Panic Takes Over Crypto Market: $1 Billion Liquidations in Three Days

Bitcoin Drops to $83,500 on February 26, Reaching Its Lowest Price Since November 2024

Bitcoin fell to $83,500 on February 26, marking its lowest price since November 2024. This $12,820 drop over three days wiped out more than $1 billion in leveraged long positions, according to CoinGlass data. Analysts attribute the bearish pressure to growing fears of a global economic recession. However, pressure from the derivatives markets and weaker corporate earnings are also keeping Bitcoin below $90,000.

Market Sell-off Coincides with U.S. Tariff News

The sell-off coincided with news that U.S. President Donald Trump is pushing for tariffs on imports from Canada and Mexico. This prompted investors to shift towards long-term U.S. Treasury bonds as a form of protection. Even gold, typically seen as a safe-haven asset during uncertain times, lost 2.2% in two days. Its price fell from a record high of $2,956 on February 24, reflecting broader market tensions.

Bitcoin Lacks Traditional Market Advantages

Unlike well-funded Big Tech companies, BTC does not offer dividends or clear ways to benefit during economic downturns, such as acquiring smaller competitors at lower prices. As a result, the S&P 500 serves more as a hedge than a high-risk investment.

Meanwhile, critics argue that Strategy (formerly MicroStrategy) played a key role in pushing Bitcoin’s price to $100,000. However, there is no guarantee that the company will continue raising funds. Strategy’s stock has dropped 19.4% over seven days, indicating investor skepticism about its plan to secure $42 billion in capital over the next three years. This raises doubts about Bitcoin’s ability to sustain its value without such support.

Bitcoin Needs Positive Economic Signals, But AI Bubble Fears Don’t Help

To return to $95,000, traders are looking for positive economic signals. AI giant Nvidia will release its quarterly earnings after the market closes on February 26. Many investors fear that the company may struggle due to global trade tariffs and U.S. export restrictions on processor chips to China. Additionally, concerns over an AI bubble are dampening risk appetite, as evidenced by the decline in U.S. 5-year Treasury bond yields to their lowest level since December 2024.

High demand for bonds, coupled with a sharp rise in gold prices, is often a sign of market fear. This is a worrying signal for Bitcoin, especially since spot Bitcoin ETF outflows exceeded $1.1 billion on February 24, according to Farside Investors. The wave of panic selling has hurt confidence, as investors had expected major institutions to manage Bitcoin’s volatility and use it as a hedge against a potential economic downturn.

Options Market Signals Further Decline

The upcoming expiration of monthly BTC options worth $6.9 billion on February 28 is pushing traders to expect a lower price. Bulls were caught off guard, even though open interest in put (sell) options is $530 million lower than in call (buy) options. For example, out of a total of $3.7 billion in call options, less than $60 million is positioned at $88,000 or lower.

This gives bears a clear incentive to keep Bitcoin’s price below $88,000 before options expiration at 10:00 AM. With declining chances of success for call options and rising market risks, bulls lack the strength to reverse the trend.

A recovery to $95,000 after options expiration seems unlikely, as the most probable scenario does not favor bulls, and confidence remains limited.

Senate Hearing Fails to Boost Bitcoin

Investors had hoped that the U.S. Senate hearing in Washington on Wednesday would act as a catalyst for Bitcoin following recent sell-offs.

Instead, Bitcoin recorded its fourth consecutive day of decline. Derivatives investors are now hedging against a further drop to $70,000—a level last seen shortly after election day. The withdrawal of over $1 billion from spot Bitcoin ETFs is adding further pressure. With increasing asset outflows, ETF providers may resume selling crypto futures, a trend observed earlier this month. According to futures brokers, this selling pressure has contributed to the recent market downturn.

Additionally, Commodity Trading Advisors (CTAs) have been spotted selling both BTC and ETH futures. These momentum-based traders typically engage when underlying asset prices rise or fall by 3%. Front-month Bitcoin futures fell by as much as 6.6%, while the asset itself lost up to 7.4% on Wednesday.

However, the token began to rise slightly during early Asian trading on Thursday. Investors will be watching price movements in Hong Kong as a market sentiment indicator since the city has become a crypto hub—and recent major sell-offs have been concentrated in Asia. Bitcoin’s support level stands around $81,724, its 200-day moving average, compared to Wednesday’s low of ~$82,167.

Crypto Fear Index Reaches Levels Seen During Celsius, Terra, and 3AC Collapses

The index measuring overall crypto market sentiment has not reached such low levels since the collapse of multiple crypto firms in 2022.

On February 26, the Crypto Fear and Greed Index plunged deeper into the “Extreme Fear” zone, reaching a score of 10. This is its lowest level since June 2022, when hedge fund Three Arrows Capital (3AC) faced liquidity issues—just one month after the collapse of Terraform Labs’ tokens, Terra (LUNC) and TerraClassicUSD (USTC), alongside crypto lender Celsius, which halted all withdrawals weeks after its token Celsius (CEL) dropped 90%.

Even though there haven’t been major crypto collapses leading up to February 26, many observers blame rising macroeconomic uncertainty.

The sentiment indicator initially entered the “Extreme Greed” zone the day before, on February 25. At that time, Bitcoin (BTC) fell below $90,000 for the first time since November, after U.S. President Donald Trump stated a day earlier that planned 25% tariffs on Canada and Mexico “will proceed on schedule.” More recently, during a cabinet meeting on February 26, Trump also announced a 25% tariff on the European Union.