What caused the Bitcoin crash in February 2026?

The immediate trigger was the 'Warsh Shock'—receding rate cut expectations following rumors of hawk Kevin Warsh's nomination as Fed Chair. This compounded with escalating Trump tariffs, a collapse in precious metals, massive ETF outflows, and a cascade of leverage liquidations, leading to a ~52% drop.

Why did Bitcoin drop again on February 7?

Three main factors: 1) Dealer hedge selling related to BlackRock IBIT structured products, 2) Massive sales by the '195DJ' OG wallet, and 3) Position adjustments surrounding a $2.6 billion options expiry. BitMEX co-founder Arthur Hayes specifically pointed to IBIT hedging as a key driver.

Will Bitcoin drop further? What is the bottom?

Experts are divided. Bears like Stifel suggest a drop to $38,000, while 10X Research points to $50,000. However, historically low Fear & Greed levels (4-9) and an RSI of 16.52 mirror past market bottoms. Bulls like Bernstein and Standard Chartered still forecast $150,000 by year-end. The $73,500-$76,700 zone is the key level to watch.

How do mining costs affect Bitcoin's price?

According to CoinDesk, the average mining cost is currently ~$87,000, meaning the market price is trading ~20% below cost. Historically, when price falls below production cost, inefficient miners capitulate, reducing sell pressure and signaling a price reversal. The Hash Ribbon capitulation signal has lit up for the first time since 2022, often a precursor to significant rallies.

Anatomy of the Crash: Bitcoin Breaks $60K Amid “Warsh Shock” — Dead Cat Bounce or Bottom? [February 2026]

1 Anatomy of the Crash: Bitcoin Breaks $60K Amid “Warsh Shock” — A Deep Dive into the Drop, Rebound, and Relapse

Anatomy of the Crash: Bitcoin Breaks $60K Amid “Warsh Shock” — A Deep Dive into the Drop, Rebound, and Relapse

The Bottom Line: This Bitcoin crash was not triggered by a single event, but by a “perfect storm” of three converging layers: Macroeconomics, Market Structure, and Institutional Behavior. The V-shaped recovery on Feb 6 was likely a “short-covering rally.” However, with the Fear & Greed Index at historic lows and Hash Ribbon capitulation signals flashing, the market is showing technical signs similar to previous cyclical bottoms.

On February 5, 2026, Bitcoin (BTC) plummeted to an intraday low of $60,008. This marked a staggering 52% decline from its October 2025 all-time high of $126,272. While the price staged a sharp 15% rebound to $71,458 the following day, gravity took hold again on the afternoon of February 7, with BTC trading between $68,500 and $70,200. The RSI hit 16.52—the third most oversold reading in Bitcoin’s history—while the Fear & Greed Index dropped to 4–9, levels not seen since the COVID crash of March 2020. The question on every investor’s mind is clear: “Is this a dead cat bounce, or the beginning of a bottom?”

This article provides a data-driven autopsy of the crash, examining why it happened, the mechanics behind the February 7 relapse, the state of the mining economy, and the outlook ahead.

From $126,000 to $60,000 — The 16-Month Timeline of the Crash

To understand this crash, we must view the entire cycle starting late 2024. Following Donald Trump’s election victory on November 5, 2024, BTC surged 40%, breaking the historic $100,000 barrier on December 5. It peaked at $109,071 on Inauguration Day, January 20, 2025.

However, this marked the cycle’s first top. On February 1, 2025, when President Trump signed orders for 25% tariffs on Canada/Mexico and 10% on China, BTC plunged to $91,200 in thin weekend liquidity. Tariffs escalated throughout the year, culminating in 100% tariffs on China by October.

Despite a drop to $78,200 following the massive Lazarus Group hack of Bybit (approx. $1.5B in ETH), regulatory progress and tariff delays helped propel BTC to a new all-time high of $126,272 on October 6, 2025.

Since that peak, the market has suffered four consecutive months of red candles—the longest downtrend in eight years. Bearish signals piled up: receding Fed cut hopes, record outflows from BlackRock’s IBIT ($523M in a single day), and a “Death Cross” in late November 2025.

