffs, causing about $19 billion worth of leveraged tokens to be wiped out, and the broader crypto market has yet to fully recover.
Apart from the price volatility caused by tariffs in April last year, Bitcoin mostly stayed above $75,000 after Trump’s re-election—promising more favorable policies for the crypto industry.
But since that sell-off in October, the market has been under persistent downward pressure. Although Bitcoin briefly rebounded nearly 7% during Thanksgiving week, sentiment turned negative again in December. Under economic headwinds, investor concerns remain high; low risk appetite and ongoing worries about an AI bubble also hinder effective rebounds. While some institutional holders continue to hold, retail participation has declined, with major long-term holders selling assets worth billions of dollars.
Fund flow data continues to show a cautious crypto market.
CoinShares reported last week that global crypto investment products experienced a net outflow of $1.7 billion for the second consecutive week. Bitcoin funds saw the largest outflows, followed by other major tokens.
Meanwhile, on-chain indicators show positions becoming more “defensive.” Long-term Bitcoin holders are now in an unrealized loss state, and CryptoQuant associates this with an “extremely bearish” phase, which sometimes appears before local bottoms.

Options markets also show early signs of traders positioning for potential stabilization. Corporate crypto asset exposure remains a focus. Ethereum’s decline has increased unrealized losses for large holders, such as BitMine, which has nearly $7 billion in paper losses, prompting some institutional investors to reduce their holdings; however, some firms like Strategy continue to increase their positions amid volatility.
Bitcoin’s latest decline occurred against a broader market turbulence, especially after a historic crash following an astonishing rally last weekend.
On Tuesday, indices retreated from near-record highs amid a tech sell-off; meanwhile, gold and silver rebounded, and geopolitical tensions reignited, pushing oil prices higher.
For Bitcoin, the crypto derivatives market is pointing toward further weakness, with no clear bullish catalysts at present. According to CME and Coinglass data, open interest in crypto contracts sharply declined last weekend. Perpetual contract funding rates (which dominate digital asset trading volume) have turned negative, indicating stronger market demand for bearish bets. Put options used for hedging downside risk have fallen in price, but the concentration of strike prices suggests market nervousness persists.
Augustine Fan, partner at Hong Kong-based crypto options platform SignalPlus, said, “Market sentiment is at rock bottom. Traders are scrambling for protection. After more than a year of decline, volatility finally picked up, and the market is now in a bear trading mode.”
Experts warn that although Bitcoin has temporarily stabilized after a sharp drop, weakening momentum below key support levels still poses further downside risks for both Bitcoin and the entire crypto market. QCP Capital analysts noted this week that Bitcoin is currently “holding above $74,500,” but its price action remains “fragile,” with momentum “still pointing downward.” They added, “Upside potential remains limited near recent resistance levels,” exposing the broader market to further volatility driven by liquidations.
QCP said the next few trading days will be critical and warned that if prices continue to fall below $74,000, it could open the door to a deeper correction for the entire crypto market; however, a rebound above $80,000 might provide a short-term respite.
They also noted traders are watching for signs of institutional buying around $76,000, as well as monitoring whether geopolitical tensions ease and whether dovish signals emerge. The big short sellers also issued warnings outside the crypto space, echoing the cautious sentiment emphasized by QCP.
Famous for “The Big Short,” investor Michael Burry pointed out that liquidity conditions are tightening, and the vulnerability of risk assets is re-emerging, warning that recent price movements reflect structural pressures.
Burry said, “The nauseating scenario is now within reach.” He noted that the recent plunge in tokens could evolve into a self-reinforcing “death spiral,” causing lasting damage to companies that accumulated large holdings over the past year. He also listed three other potential consequences if Bitcoin continues to free-fall: if it drops below $70,000, it could force institutions holding crypto assets to suffer significant losses, further tighten Strategy’s financing channels, and push the market toward more aggressive risk management; if it approaches $60,000, it could trigger a crisis for Michael Saylor’s companies.
He further warned that if Bitcoin falls to $50,000, it could push Bitcoin mining companies toward bankruptcy, forcing miners to sell reserves, which could spill over into tokenized metals and physical metal markets, causing severe dislocation.
Burry warned, “Tokenized metal futures could collapse into a black hole with no buyers; physical metals might decouple from their previous trends due to safe-haven demand.” Galaxy Digital CEO Michael Novogratz said during earnings call, “The market’s near-religious conviction that Bitcoin must be held at all costs has been shattered, and we are now seeing some selling activity.”