Bitcoin’s Grand Ball: A Most Unseemly Tumble on the 5th of February

by

On a most unremarkable Thursday, the illustrious Bitcoin, that darling of the digital sphere, took a tumble so dramatic, it might have been mistaken for a lady fainting at a ball. Sliding with a grace most unbecoming, it plummeted more than 15%, a sum of roughly $10,800, sending ripples through the derivatives, spot venues, and the newly minted US Bitcoin ETF complex. A spectacle, indeed, for those who delight in the misfortunes of others.

The magnitude of this descent was not merely in its percentage, but in the cacophony of distress signals it brought forth. Implied volatility, that most fickle of companions, spiked with alarming fervor, while volumes exploded like a poorly timed jest at a dinner party. Momentum gauges, once so buoyant, collapsed into levels more suited to forced selling than the genteel art of discretionary risk reduction. A most unseemly affair, to be sure.

A Capitulation of Most Peculiar Nature

Real Vision’s Jamie Coutts, ever the observant gentleman, declared the session a “capitulation watch,” as though it were a society event one might attend with a mixture of dread and fascination. He pointed to a cluster of metrics, rarely seen in such company, including Bitcoin implied volatility via BVIV at 88.55, “closing in on the FTX-collapse peak of 105.” Coinbase, not to be outdone, logged its eighth-largest trading day ever by USD value, with $3.34 billion changing hands-a sum so grand, it might have funded a dozen seasons in London.

Coutts further remarked on the extreme nature of the momentum reset, citing a daily RSI of 15.64, “at or below March 2020 COVID crash lows.” He added, with a touch of melodrama, “Margin calls are firing. Forced liquidations are likely still working through the system. This has the signature of a capitulation event, but capitulation, like a protracted engagement, can be a process, not a single candle. These conditions may persist for weeks or even months before a durable low forms.”

Macro trader Alex Krüger, ever the pragmatist, declined to offer a price target for the lows, but observed that the market was displaying the sort of positioning and pricing distortions that often herald turning points. “Friends,” he wrote, with a tone of weary resignation, “I really do not know where the bitcoin bottom is, but I can recognize extreme conditions that you only see close to bottoms in time, such as extreme negative funding, options skew at levels only seen once before since 2022 (FTX day), and volumes & liquidations at extraordinary levels.”

Krüger’s caveat was as direct as a governess’s rebuke: “In the meantime, equities must hold. And having a bottom in does not mean that you will see a major trend from here.”

Galaxy’s Alex Thorn, with a flair for the dramatic, described the tape as historically stretched on RSI measures, declaring bitcoin “the most oversold today than any day since 3AC blew up in June 2022 (30d RSI),” and calling it “basically in the top 3 oversold events ever,” alongside November 2018 and June 2022. A most unfortunate distinction, indeed.

Bitcoin Oversold Chart

The US spot Bitcoin ETF market, far from cushioning the blow, amplified the day’s activity. Bloomberg Intelligence’s Eric Balchunas noted that BlackRock’s iShares Bitcoin Trust (IBIT) “just crushed its daily volume record with $10b worth of shares traded” as the fund’s price fell 13%, its second-worst daily drop since launch. A most unfortunate performance, akin to a debutante tripping on her hem at her first ball.

IBIT Volume Record

Head of Research for Anchorage Digital David Lawant added that IBIT alone trading above $10 billion was the highest since launch, beating prior records by 69% in shares and 27% in USD volume. A triumph of sorts, though one wonders if it was worth the price paid.

Positioning data hinted at a complex, two-sided ETF ecosystem. Head of Research at K33 Research Vetle Lunde noted net equivalent short exposure in short BTC ETFs was nearing the November 2022 peak at 7,745 BTC, while 2x leveraged long BTC ETFs-products that didn’t exist then-currently hold 39,590 BTC, “at levels not seen since Mar 24.” A most intriguing dance of bulls and bears.

ETF Positioning Data

Volatility, that ever-present specter, remained the throughline. ProCap CIO Jeff Park remarked: “Bitcoin implied vol is now at 75%. This is the highest level since the ETF launch in 2024. It is also finally higher than gold volatility. Know it’s a lot of pain right now, but this is all part of the process required for Bitcoin to make new highs. The melt up will be fast.” A reassuring thought, though one might prefer a less tumultuous journey.

Bitcoin Volatility Chart

At press time, BTC rebounded from $60,000 to roughly $64,900, a gain of about 9% from the session low. A modest recovery, perhaps, but one that offers a glimmer of hope in this most trying of times.

BTC Price Rebound

Read More

2026-02-06 12:41