Market-Wide Plunge Driven by Liquidity Crisis, Not Crypto Fundamentals

VADODARA, February 5, 2026 — A synchronized selloff across cryptocurrency, precious metals, and equity markets reveals a systemic liquidity crisis rather than asset-specific weakness. According to on-chain data from Glassnode, Bitcoin, gold, and silver posted their largest weekly declines in months. This unusual correlation stems from forced deleveraging triggered by portfolio-wide risk aversion. Market structure suggests the Federal Reserve's monetary policy actions failed to stabilize market expectations.

Investigation: The Cross-Asset Liquidity Squeeze

BeInCrypto's analysis indicates the downturn represents a mechanical response to liquidity pressures. Bitcoin dropped 13.29% to $63,605 within 24 hours. Gold and silver experienced parallel declines. This correlation breaks from typical decoupling patterns observed during crypto-specific events. The report attributes the turmoil directly to U.S. monetary policy uncertainty. Forced deleveraging across leveraged positions in multiple asset classes amplified the downward momentum.

Market Context & Historical Precedent

Historically, cross-asset correlations during liquidity crises mirror the 2020 COVID crash and the 2021 post-stimulus taper tantrum. In contrast, the 2022 crypto winter showed Bitcoin decoupling from traditional markets as institutional adoption accelerated. Underlying this trend, the current correlation suggests a macro-driven liquidity grab rather than a shift in crypto fundamentals. Similar to the 2021 correction, market participants face margin calls that trigger cascading liquidations.

Related developments include crypto futures liquidations exceeding $214 million and Bitfinex BTC margin longs hitting a 2-year high amid price declines.

Technical Architecture & Price Action

Technical analysis reveals critical support levels across assets. Bitcoin faces a key weekly support at the $62,800 Fibonacci 0.618 retracement level from its 2025 rally. A breakdown below this level would invalidate the current bullish structure. The Relative Strength Index (RSI) for Bitcoin sits at 28, indicating oversold conditions. However, volume profile analysis shows selling pressure remains elevated. Gold's 200-day moving average at $2,150 acts as a bearish invalidation level.

By The Numbers

Why It Matters

This liquidity crisis matters because it exposes interconnected systemic risks. Institutional liquidity cycles typically follow Federal Reserve policy shifts. According to the Federal Reserve's official statements on monetary policy, current tightening measures aim to combat inflation but create collateral damage across risk assets. Retail market structure shows increased leverage through crypto derivatives, amplifying volatility. On-chain data indicates long-term holders remain steadfast despite price declines.

Expert Commentary

The correlation between Bitcoin, gold, and equities signals a macro liquidity event, not a crypto-specific failure. Market participants face forced deleveraging due to portfolio-wide risk management protocols. This mechanical selling pressure creates oversold conditions that may present strategic entry points for patient capital.

— CoinMarketBuzz Intelligence Desk

Market Outlook & Price Scenarios

Market structure suggests two primary scenarios based on liquidity flows. The bullish scenario requires stabilization above key support levels with reduced correlation to traditional markets. The bearish scenario involves continued deleveraging and breakdown of critical technical levels.

• Bullish Invalidation Level: Bitcoin must reclaim and hold above $68,000 to invalidate the current downtrend. This level represents the previous week's high and a key psychological resistance.
• Bearish Invalidation Level: Bitcoin must maintain weekly closes above $62,800 to prevent a structural breakdown. This Fibonacci support level aligns with the 200-day moving average.

The 12-month institutional outlook depends on Federal Reserve policy clarity. Historical cycles suggest liquidity-driven selloffs create accumulation opportunities for long-term investors. The 5-year horizon remains positive given Bitcoin's fixed supply and institutional adoption trajectory.