The old logic of wealth creation has collapsed, and the market is forced to seek true value anchors in the winter.

Author: Xie Zhaoqing, Tencent Finance "Periscope"

The cryptocurrency market has given back all the gains brought by Trump's presidency, experiencing an epic crash that has brought the word "risk," temporarily forgotten by greed, back to stare grimly at all investors.

In the past week, Bitcoin experienced its largest weekly decline in three years. February 5 became an unexpected day for cryptocurrency investors: Bitcoin fell by 13% that day, marking the largest single-day drop since June 2022, and at one point on February 6, it dipped below $61,000.

In this wave of severe correction, veteran in the crypto space, Yi Lihua, "liquidated" 400,000 Ethereum within a week, incurring a loss of $700 million, becoming the number one "whale" ruthlessly hunted in this round of crash.

This sharp correction caught the market off guard, including those long-term bullish "HODLers." Worse still, many bullish investors still have not clarified the exact reasons for this crash.

Several cryptocurrency market investors in Hong Kong or Singapore told Tencent News "Periscope" that while they cannot pinpoint a single cause for the crash, they unanimously believe that the immediate trigger was the flash crash in silver and gold prices, which accelerated the decline of cryptocurrencies like Bitcoin.

On January 30, with the news of U.S. "hawk" Kevin Warsh being nominated as the Federal Reserve Chair, the market anticipated that the Fed would maintain high interest rates to curb inflation, leading to a strengthening of the dollar and a more than 30% drop in silver that day. Subsequently, global risk assets began to come under pressure.

A crypto industry entrepreneur in Hong Kong analyzed to Tencent News "Periscope" that the "four-year cycle" theory in the crypto market is still valid due to the impact of Bitcoin's halving mechanism, but with the addition of external macro factors, the market's volatility has significantly increased. The halving of Bitcoin mining rewards every four years remains the core logic of the "four-year cycle."

"This round of the crypto market's rise was mainly driven by 'narratives': expectations of pro-crypto policies after Trump's election, anticipated policy paths from the Fed, and the corporate treasury model of MicroStrategy (MSTR), all seen as positive."

However, many industry insiders, including the aforementioned entrepreneur, believe that these expectations mostly remain at the narrative level, lacking substantial business innovation.

Believers in the crypto market firmly believe that once a narrative is accepted by the market, traditional funds will continue to flow in, thereby driving up the demand and price of Bitcoin. However, these narratives have clearly "suffered" now, losing their real-world support. Unlike the steadfast believers in the crypto market, traditional funds or institutions typically list crypto assets at the bottom of their asset allocation. Once market volatility increases, crypto assets are the first to be reduced.

Yi Lihua's $700 million loss not only marks a Waterloo for a top player but also signals the failure of the "old narrative" that the crypto market relied on for survival. For a long time, the market has been intoxicated by the iron law of the "four-year halving" cycle, the illusion of funds brought by ETF compliance, and the policy dividends from Trump and the treasury leverage games of MicroStrategy. However, this bull market is different from previous ones; it lacks substantial innovation as a backbone, relying solely on macro expectations and emotional narratives to build a house of cards. When the Fed's hawkish signals burst the bubble, the era of maintaining high valuations solely by storytelling came to an abrupt end. This marks that the crypto market is undergoing a brutal de-mystification: "faith" unsupported by underlying application innovation becomes vulnerable when liquidity recedes, the old logic of wealth creation has collapsed, and the market is forced to seek true value anchors in the winter.

01 The Collapse of Faith: The Harsh Lesson of $700 Million

The list of "evangelists" in the crypto market who suffered heavy losses in this Bitcoin crash includes, but is not limited to, Michael Saylor, Tom Lee, and veteran Yi Lihua.

Michael Saylor's publicly traded company MicroStrategy currently holds 713,502 Bitcoins, making it the publicly traded company with the most Bitcoin in the world. Tom Lee is known as Wall Street's "prediction emperor" and is currently the chairman of the board of Bitmine, the publicly traded company holding the most Ethereum. Both are long-term steadfast holders of Bitcoin and Ethereum.

Public data shows that the holdings of the publicly traded companies owned by Michael Saylor and Tom Lee have already shown significant paper losses: MicroStrategy has lost about $12.4 billion, while Bitmine has lost about $6 billion.