Date	Event	BTC Price
Nov 5, 2024	Trump Wins Election	~$70,000
Dec 5, 2024	First Break of $100k	$100,000
Jan 20, 2025	Trump Inauguration	$109,071 (ATH)
Feb 1, 2025	Tariff Executive Order	$102,000 → $91,200
Apr 7, 2025	“Liberation Day” Tariff Impact	$74,425 (Low)
Oct 6, 2025	New Cycle High	$126,272 (ATH)
Late Nov 2025	Death Cross Formation	~$81,000
Late Jan 2026	ETF Outflows Accelerate	~$88,000
Feb 5, 2026	“Warsh Shock”	$60,008 (Low)
Feb 6, 2026	V-Shape Rebound	$71,458 (High)
Feb 7, 2026	Relapse	$68,500 – $70,200

The Anatomy of the Collapse — A Three-Layered Crisis

This was not a single-variable equation. The crash resulted from the compounding effects of Macroeconomics, Market Structure, and Institutional shifts.

Layer 1: Macroeconomics — The Tariff & Fed “Double Punch”

The Trump administration’s aggressive tariff policy and the looming Fed Chair nomination created a toxic macro environment. As tariffs on semiconductors and autos expanded to 25%, analysts at Bernstein noted, “Tariffs drove a strong dollar and sticky inflation, killing risk asset inflows.”

The direct trigger for the February 5 capitulation was the “Warsh Shock.” Rumors solidified that former Fed Governor Kevin Warsh—a known hawk—would be nominated as Fed Chair, crushing pivot hopes. Simultaneously, Treasury Secretary Bessent stated the US government “has no authority to bail out crypto,” shattering hopes for a Strategic Bitcoin Reserve. The panic was cross-asset; Silver crashed 33% in the same window.

Layer 2: Market Structure — The Liquidation Cascade

The most destructive force was leverage. On Feb 5 alone, over $2.8 billion in long positions were liquidated, wiping out 311,000 traders. CoinGlass reported $1.45 billion in liquidations within 24 hours, with Hyperliquid ($567M) and Bybit ($329M) leading the carnage.

Spot Bitcoin ETFs, previously the market’s backstop, turned into a source of sell pressure. US Spot ETFs saw record outflows of $6.18 billion since November 2025. 10X Research warned that with the average ETF holder’s cost basis around $90,000, realized losses could drive further capitulation.

Furthermore, the “Carry Trade” unraveled. Many hedge funds held BTC not for directional exposure but for the basis trade (Spot Long / Futures Short). As futures premiums collapsed to Treasury yield levels, these funds unwound their positions, amplifying the sell-off.

Layer 3: Institutional Behavior — Whale Capitulation

On-chain data reveals that Whales (large holders) sold aggressively into the drop. According to Bloomberg, Whales offloaded roughly 81,068 BTC during the crash. The Exchange Whale Ratio on Binance hit 0.447, the highest since March 2025, indicating large transfers to exchanges for selling.

However, there was a divergence. Mid-sized whales (100–1,000 BTC) bought a net 62,651 BTC during the dip, suggesting some smart money viewed this as an accumulation zone.

The Feb 7 Relapse — IBIT Hedging and OG Wallet Selling

The recovery to $71,458 on Feb 6 proved short-lived. By the afternoon of Feb 7, BTC was sliding back toward $68,000. Three distinct mechanisms drove this secondary drop.

Dealer Hedging of IBIT Structured Products

BitMEX co-founder Arthur Hayes took to X (formerly Twitter) to pinpoint the culprit: “BTC drop is likely dealer hedging of $IBIT structured products.”

The mechanism is a negative feedback loop. As IBIT prices drop, dealers managing delta-neutral books must short more Futures or Spot BTC to stay hedged. Major IBIT holders like Goldman Sachs and Jane Street, often engaged in basis trades, sold IBIT shares as spreads tightened. On Feb 5, IBIT volume hit a record 284 million shares, with $900 million in option premiums traded—signals of a massive deleveraging event.

The “195DJ” OG Wallet Dump

CryptoQuant analyst JA Maartunn highlighted the activity of “195DJ,” a Bitcoin OG wallet. Once holding over 80,000 BTC, this entity has been systematically selling since August 2025, engaging in a “BTC to ETH rotation trade” via Hyperliquid. Continued selling from this massive entity added constant supply pressure.

