Bitcoin’s decline into a bear market is progressing faster and deeper than in the previous cycle, according to on-chain analytics platform CryptoQuant. Since falling below its 365-day moving average in November, BTC has dropped 23 percent in just 83 days, compared to a 6 percent decline over the same period in early 2022. CryptoQuant noted that momentum is deteriorating faster this cycle.
The cryptocurrency peaked at $126,000 in early October, but following the October 10 liquidation event, key indicators turned bearish. Bitcoin has since fallen to $71,000, lost major support levels, and may be targeting $70,000 to $60,000. The coin has also been rejected three times at the “Traders’ On-chain Realized Price” and recently dipped below its lower band, previously a bull market support.
Sentiment in the market has turned extremely negative, with both Bitcoin and Ethereum facing heavy pessimism, according to Santiment. Glassnode reported that BTC’s bear market continues as profitability resets, realized losses increase, spot demand remains weak, and leverage unwinds. The crypto Fear and Greed Index has plummeted to record lows around 12, signaling widespread panic.
The broader crypto market is also under pressure. Total market capitalization fell 4.4 percent to $2.53 trillion, its lowest since April 2025. Bitcoin slipped below $71,000 during early trading in Asia and is heading toward support near $65,000. Ethereum has dropped below $2,100 and is on a path to previous cycle lows. Most altcoins are performing even worse, down roughly 80 percent from their peaks.
Ethereum co-founder Vitalik Buterin has argued that the original vision of Layer 2 scaling within the Ethereum ecosystem is no longer being fulfilled. He believes that many L2 networks have failed to live up to expectations, while the Ethereum mainnet itself continues to scale directly.
Slow Progress and Low Fees
In a recent post on X, Buterin highlighted two key trends reshaping the discussion. First, L2 networks have struggled to achieve advanced decentralization and interoperability. Second, Ethereum’s mainnet now has very low fees, with gas limits expected to rise significantly through 2026.
Buterin emphasized that true Ethereum scaling was meant to expand block space while fully inheriting Ethereum’s security, meaning that all activity remains valid and censorship-resistant. Systems relying on multisig bridges or discretionary control cannot be considered genuine Ethereum extensions, even if they provide high throughput.
He noted that some L2 projects may never progress beyond an initial stage, citing technical limitations with zero-knowledge EVM safety and regulatory or customer requirements that demand ultimate control. While appropriate for those projects’ purposes, this disqualifies them from being considered Ethereum scaling in the original sense.
A Spectrum of L2s
Rather than treating all L2s as a single category, Buterin suggested viewing them as a spectrum of systems with varying degrees of Ethereum security. Some L2s may be fully secured by Ethereum, while others operate with more limited guarantees. This approach allows users and applications to select networks based on their specific needs.
He added that L2s should aim to provide unique value beyond general scaling, including specialized virtual machines, application-specific efficiency, high throughput, low-latency sequencing, or integrated services like oracles or dispute resolution. For networks handling ETH or Ethereum-based assets, reaching at least stage 1 should be a baseline requirement.
ZK-EVM Precompile
Buterin also stressed the importance of a native rollup precompile that can verify ZK-EVM proofs directly on Ethereum. This would enable trustless interoperability and composability while allowing L2s flexibility to extend functionality. He noted that while some systems in a permissionless ecosystem will operate with weaker guarantees, Ethereum’s role is to make security guarantees clear and continue strengthening the base protocol.
Tether has reportedly reduced its planned fundraising target after facing resistance from investors. According to a Financial Times report on February 4, the stablecoin issuer is now considering raising about $5 billion, down from the $15 to $20 billion initially discussed in 2025.
The earlier range was linked to a $500 billion valuation, which would have made Tether one of the world’s most valuable private companies. Several investors questioned whether this figure reflected realistic growth expectations. CEO Paolo Ardoino emphasized that the higher amount was never a firm goal and that the company, which remains profitable, does not urgently need external capital.
Tether issues USDT, the world’s largest dollar-pegged stablecoin, with approximately $185 billion in circulation. Last year, the company earned around $10 billion in profit, primarily from returns on reserves held in U.S. Treasuries. Despite strong earnings, some investors remain cautious about the valuation and fundraising plans.
The company has also diversified its reserves, holding large positions in Bitcoin and gold. In the fourth quarter of 2025, Tether purchased roughly $779 million in Bitcoin, raising total holdings to over 96,000 BTC. Transparency concerns persist, as S&P Global Ratings gave USDT its lowest score on the stablecoin stability scale last November, citing disclosure gaps and significant exposure to Bitcoin, gold, and secured loans. Ardoino criticized the rating methodology, stating it fails to capture Tether’s business model.