Yi Lihua may be the whale that was "sniped" the fastest in this wave of crash. As a public market bull, all six account addresses of Yi Lihua's fund are fully transparent.

Since February 1, under the pressure of leverage, Yi Lihua and his team were forced to continuously sell Ethereum, with the entire network witnessing in real-time their descent into a "death spiral."

Yi Lihua may have once considered continuing to gamble. In the first four days of February, he only sold about 190,000 Ethereum and even paused selling on February 5, at which time he still held 460,000 Ethereum.

On February 4, Yi Lihua still expressed on social media that he was "optimistic about this bull market" and claimed "now is the best time to buy spot." Public data shows that to deleverage, his average liquidation price dropped from over $2,000 all the way down to $1,500.

Yi Lihua is an early participant in the crypto market and successfully escaped the peak before the "10·11 incident" in 2025, reportedly cashing out over $300 million. Within 24 hours on October 11, 2025, Bitcoin's price plummeted from a high of $120,000, with the total liquidation amount across the network roughly exceeding $19 billion.

Just three days later, Yi Lihua no longer insisted on his viewpoint and began to accelerate the sale of Ethereum held by his fund, Trend Research.

Data from Arkham shows that on February 6, Yi Lihua may have decided to give up resistance, selling off the remaining 440,000 Ethereum in one go, including nearly 60,000 Ethereum sold between 9 PM and midnight that night.

Yi Lihua may have already made plans for liquidation during the day on February 6. Tencent News "Periscope" learned that Yi Lihua appeared near Causeway Bay in Hong Kong on the afternoon of February 6 and stayed until around 10 PM that night. Yi Lihua did not show any unusual behavior on-site. However, at the same time, his team was executing a rapid liquidation action.

As of February 7, Yi Lihua's fund only held 20,000 Ethereum, with cumulative losses exceeding $700 million.

Some early investors in the crypto market told Tencent News "Periscope": "Selling 630,000 Ethereum means this time, Yi Lihua has completely surrendered."

The entire process was extremely fast, "losing nearly $800 million in just six days." Crypto data platform Arkham shows that since gradually building positions on November 11, 2025, until January 25, 2026, Yi Lihua's peak holding reached 651,000 Ethereum; from February 1, he sold off, completing liquidation in just six days.

"People like him, who are steadfast believers, have experienced multiple bull and bear markets in the crypto market. After making the decision to liquidate, what remains is likely just waiting for the next opportunity to turn things around," an early market participant told Tencent News "Periscope."

Yi Lihua may have become the most well-known Chinese "veteran" in the crypto market to be targeted in this round of crash. Arkham shows that Yi Lihua's cumulative loss in this round reached $779 million, with peak losses once reaching $848 million.

02 Capital Backlash: The Cold Exit of Traditional Funds

"In this round of crash, some traditional investors who entered the crypto market over the past two years were also severely impacted." Albert Luxon, a fund manager at a macro hedge fund in Singapore, told Tencent News "Periscope" that most of these traditional funds entered the market by buying ETFs.

The U.S. approved Bitcoin ETFs in January 2024, after which Bitcoin prices continued to rise, attracting a large influx of traditional funds. Public data shows that the scale of U.S. Bitcoin ETFs reached a historical peak in October 2025, with the total assets under management of 12 Bitcoin ETFs amounting to about $168 billion. At that time, Bitcoin's price also soared to a historical high, exceeding $120,000.

"Once the market experiences volatility, these traditional funds will prioritize reducing their holdings in more volatile Bitcoin assets," Albert Luxon told Tencent News "Periscope."

Data confirms this. On January 29, when the market, including U.S. stocks, experienced significant volatility, the outflow from Bitcoin ETFs increased significantly. Public data shows that on January 29 and 30, during the severe fluctuations in U.S. stock commodities and other markets, the net outflows from the 12 Bitcoin ETFs were $817 million and $509 million, respectively. Meanwhile, on February 4 and 5, when Bitcoin prices plummeted, the net outflows were $544 million and $434 million, respectively.

Tencent News "Periscope" learned from some private banking managers that indeed many high-net-worth clients redeemed their asset allocations in the crypto market over the past week.

