Why This Bitcoin (BTC USD) Crash Looks Different From Past Sell-Offs
Matthew Sigel, head of digital asset research at VanEck, outlined the top forces that collectively dragged Bitcoin to around $60,000 on Thursday, according to a DL News report. In previous downturns, the trigger was clear. FTX crashed. China has banned mining. Terra burst in. This time there is no single shock event. This makes it more difficult to call a definitive bottom, but it also means that the market is not dealing with a sudden structural failure.
Massive Leverage Relaxation Hits Bitcoin Price (BTC USD)
One of the biggest pressures was the rapid unwinding of leverage. Open interest on Bitcoin futures fell sharply, falling to about $49 billion from about $61 billion just a week earlier, according to Coinglass. That’s more than a 20% drop in leveraged exposure in a very short time.
Zoom out further, and the shift looks even more dramatic. Open interest on futures contracts peaked above $90 billion in early October. Since then, more than 45% of that leverage has been flushed out of the system. Bitcoin’s price fell by a similar percentage, suggesting that leverage and price fell together rather than causing a chaotic cascade of forced selling.
Also Read: BTC USD Price: Bitcoin Regains $70,000 Level After Brutal Crash Since FTX Crash 2022 – Here’s What’s Happening In The Crypto Market Today
BTC USD Liquidations Rise As Traders Pull Back
Liquidations were still heavy. Over the past week, total crypto liquidations have reached an estimated $3 to $4 billion, with roughly $2 to $2.5 billion tied to Bitcoin futures alone.
AI Hype Cools Down, Puts Pressure on Bitcoin Miners
At the same time, enthusiasm around artificial intelligence began to cool. Sigel noted that investors are increasingly questioning whether massive AI infrastructure spending will actually generate meaningful returns. Monetization remains unclear, and that uncertainty has begun to ripple outward.
Bitcoin miners have been particularly hard hit. Many mining companies have turned to AI and high-performance computing, hoping to reuse facilities and ride the AI boom. But as financing conditions tightened and Bitcoin prices weakened, miners were forced to sell Bitcoin to raise cash and strengthen balance sheets, adding extra supply to an already fragile market.
According to Sigel, the timing couldn’t be worse. Miners are selling Bitcoin to fund AI ambitions just as confidence in those AI bets begins to waver.
Also Read: MSTR Shares Up 23% Today Despite Strategy’s $12.4B Net Loss As Bitcoin (BTC USD) Recovers To $70,000 – Analyst Share Price Target Revealed
Governance concerns resurface amid World Liberty Finance deal
Management concerns also resurfaced. The Trump family’s World Liberty Finance project has raised new transparency questions after it sold a large stake to UAE-linked investors. A Wall Street Journal report on Jan. 31 revealed that nearly half of the project was sold for an undisclosed $500 million to a member of the Abu Dhabi royal family around the time Donald Trump took office in January 2025.
Sigel pointed out the irony that these are exactly the kinds of disclosure concerns the Clarity Act aims to address, suggesting that uncertainty like this could weigh on broader market confidence.
Quantum computing fears add another layer of uncertainty
Another source of unease has been the renewed focus on quantum computing risks. Discussion on the topic has intensified across developer and community forums, even as several Bitcoin Core developers remain tight-lipped about how immediate the threat really is.
Quantum computers could theoretically break Bitcoin’s encryption model, and a Chaincode Labs report estimated that anywhere between 20% and 50% of circulating coins could be vulnerable. Adding to the irony, stocks linked to quantum computing have fallen sharply along with Bitcoin and other risk assets.
Bitcoin four-year cycle continues to shape investor psychology
Investor psychology tied to Bitcoin’s four-year cycle also played a role. Historically, Bitcoin’s halving reduces new supply, prices rise, profits are taken, and a bear market ensues. That narrative remains deeply ingrained, even as many observers have argued that the cycle may no longer apply.
Sigel emphasized that previous cycles were rarely clean or linear. After major declines, there were often multiple rebounds strong enough to support meaningful countertrend rallies.
Analysts See Opportunity Despite Bitcoin Withdrawal
Despite the list of negative forces, Sigel believes the current recovery has created opportunity. He said, “The depth of the pullback and the degree of leverage reset has made the current price washout increasingly attractive for building positions on a one-to-two-year view,” adding, “I added today to see Bitcoin,” as quoted by DL News.
Crypto crash reasons explained
Bitwise CIO Matt Hougan echoes the idea that there is rarely a single explanation for crypto downturns, as per The Block report. He said the latest decline was mainly driven by long-term investors selling ahead of the historically observed four-year cycle, combined with leveraged liquidations and a broader shift to risk-off assets.
Hougan estimated that long-term holders sold more than $100 billion worth of Bitcoin last year as fears grew that the cycle would repeat earlier post-peak withdrawals. That increase in supply came just as speculative demand faded, with capital rotating into AI-linked stocks and, more recently, precious metals.
Why This Bitcoin Downturn Isn’t Like 2022
This time, however, Hougan argues that the backdrop is different from 2022. While Bitcoin has fallen along with other risk assets, including stocks, gold and silver, there are no signs of insolvency-driven forced selling or broken market infrastructure.
With sentiment near levels seen at the 2018 and 2022 lows, Hougan believes that much of the bad news may already be reflected in prices, even if further downside remains possible.
Crypto bear markets, he said, tend to end in exhaustion rather than excitement.
Bloomberg ETF analyst Eric Balchunas reinforced the long-term perspective, noting that sharp withdrawals have historically failed to derail Bitcoin’s broader trajectory, as per The Block report. While he acknowledged that this time may be different, he pointed out that both stocks and Bitcoin have always recovered from previous declines to reach new highs.
Bitcoin price recovers after touching $60,000
After hitting lows near $60,000, Bitcoin recovered and reclaimed $70,000, rising nearly 4% on the day.
Frequently Asked Questions
Why do Bitcoin miners sell BTC? Miners sold Bitcoin to raise cash as funding tightened and prices fell, especially after turning to AI projects. Does the four-year Bitcoin cycle still matter? Many investors still trade around it, even if some claim it may no longer fully apply.
Disclaimer for Uncirculars, with a Touch of Personality:
While we love diving into the exciting world of crypto here at Uncirculars, remember that this post, and all our content, is purely for your information and exploration. Think of it as your crypto compass, pointing you in the right direction to do your own research and make informed decisions.
No legal, tax, investment, or financial advice should be inferred from these pixels. We’re not fortune tellers or stockbrokers, just passionate crypto enthusiasts sharing our knowledge.
And just like that rollercoaster ride in your favorite DeFi protocol, past performance isn’t a guarantee of future thrills. The value of crypto assets can be as unpredictable as a moon landing, so buckle up and do your due diligence before taking the plunge.
Ultimately, any crypto adventure you embark on is yours alone. We’re just happy to be your crypto companion, cheering you on from the sidelines (and maybe sharing some snacks along the way). So research, explore, and remember, with a little knowledge and a lot of curiosity, you can navigate the crypto cosmos like a pro!
UnCirculars – Cutting through the noise, delivering unbiased crypto news
