On February 2, the crypto market experienced a pronounced downturn. Bitcoin broke below the critical $80,000 support level, falling to a low of $74,500, while Ethereum declined in parallel, slipping below $2,170. This marks Bitcoin’s fourth consecutive monthly correction, further weighing on overall market sentiment.
Shifts in Policy Expectations Emerge as a Key Trigger
The sell-off followed confirmation that Kevin Warsh will serve as the next Chair of the U.S. Federal Reserve. Market expectations of a potentially tighter future monetary policy stance intensified, placing broad pressure on risk assets, with crypto markets unable to remain insulated. Policy uncertainty is widely viewed as a major external driver of recent volatility.
Leveraged Liquidations Amplify Downside Pressure
On-chain and exchange data indicate that over $2.5 billion in leveraged long positions were forcibly liquidated during this decline. The rapid unwinding of high-leverage exposure accelerated price losses and exposed accumulated risk built up during the prior rally.
Key Price Levels Under Scrutiny as Sentiment Remains Cautious
Bitcoin is currently attempting to stabilize around the $74,500 level, which aligns closely with the 2025 cycle low and is regarded as a critical observation zone. Options market data suggests that investor sentiment remains cautious; however, downside hedging demand has not escalated sharply, unlike during previous periods of extreme stress.
Analysts note that near-term direction will depend on whether institutional capital re-enters the market, whether geopolitical risks ease, and how the incoming Fed Chair communicates future policy intentions.
Rising Demand for Risk Identification in a Volatile Environment
Amid sharp price swings and large-scale liquidations, market participants are paying closer attention to abnormal fund flows, leverage concentration, and changes in address behavior. Through on-chain behavior analysis and risk monitoring, potential stress points can be identified earlier in the market cycle.
In practice, some institutions are increasingly leveraging on-chain risk identification tools such as Trustformer KYT to continuously monitor transaction paths and capital behavior during periods of heightened volatility, supporting assessments of evolving market structure.
Market Enters a Rebalancing Phase
Overall, this correction reflects the combined impact of shifting macro policy expectations and structural risks within the crypto market. As prices retreat toward key levels, the market may be entering a new rebalancing phase, with future direction contingent on clearer macro signals and observable changes in capital behavior.