The success or failure of the next test depends on the occurrence of three conditions in sequence: maintenance of macro risk appetite, slowdown or reversal of ETF outflows, and normalization of derivatives sentiment.
Author: CryptoSlate
Compiled by: ShenChao TechFlow
ShenChao Overview:
After a violent rebound from $60,000 to over $70,000 within 24 hours, Bitcoin seems to have regained lost ground, but the underlying logic shows that this is not due to strong spot buying, but rather forced rebalancing and short squeezes triggered by a macro market recovery. This article delves into the causes of this "frightening turmoil" in early February 2026: from liquidity contraction expectations following Trump's appointment of Kevin Warsh, to the pressure of miner profits hitting historical lows. Despite the price returning above $70,000, options traders are heavily betting on a potential second dip to $50,000-$60,000 by the end of February, revealing the market's fragile sentiment and complex financial games beneath the "violent rebound" facade.
Bitcoin skyrocketed from $60,000 to over $70,000 in less than 24 hours, erasing a previous brutal drop of 14% that tested all "bottom-fishing theories" in the market.
The speed of this reversal—an increase of 12% in a single day and a recovery of 17% from the intraday low—was intense enough to feel like the dust settling after a liquidation. However, the mechanisms behind the rebound tell a different story: it is more a combination of cross-asset stability and forced position rebalancing, rather than large-scale spot demand driven by conviction.
Meanwhile, the derivatives market remains filled with bearish protective positions, with pricing indicating that $70,000 may only be a way station, not a true bottom.
Forced Liquidation Meets Macro Pressure
On February 5, the market opened around $73,100, briefly surged before collapsing, closing down at $62,600. According to CoinGlass data, the single-day drop led to about $1 billion in leveraged Bitcoin positions being liquidated.
This figure alone illustrates the chain reaction of forced selling, but the broader environment is actually worse.
CoinGlass data shows that Bitcoin futures open interest dropped from about $61 billion to $49 billion last week, indicating that the market had already begun deleveraging before the final wave of impact arrived.
The trigger was not the cryptocurrency itself. Media reports characterized this sell-off as a deterioration in risk sentiment, primarily driven by the sell-off in tech stocks and volatility in precious metals—silver once plummeted 18% to around $72.21, dragging down all related risk assets.
Research from Deribit confirmed this spillover effect, pointing out that derivatives sentiment turned extremely pessimistic: funding rates turned negative, implied volatility term structures inverted, and the 25-delta risk-reversal skew was pushed down to about -13%.
This is a typical "extreme fear" state, where position layouts amplify bidirectional price fluctuations.
Policy narratives added fuel to the fire. According to Reuters, the market reacted strongly to President-elect Donald Trump choosing Kevin Warsh as Federal Reserve Chairman, interpreting it as a signal for future balance sheet contraction and tightening liquidity.
At the same time, miners are facing immense profit pressure. According to TheMinerMag, the hash price fell below $32 per PH/s, and network difficulty is expected to decrease by about 13.37% within two days. However, this relief mechanism has yet to take effect before prices break below support levels.
Bitcoin's price movement over 48 hours shows the collapse from $73,000, the sweep below $63,000, the local bottom near $60,000, and the subsequent rebound above $70,000.
Macro Reversal and Squeeze Mechanism
On February 6, the market opened at the previous day's closing price, then fell to an intraday low near $60,000, before surging to a high of $71,422. After three unsuccessful attempts to break through this level, the price retreated below $70,000.
The catalyst did not originate from within the crypto industry, but rather from a sharp turn in cross-asset trends. Wall Street performed strongly: the S&P 500 rose 1.97%, the Nasdaq rose 2.18%, the Dow Jones rose 2.47%, and the Philadelphia Semiconductor Index (SOX) surged 5.7%.
Metal prices rebounded sharply, with gold up 3.9%, silver up 8.6%, while the dollar index fell 0.2%, signaling a loosening financial environment.
Bitcoin mechanically fluctuated with this change. The correlation is very clear: when tech stocks stabilize and metals rebound, Bitcoin is lifted through common risk exposure.
However, the violence of this rebound also reflects the position situation in derivatives. A near -13% skew, negative funding rates, and inverted volatility structures created conditions where any macro positive could trigger short-covering and forced rebalancing.
This rebound is essentially driven by liquidity events and amplified by the closing of crowded short positions.
Nevertheless, forward-looking signals still lean bearish. Data from Derive shows that in options expiring on February 27, a large number of put options are concentrated at strike prices of $60,000 to $50,000.