03 The Disillusionment of Narratives: A New Round of Crypto Winter After False Prosperity

Most people would not deny that a new round of winter in the crypto market has arrived: from the peak of Bitcoin exceeding $120,000 in October 2025 to the current price of about $68,000, the price has nearly halved.

In the face of the crash, investors are panicking. The explanations for this significant drop vary widely: some believe that early investors have already taken large profits after experiencing a bull market; others think that since Bitcoin entered the compliant market, new products like Bitcoin ETFs have diluted Bitcoin's scarcity; and some attribute it to "liquidity exhaustion"—which is almost the "universal" factor during crashes in all financial markets.

Allen Ding, head of the New Fire Technology Research Institute, stated that these explanations have some validity, but the real core driving factor may not be a single answer. He believes that there may be a divergence in consensus itself. In his view, some steadfast believers think that Bitcoin has now partially integrated into mainstream finance, having achieved a certain "milestone," equivalent to "graduating from faith."

Crypto evangelist and investor Anthony Pompliano analyzed the reasons for Bitcoin's crash on Friday, stating that Bitcoin breaking through $100,000 itself is an important "milestone."

Many industry insiders, including Allen Ding and Albert Luxon from a macro hedge fund in Singapore, stated that "profit-taking" is one of the key driving factors behind this crash.

They believe that a large number of early investors are eager to lock in profits, which stem from the "frenzied sentiment" triggered by Trump's election and his promise to make the U.S. the "global crypto capital," driving up the prices of assets like Bitcoin and Ethereum significantly.

The returns for these relatively early investors are astonishing. For example, in the case of Bitcoin, its price doubled from the time Trump decided to run until early October 2025.

"Crashes" or "booms" are not uncommon in the crypto market. The aforementioned industry veterans told Tencent News "Periscope" that this round of ups and downs is significantly different from previous ones: the bull market since 2024 is more related to "narratives" rather than being driven by genuine industry innovation.

The entrepreneur in Hong Kong mentioned that in the four-year bull and bear cycle of the crypto market, exchanges were born in 2013, smart contracts emerged in 2017, and DeFi (decentralized finance) products surged in 2022: these innovations provided fundamental support for the previous bull markets.

However, this time, the 2024 bull market is unrelated to innovation and is primarily driven by "narratives."

He cited examples, stating that from the initial "Trump narrative" to the MSTR treasury model, there has been no change in the fundamentals. After Trump took office, he did express intentions to introduce significant policies, but the market overlooked the fact that the Trump family was using cryptocurrencies to predatorily "siphon" money from the market. The treasury company model created by Michael Saylor (the MSTR model), which involves publicly traded companies buying Bitcoin as an asset, led MicroStrategy to hold over 710,000 Bitcoins. This indeed boosted both the stock price and the coin price, with the company's market value once exceeding $120 billion, but this model is not sustainable—last year, the company reported a loss of over $12 billion in the fourth quarter.

Tencent News "Periscope" learned that in August 2025, leading Chinese crypto tycoons Zhao Changpeng, Li Lin, and others were eager to try this model, but they abandoned it one after another in October 2025.

"Without innovation and relying solely on narratives, it is difficult to sustain a bull market. However, they also cannot judge how long the bear market will last without new narratives to take over."

Some more optimistic individuals believe that this round of winter may end faster than before. Currently, apart from Yi Lihua, no leading tycoons or major companies have gone bankrupt or fallen into crisis, and there have been no institutions accused of violations—such situations have previously triggered trust crises among investors during past market crashes.

Bitcoin's biggest bull, Michael Saylor, told investors on February 6 that the only way to cope with the current downturn is to hold on and ignore market volatility, while also keeping a long-term view over the entire four-year cycle.

On February 7, Bitcoin's price slightly rebounded to $68,000, still at a low point over the past two years. This winter will not end in the short term, and Bitcoin has a long way to go before breaking the $100,000 milestone again.

However, some funds that buy on dips have already begun to take action. Tencent News "Periscope" learned that a fund in Hong Kong started to enter the market to bottom-fish on February 6, though the specific scale is still unknown. Additionally, New Fire Technology, which provides private banking services for crypto assets in Hong Kong, has also received numerous inquiries about buying in the past two days.

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