The lowered fundraising target shows Tether is adjusting to investor feedback. Whether the company moves forward with a smaller raise or pauses fundraising entirely will depend on investor appetite and broader crypto market conditions in the coming months.
Changpeng “CZ” Zhao, founder of Binance, has revealed a long-standing fake account that used AI-generated images to pose as a supporter while spreading false information about Binance and BNB. The account, called “Wei 威 BNB,” had 863,000 followers and appeared legitimate by using images from a BNB Chain event.
CZ noticed posts claiming the closure of a Binance account due to alleged manipulation. On closer examination, he found several altered images, including one showing him in a shirt he does not own and another combining low-resolution images of him and Binance executive Yi He with the account holder’s image. The account’s history suggested it was either hacked or purchased, originally posting female-focused content before switching to crypto in 2015.
CZ criticized the campaign as poorly executed and likely coordinated by a competitor more focused on Binance than their own business. Influencer ShirleyXBT pointed out that the account used an AI-generated version of her photo as its profile picture.
The revelation drew community support. World of Dypians CEO Teki thanked CZ for clarifying the situation, noting the posts initially seemed credible. Commentator Vegas categorized such attacks as opportunistic engagement attempts, frustrated traders, or organized FUD campaigns. He also mentioned being offered payment to spread negative sentiment about Binance, suggesting possible coordination by competitors or large market players.
The exposure comes amid ongoing scrutiny of CZ and Binance. On January 28, CZ faced criticism for advocating a buy-and-hold approach, which he clarified was personal advice and not applicable to all tokens. On January 30, Binance announced it would convert $1 billion from its SAFU insurance fund back into Bitcoin, a move some viewed as bullish but which drew attention to the exchange’s financial strategy.
Despite controversies, Binance remains a market leader. Data from CryptoQuant at the start of 2025 showed Binance accounted for 41 percent of spot trading volume and 42 percent of Bitcoin perpetual futures volume among top-tier exchanges.
Despite a bearish digital asset market, Ark Invest, led by Cathie Wood, has been increasing its exposure to crypto-related stocks over the past few trading days. The investment firm acquired thousands of shares tied to several crypto companies, taking advantage of lower prices.
According to Ark Invest’s February 3 trade filings, the firm spent over $19 million on crypto-linked stocks through its ETFs. Purchases included shares of Circle, Coinbase, Bullish, Bitmine, Block Inc., and Robinhood. On Tuesday alone, Ark Invest bought 145,488 Bitmine shares for $3.25 million, 125,218 Bullish shares for $3.46 million, 42,878 Circle shares for $2.4 million, 3,510 Coinbase shares for $630,606, 31,202 Block Inc. shares for $1.77 million, and 89,677 Robinhood shares for $7.8 million.
These purchases followed a larger round of acquisitions on Monday, when Ark Invest bought over $71 million in crypto-related shares through ETFs including the ARK Blockchain & Fintech Innovation ETF and the ARK Innovation ETF.
The broader crypto market has been struggling, with Bitcoin trading at around $76,000, down 17 percent over the past month and 14 percent in the past week. Most crypto-related stocks have posted double-digit losses over the last three months. Despite these declines, Ark Invest has continued buying, suggesting the firm sees the current market slump as an opportunity to expand its crypto holdings.
A leaked dataset of 149 million stolen credentials has surfaced this week, reportedly including login details for around 420,000 Binance accounts. The discovery underscores a growing trend of crypto theft through long-term malware infections that steal user data directly from devices, often before any funds are moved.
The Scope of the Threat
Security firm Web3 Antivirus reported on February 4 that the dataset was compiled from information-stealing malware installed on victims’ devices. The stolen data includes exchange logins, passwords, private keys, API keys, and browser session tokens for email, social media, and financial accounts. These “infostealers” can later be used for account takeovers and fund theft, highlighting the need for early device-level detection.
Web3 Antivirus also warned that malicious AI skills on platforms like ClawHub are being used to install malware disguised as wallet tools or trading bots. These tools can remain dormant until a user’s crypto balance grows or specific actions are taken, creating upstream supply-chain risks from wallets to trusted tools.
Challenges for Users and Platforms
Crypto theft continues to cause massive losses. PeckShield reported that scams and hacks drained over $4.04 billion in 2025, with scams alone increasing 64% year over year. Centralized exchanges and large organizations were targeted most, accounting for 75% of stolen funds.
