Tiget Research: Liquidity vacuum drives sharp sell-offs, why does Bitcoin lack the power to rebound?

Bitcoin plummeted from approximately $87,000 to $81,000 in less than 24 hours between January 29 and 30, a decline of about 7%.

The market did not wait for the expected rebound but instead further declined on February 2. According to the latest data from the Gate platform, BTC briefly dropped to around $74,500 this morning, currently rebounding slightly to $77,000.

01 Market Status: Not Just a Price Correction

In early February 2026, the cryptocurrency market experienced a turmoil far beyond a typical correction. According to data from the morning of February 2, Bitcoin briefly fell below $75,000, then slightly recovered to around $77,746.86.

This decline caused Bitcoin’s price from its peak in 2025 to drop by about 40%. More concerning is that the market did not panic buy the dip but instead fell into a sustained liquidity crunch.

During the same period, over 160,000 traders faced liquidations worldwide. The previous day, liquidations reached as high as 420,000, with total contract liquidations exceeding $2.5 billion. This sell-off was not limited to Bitcoin; Ethereum, the second-largest crypto, also dropped over 11%, touching a low of $2,256.

Market tracking data shows that since the peak in October 2025, Bitcoin’s market cap has evaporated about $800 billion, even falling out of the top ten global assets.

02 Liquidity Vacuum: Amplifier of Market Sell-offs

Unlike the decline in October 2025, Bitcoin’s recent crash was not caused by a single systemic shock. The market lacked sufficient buy-side volume to absorb the selling pressure, creating a typical liquidity vacuum.

Tiger Research explicitly states in its report that trading volume in Bitcoin’s spot and futures markets continues to shrink. In a low-liquidity environment, even moderate market shocks can cause excessive price volatility.

Traditional markets like stocks and commodities can rebound quickly after initial declines, but Bitcoin has failed to follow this trend. Analysis indicates that Bitcoin is simultaneously suffering from damage to its price, market correlation, and confidence.

A key technical indicator was broken—the “Active Realized Price” near $87,000 was breached. This indicator represents the average cost basis of active traders in the current market. Once broken, most active participants face losses, intensifying selling pressure.

03 Double Impact: Traditional Finance and Policy Uncertainty

This sell-off was driven by a double shock, with both factors interacting to amplify market volatility.

First, the spillover effect from weakness in tech stocks. Disappointing Q4 earnings from Microsoft raised concerns about overheating AI investments, causing a sharp decline in the Nasdaq index.

As a high-risk asset, Bitcoin reacted especially violently. This response indicates that Bitcoin’s correlation with traditional tech stocks has significantly increased under stress.

Second, policy concerns triggered by leadership changes at the Federal Reserve. Market rumors suggest that U.S. President Trump is preparing to nominate Kevin Woorh as the next Fed Chair.

Woorh is considered hawkish; during his tenure as a Fed Governor from 2006 to 2011, he consistently opposed quantitative easing. Markets worry that if Woorh takes office, liquidity in the financial system could tighten.

04 Leverage Liquidations: Catalyst for the Downward Spiral

Excessive leverage in the market further worsened the decline. According to Coinglass data, over $2.5 billion in crypto contracts were liquidated on February 1 alone, with over 90% being long positions.

This forced selling created a vicious cycle: falling prices triggered liquidations, which led to further sell-offs, causing more liquidations. Glassnode data shows Bitcoin has broken below its “Realized Market Value” (currently $80,500) for the first time in 30 months.

Losing this key technical level often signals a transition from a bull cycle to a mid-term bear market, historically.

05 Institutional Perspectives: Short-term Pressure and Long-term Divergence

In the face of market turbulence, investors of different sizes behave very differently. According to Glassnode data, small investors holding fewer than 10 BTC have been selling continuously for over a month.

Conversely, “super whales” holding over 1000 BTC have been quietly accumulating, absorbing retail sell-offs. However, these large buy-ins are insufficient to push prices higher, highlighting current market weakness among buyers.

Some analysts warn that the current decline may echo the 2022 crypto winter, and if the speculative bubble fully bursts, further declines could occur. CryptoQuant’s CEO notes that Bitcoin’s buyer liquidity has been exhausted, and the flattening of market cap confirms that the fresh capital needed to sustain a bull run has disappeared.

06 Future Outlook: Recovery Paths and Potential Turning Points

Despite short-term challenges, some structural factors still support Bitcoin’s long-term prospects. Tiger Research points out that crypto-friendly regulations are becoming more concrete.

Allowing crypto investments within 401(k) retirement accounts could potentially bring in up to $10 trillion in capital. Additionally, rapid legislative progress on digital asset market structure is a positive sign.

From a monetary policy perspective, even if Woorh becomes Fed Chair, the Fed is expected to maintain a gradual easing bias. Woorh has proposed a middle-ground approach in a Wall Street Journal column: limited rate cuts combined with balance sheet reduction.

For market participants, patience may be necessary at this stage. CryptoQuant’s CEO believes the market might be forced into a “wide sideways consolidation” until a new bottom forms.

Future Outlook

When Bitcoin briefly fell below $75,000 on February 2, the “super whales” holding over 1000 BTC quietly increased their holdings, absorbing retail panic sell-offs. These large buy-ins are like hidden currents in the deep sea—though they did not immediately reverse the surface turbulence, they hint at a reorganization of underlying forces.

Meanwhile, winter storms in the U.S. caused Bitcoin mining daily production to plunge from 70-90 BTC to 30-40 BTC, with hash rate fluctuations resonating in energy market dynamics. The market is waiting for a new equilibrium; when liquidity finally returns, those who endured the storm may define the next cycle’s pattern.