Sean Dawson from Derive told Reuters that the demand for downside protection is "extreme." This is not a hindsight analysis; traders are clearly hedging against the next drop even after the rebound.
Bitcoin deleveraging chart shows a surge in liquidations, open interest resetting from $62 billion to $49 billion, negative funding rates, and skew reaching -13%.
Can $70,000 Hold? Analytical Framework
The logic for holding $70,000 is based on three conditions.
First, the macro rebound needs to be sustained, with tech stocks continuing to stabilize, and U.S. Treasury yields and the dollar no longer tightening. This rebound is a clear cross-asset linkage; if U.S. stocks turn down again, Bitcoin will not be able to stand alone.
Second, leverage needs to continue cooling down and no new forced selling should occur. Open interest has already decreased significantly, reducing the risk of a "vacuum drop."
Third, when the difficulty adjustment takes effect, miner pressure needs to be substantially alleviated. If prices can hold steady during the adjustment window, the expected 13.37% difficulty reduction will lessen marginal selling pressure, stabilizing the hash rate.
There are also three reasons supporting the view that another washout could occur:
First, options positioning still leans bearish. The largest put options at the end of February are concentrated at $60,000-$50,000, which is a forward-looking signal embedded in the market's implied probabilities, rather than a lagging sentiment.
Second, derivatives signals remain weak. Extreme skew, frequent negative funding rates, and inverted volatility structures align more with the characteristics of a "relief rally" under a fear framework, rather than a trend reversal.
Third, ETF flow data shows continued outflows. As of February 5, the monthly net outflow of Bitcoin ETFs reached $690 million. Although data for February 6 has not yet been released, existing patterns indicate that institutional allocators have not yet shifted from "de-risking" to "re-engagement."
Signal Dashboard
Indicators
Latest Reading / Status (as of publication)
Bull Market Confirmation (What changes to look for)
Bear Market Continuation (What to be cautious of)
Source
Derivatives
Perpetual Contract Funding Rate
Negative (below 0%) — "Extreme Bearish" state
Funding rates turn positive and stabilize on major platforms (not just a 1-2 hour pulse)
Funding rates remain negative / fluctuate repeatedly during price oscillations → "Rebound Induction" risk
Options Risk
25D Risk Reversal (Skew)
Short-term skew down to about -13% (surge in bearish demand)
Skew rebounds to 0 (decreased demand for downside protection) and stabilizes
Skew maintains deep negative values (sustained protective buying)
Leverage
Futures Open Interest (OI)
Deleveraging / OI Decline (Forced Liquidation Phase); recent reports indicate approximately $55B in equivalent positions exited within 30 days.
OI stabilizes (no rapid re-leveraging) and price holds above $70K.
OI rapidly accumulates during the rebound → Increased probability of the next liquidation leg.
Capital Flow
Spot BTC ETF Net Flow
Net Outflow: February 4 -$544.9M, February 5 -$434.1M.
Outflow slows to flat, then turns to slight inflow.
Accelerated outflow (consecutive -$400M to -$500M levels) → Repeated washout risk.
Mining
Hash Price + Difficulty Adjustment
Hash price at $32/PH/s (historical low); difficulty expected to decrease by 13.37%.
Difficulty adjustment arrives and hash rate stabilizes (reducing miner selling pressure).
Further decline in hash price / significant drop in hash rate → Increased miner selling/inventory outflow.
The Real Significance of $70,000
This price level itself has no magic. Its importance lies in the fact that it is above the $66,900 to $70,600 on-chain absorption cluster identified by Glassnode.
Holding above $70,000 means that the cluster has absorbed enough supply to temporarily stabilize the price. However, standing firm requires not only technical support but also a return of spot demand, the unwinding of derivatives hedging positions, and stabilization of institutional flows.
The rebound from $60,000 is real, but its composition is crucial. If macro conditions change, cross-asset stability will also reverse.
The forced liquidation of positions created a mechanical rebound, which does not necessarily translate into a sustained trend. Options traders still reflect a significant probability of a drop to $50,000-$60,000 within the next three weeks in their pricing.
Bitcoin has reclaimed $70,000, but it is currently consolidating below this level. This suggests a pause before the next test, and the success or failure of the next test depends on the occurrence of three conditions in sequence: maintenance of macro risk appetite, slowdown or reversal of ETF outflows, and normalization of derivatives sentiment.
The market has provided a violent pullback, but forward curves and flow data indicate that traders have not yet begun to bet on its persistence. $70,000 is not the endgame; it is merely the baseline that will determine the outcome of the next phase of the debate.
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