From February 6 to 7, in the East 8 Time Zone, Bitcoin staged a rapid counterattack after previously dropping below approximately $60,000, quickly rising to nearly $70,000, showcasing a typical "sharp drop and sharp rise" market trend. The 24-hour Bitcoin price increase on mainstream exchanges was roughly in the range of 2.2%-9.7%, while the crypto-related sectors in the U.S. stock market also strengthened, with some assets like Strategy surging about 20.05% in a single day, indicating a resonance recovery in risk appetite both on-chain and off-chain. On the surface, this volatility is generally attributed to concentrated forced liquidations of leveraged long positions and panic sentiment, but the rapid price recovery in extreme emotions shows that behind the panic selling pressure, there is still a considerable amount of bottom-fishing capital entering the market quickly, taking advantage of the price dislocation created by passive deleveraging for low-position layouts.
V-shaped Recovery from 60,000 to Approaching 70,000
● Market Path: During the significant drop on February 6, Bitcoin was quickly pierced through the previous level of approximately $60,000, and then a strong rally occurred during the trading session on February 7, bringing the price back close to $70,000. The 24-hour increase in Bitcoin on mainstream exchanges ranged between 2.2%-9.7%. Although there were differences between spot and contract quotes, the overall rhythm indicated that after extreme selling pressure in the short term, buying quickly returned, forcefully pulling the price back from the panic zone.
● Exchange Differences and V-shaped Recovery: The spot and contract markets across major exchanges experienced varying degrees of deep drops and recoveries during this volatility, with the 24-hour increase range widening to 2.2%-9.7%, reflecting differences in the depth of forced liquidations and liquidity absorption capabilities across different platforms. The price lines from February 6 to 7 exhibited a relatively typical "V-shaped" structure—first a rapid cliff-like drop, followed by a quick upward push driven by concentrated buying and short covering, forming a rapid rebound from below.
● Korean Exchange Spike and Unified Rebound: The South Korean exchange Bithumb experienced a brief abnormal drop in Bitcoin prices due to a system error during this round of decline, with local quotes deviating significantly from the global average. However, this spike did not alter the overall rhythm that followed. As the system issue was corrected, prices across major platforms converged again, and Bitcoin entered a unified rebound trajectory along with the global market, reinforcing the characteristic of this round of market movement as a "systematic rapid V-shaped recovery," rather than an isolated event in a single region or platform.
● Off-chain Risk Appetite Recovery Signals: Alongside the price increase, the crypto-related sectors in the U.S. stock market also showed significant recovery between February 6 and 7. A representative asset, Strategy (according to a single source), saw an increase of about 20.05% that day, far exceeding the overall market performance, indicating that traditional capital markets' risk appetite for crypto asset-related equity positions is rapidly recovering. The optimistic pricing of off-chain funds regarding future prices resonates with the V-shaped rebound in the on-chain spot and contract markets.
Funding Rates Turn Cold: How Pessimism Accumulates
● Futures Funding Rates Reflect Expectations: Before and after the sharp drop, the funding rates for contracts on mainstream exchanges shifted from being slightly bullish to bearish, with a clear structure favoring shorts during certain periods, indicating that the mainstream market expectation before this rebound was defensive and risk-averse rather than aggressive. Leveraged longs were forced to reduce positions during the price decline, while new funds entered more through shorting, hedging, or reducing net long exposure, laying the groundwork for the subsequent "emotional mismatch + price squeeze."
● Macroeconomic Uncertainty Amplifies Panic: On a macro level, Federal Reserve official Daly's statements regarding the current economic and financial environment's "instability" were interpreted by the market as another layer of uncertainty regarding future interest rate paths and risk asset valuations. Fluctuations in interest rate expectations directly affect the risk discounting factor for crypto assets, and in an already volatile market, such statements can easily amplify the fragility of positions, causing what could have been a natural technical adjustment to evolve into an emotional stampede carrying "macro shadows."
● Bitwise Perspective on Emotion and Bottoms: Asset management firm Bitwise pointed out that the "highly anxious sentiment" currently present in the crypto market is often a common psychological state near historical phase bottoms. This judgment provides an emotional framework for understanding this round of volatility: on one hand, funding rates, risk-averse sentiment, and macro uncertainty collectively accumulate pessimistic expectations, amplifying the downward slope; on the other hand, when emotions are pushed to extremes, the marginal sensitivity of prices to bad news begins to decline, providing space for contrarian funds to seek value support amid "emotional imbalance."
Leveraged Chain Liquidations: Mechanical Downward Pressure and Liquidity Vacuum
● Amplifying Effects of Mechanical Deleveraging: The mainstream explanation for this round of sharp declines focuses on the chain reaction of "leveraged longs being forced liquidated, triggering mechanical deleveraging." When prices break through key support levels, a large number of highly leveraged long positions hit the liquidation line, and the passive selling momentarily amplifies the selling pressure. Liquidation orders are not based on rational judgments about future prices but are a mechanical response of risk control algorithms to insufficient margin, thus forming a self-reinforcing cycle of "forced selling—price decline—more liquidations" that is decoupled from fundamentals.
● Active Deleveraging Example: Taking industry investor Yi Lihua as an example, according to Jiang Zhuoer, he continuously sold ETH during this round of volatility to reduce leverage, aiming to lower the liquidation line to around $1,500. This proactive reduction contrasts sharply with passive liquidations: the former seeks to lower leverage in advance to leave room for survival and accumulation during significant volatility, while the latter is forced to exit when margins are maxed out. This case intuitively demonstrates that some funds choose to actively deleverage during panic periods to exchange for lower risk exposure and control over future volatility.