$2.6 Billion Options Expiry

February 7 marked a $2.6 billion options expiry. Deribit analysts warned that the disappearance of “gamma gravity” around strike prices would unleash volatility. With Implied Volatility (IV) hitting 100%—levels not seen since the FTX collapse—and Put premiums dwarfing Calls ($49M vs $2.49M), market makers were forced to adjust positions aggressively post-expiry.

Mining Economics: A Bottom Signal?

The mining sector is currently screaming “capitulation”—historically a reliable indicator of a market bottom.

Trading Below Production Cost

Per CoinDesk, the average production cost for one Bitcoin is now estimated at $87,000. At $68,000–$70,000, miners are operating at a deep loss. The “Shutdown Price” for the widely used Antminer S21 is estimated between $69,000 and $74,000. The market is currently grinding exactly on this pain threshold.

Hash Ribbon Capitulation

Glassnode’s Hash Ribbon indicator flashed a “Capitulation” signal on November 29, 2025, for the first time since the 2022 bear market. Historical data shows that miner capitulation—where inefficient miners unplug and sell pressure vanishes—often precedes major bull runs. Hashrate has dropped 20% from its peak, and mining difficulty is projected to drop 14% on Feb 8, the largest downward adjustment since July 2021.

Under the Surface: Stablecoins and DeFi

Stablecoin Dislocation

While Tether and Circle minted a combined $4.75 billion in USDT and USDC in early February, these funds are not flowing into exchanges. Instead, exchanges saw net stablecoin outflows of $4 billion. This suggests the new minting is for inventory replenishment by trading desks, not immediate buying power for BTC.

DeFi Resilience vs. “Digital Gold” Failure

DeFi saw massive liquidations (Aave processed $450M), but the system held without systemic failure. However, the “Digital Gold” narrative took a heavy beating. While BTC dropped 35%, Gold surged 70% to over $5,500/oz. The correlation between Crypto and the Nasdaq/S&P 500 remains tightly coupled, failing to act as a hedge during this macro volatility.

Dead Cat Bounce or Bottom? Experts Divided

Is the Feb 6 rebound a trap? The experts are split.

The Bear Case

BanklessTimes warns of a “Bull Trap,” citing 28 bearish technical indicators against only 5 bullish ones. Stifel’s Barry Bannister predicts a slide to $38,000 based on historical trends, while Bitwise CIO Matt Hougan declared the onset of a “full-blown 2022-style Crypto Winter.”

The Bull Case

Santiment advises to “buy the blood,” noting that the Fear & Greed Index (single digits) has only occurred a handful of times in 17 years—usually a generational buying opportunity. Bulls like Bernstein and Standard Chartered maintain their $150,000 year-end targets, arguing that the structural flush (deleveraging) sets the stage for a clean recovery.

Outlook: Key Levels and Events

Price Level	Significance
$60,000	Crash Low. Losing this opens the door to $53k and the 200W MA at $58k.
$68,000 – $70,000	Current Battleground (Near 200W EMA). Must hold for short-term stability.
$73,500 – $76,700	Major Support/Resistance Flip Zone.
$80,000	First major resistance. Daily close above this signals strength.
$97,000 – $100,000	Psychological Barrier & 200D EMA. Bull market is not back until this is reclaimed.

How Investors Should Navigate This

Note: This is market analysis, not financial advice.

First, recognize that this is a structural deleveraging event in the ETF era, not a fundamental failure of the protocol. Institutional infrastructure (ETFs, MicroStrategy’s 713k BTC holdings) provides a floor that didn’t exist in 2022.

Second, extreme fear (Index 4–9) and Hash Ribbon capitulation are historically strong contrarian buy signals. However, “cheap” does not mean “immediate recovery.” The 2022 bottom took months to carve out.

Finally, watch the stablecoin flows. Until USDT/USDC starts flowing back into exchanges, any rally is likely to be capped. 2026 will be a year requiring patience and a stomach for volatility.

References & External Links

*Disclaimer: This article is based on information available as of February 7, 2026. Investing in crypto assets involves significant risk. Please make investment decisions at your own discretion.