Web3 Antivirus estimated total illicit crypto activity in 2025 at $158 billion, up from $64 billion in 2024. The firm noted that even low-success attacks can cause massive losses at scale, and that the real opportunity to prevent theft lies with platforms, which can monitor transaction approvals and behavior before users act.
Wallet drainers are a particularly common attack vector. Web3 Antivirus recorded 15,530 suspicious approvals across 11,908 wallets in January, leading to $4.25 million in losses. These attacks typically exploit malicious transaction approvals, emphasizing the importance of detection before signatures are confirmed.
XRP has remained under pressure over the past month, falling more than 26 percent amid broader weakness in the crypto market. Another decline of nearly 3 percent on Wednesday renewed concerns that liquidation pressure from last weekend’s sharp sell off may not be fully resolved.
However, new data indicates that the recent wave of liquidations may have reset market conditions, allowing spot demand to influence price action more organically without excessive leverage amplifying moves.
Signs of a Market Reset
Data from CryptoQuant shows that XRP open interest on Binance has dropped to about $406 million, the lowest level recorded since November 2024. The sharp decline suggests a significant unwinding of leveraged positions, likely driven by long liquidations and traders exiting positions as prices fell.
When open interest reaches such low levels, the market becomes less prone to sudden volatility caused by long or short squeezes. CryptoQuant noted that this type of derivatives market reset often leads to more stable price behavior.
With liquidation pressure largely reduced, future price movements are less likely to be exaggerated by over leveraged positions. If spot demand increases alongside strong on chain activity, XRP could see a more sustainable recovery. According to the analysis, this clean slate creates conditions that may support a meaningful trend reversal, with the derivatives market now better positioned to absorb new buying or selling pressure.
Momentum Indicators Signal Reset
Technical indicators are also pointing to a broader reset. Crypto analyst Egrag Crypto said XRP macro relative strength index has dropped into the 45 to 50 range faster than expected, a zone that has historically preceded strong price rebounds.
He explained that while downside momentum looks aggressive, the selling does not appear to be driven by retail investors. Instead, it reflects distribution by larger holders during periods of heightened liquidity. Egrag Crypto described the current setup as a full reset phase following a previous RSI peak near 80.
He added that the 45 to 50 RSI range has served as macro support in every prior XRP cycle and has never been breached. Historically, this compression phase has flushed out weaker holders, reset momentum, and been followed by renewed expansion. The analyst noted that the structure would only turn bearish if RSI drops below approximately 43.
Institutional interest has also shown resilience. US listed spot XRP exchange traded funds recorded $19.46 million in inflows on February 3, according to SoSoValue. The Franklin XRP ETF led with $12.13 million, followed by Bitwise with $4.8 million and the Grayscale XRP Trust with $2.51 million. In comparison, Bitcoin ETFs saw $272 million in net outflows, while Ethereum ETFs recorded about $14 million in inflows, positioning XRP funds as relative outperformers.
Ripple has announced that its Ripple Prime brokerage platform will support Hyperliquid, giving institutional clients access to the decentralized perpetual futures exchange.
Through the integration, Ripple Prime users can trade on chain derivatives via Hyperliquid while managing their decentralized finance exposure alongside other supported assets. These include cleared derivatives, over the counter swaps, fixed income products, foreign exchange, and various digital assets.
Ripple said clients will be able to access Hyperliquid’s liquidity while maintaining a single counterparty relationship through Ripple Prime.
Michael Higgins, international chief executive of Ripple Prime, said the expansion strengthens the connection between decentralized finance and traditional prime brokerage services. He noted that the move enhances trading, yield generation, and access to a wider range of digital assets, while improving liquidity, efficiency, and innovation for institutional clients.
Ripple continues to expand its product suite while progressing on licensing and regulatory initiatives globally. The company recently secured preliminary approval for an electronic money institution license in Luxembourg.
The integration comes as Hyperliquid continues to attract billions of dollars in daily trading volume across multiple assets, offering some of the deepest on chain liquidity in the industry.
Michael Burry warned that Bitcoin is increasingly behaving like a speculative asset rather than a reliable hedge, increasing the danger for companies holding large Bitcoin reserves.
Bitcoin’s drop below $80,000 has intensified fears that a broader downturn across the crypto market may be unfolding.
Analysts suggest the decline may go beyond a routine correction and could begin to strain corporate balance sheets, raising systemic risk if losses deepen.
Rising Threat to Corporate Holders
Burry cautioned that continued weakness in Bitcoin could erase significant market value, with the highest exposure among firms that have built sizable corporate treasuries around BTC, a trend that has expanded rapidly in recent years.
In a recent Substack post following the latest crypto sell off, the investor behind The Big Short said that Bitcoin breaking key technical levels could trigger cascading stress not only within crypto markets but also across related financial sectors.