● Liquidity Vacuum and Low-Position Buying: When chain liquidations erupt in a short time, the already relatively fragile order book is pierced by a large number of market sell orders, and the buying near the mid-price is quickly consumed, creating a "liquidity vacuum zone." In this zone, prices can be significantly pushed down without a large influx of funds. It is precisely this price misfire caused by passive selling that provides opportunities for more patient, lower-leverage funds to buy in at extreme discount ranges, thus laying the foundation for a subsequent rapid rebound.
Bitwise's Anxiety: Panic Zones and Long-Term Return Imagination
● Why Anxiety May Be Near the Bottom: Bitwise emphasizes that when the crypto market enters a "highly anxious" stage, it often means that previous optimistic expectations have been fully reversed, and short-term selling momentum is significantly released. In an extreme state of anxiety, marginal selling pressure mainly comes from passive position reductions and risk management directives, rather than a reassessment of future long-term value. This misalignment of sentiment and behavior makes it easier for prices to fall into "valuation lowlands," which, from a contrarian investment perspective, may actually be close to a phase bottom.
● Amplifying Effect of Returns from the 2018 Sample: Bitwise Chief Investment Officer Matt Hougan pointed out that investors who bought Bitcoin near the market low in 2018 subsequently achieved approximately 2000% long-term returns. This data concretizes the "long-term returns from panic zones": when market sentiment is at its worst and narratives are most pessimistic, prices often already imply a prepayment of numerous future negatives, and in the following years, as long as the industry does not experience a systemic collapse, the mean reversion of sentiment itself is sufficient to bring considerable price recovery space.
● Similarities and Differences Between Current and 2018: From an emotional structure perspective, the extreme anxiety following this round of sharp declines bears some resemblance to the pessimistic atmosphere at the end of the deep bear market in 2018: public expectations are generally bearish, short-term funds are crowding out, and long-term participants are suffering deep floating losses. However, there are also significant differences in volatility and macro environment—current Bitcoin prices and market capitalization are far higher than in 2018, and the macro level is compounded by interest rate cycles and regulatory uncertainties, which means that simple comparisons to historical high-return samples have clear limitations. Emotional comparability does not imply that future return paths can be risk-free replicated.
On-chain Speculative Sparks: Meme and Marginal Risk Appetite Recovery
● Local Frenzy of Meme on Base Chain: While Bitcoin experienced severe volatility, on-chain short-term speculation has not completely extinguished. Taking the KellyClaude meme coin on the Base chain as an example, according to a single source, its market capitalization once peaked at approximately $12 million, still attracting concentrated short-term speculative funds during a time when the overall market had just undergone a panic reshuffle. The rapid rise of such small-cap tokens reflects that some funds still choose to seek excess returns through high-risk assets amid high volatility and uncertainty in mainstream assets.
● Reflective Significance of Meme Fund Recovery: Against the backdrop of Bitcoin experiencing "sharp drop + sharp rise," funds in the meme sector have not fully retreated but have instead shown localized warming, indicating that the market's risk appetite is not collapsing in one direction. Some speculative funds view the significant volatility of mainstream assets as an "emotional trigger point," and then amplify return expectations through high-leverage speculation in on-chain small tokens, which indirectly reflects that the overall market's risk appetite is marginally recovering rather than entering a full defensive mode.
● Representativeness and Leading Indicators: It is important to emphasize that data from single meme projects like KellyClaude is greatly influenced by individual narratives, liquidity organization, and trading depth, and its market capitalization performance does not represent the macro state of the entire crypto market or meme sector. However, similar assets can be seen as leading indicators for observing speculative risk appetite: when mainstream assets experience significant volatility, if these high-beta assets warm up first, it often indicates that short-term sentiment has shifted from "pure defense" to "tentative offense."
Price Spring Effect: The Game Between Panic, Deleveraging, and Bottom-Fishing Funds
● Core Chain from Sharp Drop to Sharp Rise: Analyzing the market from February 6 to 7, a relatively clear chain can be seen: macro uncertainty and cooling funding rates quickly pushed market sentiment toward extreme pessimism; high-leverage longs faced concentrated liquidations during price breakdowns, triggering mechanical deleveraging and liquidity vacuum; under this passive selling pressure-driven "price misfire," Bitcoin was smashed from around $60,000 into a deeply discounted range, and was then quickly picked up by low-leverage and contrarian funds, pushing the price to record a 2.2%-9.7% rebound within 24 hours, achieving a "price spring effect" from sharp drop to sharp rise.
● Cautious Boundaries of Conclusions: It is important to be cautious that there are still data gaps in several key dimensions regarding this round of volatility, including the specific scale of contract liquidations across the entire market, the funding flow details of Bitcoin spot ETFs, and the precise readings of sentiment indicators. In the absence of these key pieces of information, directly defining this rebound as a "certain bottom" carries significant over-interpretation risks. A more reasonable attitude is to view it as a price repair occurring after extreme emotions and deleveraging, while maintaining continuous tracking and verification of subsequent data.
● Three Key Signals to Watch in the Future: Looking ahead to the evolution of the market, investors need to focus on three main lines: first, whether the contract funding rates and term structures on mainstream exchanges can gradually return from bearish to neutral, or lean again toward one-sided bets; second, whether macro-level policy and expectation signals, including those from Federal Reserve officials, continue to reinforce the "instability" narrative or gradually alleviate valuation pressures on risk assets; third, the transaction structure and buying sources in the spot market, whether dominated by short-term chasing or showing steady inflows from longer-term funds and institutional channels. Only when these three aspects collectively point to a sustained recovery of risk appetite, rather than a one-time emotional rebound, can this round of V-shaped rise have the opportunity to evolve into a new upward attack starting point, rather than merely a technical relief rebound.
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