He argued that Bitcoin is failing to live up to its role as a hedge against currency debasement. Instead, its recent performance has mirrored that of a high risk speculative asset, particularly due to its correlation with the S and P 500. He noted that while gold and silver rallied amid geopolitical tension and dollar weakness, Bitcoin did not respond to those same macro signals.
Burry warned that additional downside could have serious consequences for Bitcoin treasury firms that accumulated large positions at higher prices. He suggested that a further 10 percent drop could push major holders such as Michael Saylor’s Strategy billions of dollars underwater and potentially limit their access to capital markets, increasing bankruptcy risk.
He added that these pressures could spill beyond individual companies and contribute to wider market instability. Burry also noted that Bitcoin’s weakness has coincided with recent softness in precious metals.
Skepticism Around Treasury Models
Galaxy Digital executive Zac Prince also questioned the long term sustainability of Bitcoin treasury companies. Speaking on TheStreet Roundtable, he said these firms often depend on aggressive financial engineering rather than Bitcoin’s underlying value. He compared them to earlier structures that created tokens to generate Bitcoin and warned that paying a premium for such models does not make them durable.
Prince added that while some firms may pivot toward revenue generating operations, many will still struggle to justify their valuations. He stressed that businesses should focus on building real operations first and treat Bitcoin as a treasury strategy rather than the core of the business.
Confidence Continues to Fade
Bitcoin remains under heavy pressure, and many analysts believe further downside is possible rather than the long anticipated recovery.
Former Binance chief executive Changpeng CZ Zhao also expressed growing uncertainty. After recently backing the idea of a Bitcoin super cycle, he said current market conditions have weakened his confidence. Posting on Binance’s social platform, Zhao pointed to rising fear, uncertainty, and doubt in the community and admitted that the emotional intensity has made Bitcoin’s near term outlook increasingly unclear.
Bitcoin fell to about $72,800 amid concerns over a potential U.S. government shutdown before rebounding strongly after lawmakers approved a funding measure.
Bitcoin dropped sharply during heightened shutdown fears as U.S. lawmakers debated a temporary funding solution, then recovered once the House passed the bill on February 4, 2026, reducing the risk of a government shutdown.
The swift rebound highlighted how sensitive crypto markets remain to U.S. political uncertainty, even in the absence of crypto related developments.
Shutdown Anxiety Spreads Across Markets
On February 4, blockchain analytics firm Santiment reported that the sell off occurred during U.S. market hours as media coverage focused on a closely contested House vote. As uncertainty increased, Bitcoin declined rapidly, leading to roughly $30 million in DeFi liquidations. At the same time, the S and P 500 and gold also moved lower, despite gold’s reputation as a defensive asset.
This synchronized decline suggested investors were broadly pulling back from risk assets due to political uncertainty rather than reacting to any crypto specific issue.
At the center of the concern was a proposed $1.2 trillion funding bill intended to keep most federal agencies operating through September 30. Failure to pass the legislation would have triggered a partial shutdown, potentially delaying economic data releases and adding pressure to already cautious markets.
The vote exposed divisions within the Republican party, including one lawmaker opposing the bill over objections tied to foreign aid provisions.
Despite the tension, the bill ultimately passed, avoiding a shutdown and prompting immediate relief across financial markets. Bitcoin rebounded from its lows, gaining more than 5 percent within hours, while the S and P 500 also recovered. Santiment noted that the rapid bounce suggested the earlier sell off was driven by fears of political dysfunction rather than a shift in Bitcoin’s underlying value.
Ongoing Challenges for Bitcoin
Although the funding decision provided short term relief, Bitcoin continues to face broader challenges. Data from CoinGecko shows the asset has fallen nearly 14 percent over the past week and 17 percent over the last month.
A recent report from Galaxy Digital pointed to weakening on chain indicators. Research head Alex Thorn noted that 46 percent of Bitcoin’s circulating supply is currently underwater, meaning it last changed hands at higher prices, a condition that can increase selling pressure. He also highlighted the absence of meaningful accumulation by large investors.
On February 3, reports suggesting Iran was seeking changes to the structure of nuclear negotiations with the U.S. added further pressure, pushing Bitcoin below $75,000 and wiping out at least $20 million in derivatives positions.
Some analysts, including Doctor Profit, have lowered their downside projections, estimating that the cycle low could fall between $44,000 and $54,000. The critical question now is whether the removal of immediate U.S. political risk will be enough to counteract weakening technical signals and on chain data, or if Bitcoin remains exposed to a deeper pullback.
