What Triggered Bitcoin’s Major Selloff in February 2026?

Please note that VanEck may have a position(s) in the digital asset(s) described below.

Note: This commentary was written on February 5, when Bitcoin was trading in the mid-$60,000s. For a quick take on the selloff, see our Trends with Benefits quickie here.

Key Takeaways

• Deleveraging Without Capitulation: Leverage has been reduced meaningfully, while price action has remained orderly rather than disorderly.
• Statistical Stress, Not Structural Failure: Multiple indicators reflect elevated stress levels, even as underlying market structure and fundamentals remain intact.
• Mean Reversion Bias Emerging: Velocity, distance-from-trend, and positioning measures suggest growing potential for stabilization rather than continued acceleration lower.

Deleveraging is Driving the Bitcoin Drawdown

Bitcoin has experienced a sharp drawdown over the past week, with prices falling roughly 19% and currently trading in the mid-$60,000s. The move has been driven by a rapid unwind of leverage rather than a single liquidation shock.

BTC futures open interest has fallen from roughly $61 billion one week ago to about $49 billion today, a decline of more than 20% in notional exposure in just a few sessions. More broadly, futures open interest peaked above $90 billion in early October ahead of the 10/10 inflection, meaning the market has now shed over 45% of peak leverage.

Bitcoin Price Movement

Bitcoin’s price has declined by a similar magnitude over the same period. This symmetry cuts both ways. On one hand, it suggests leverage has been reduced alongside price rather than driving a disorderly unwind. On the other hand, it implies the market has not yet experienced a classic capitulation event where price overshoots leverage reduction. Over the past week, crypto markets experienced approximately $3 to $4 billion in total liquidations, with an estimated $2 to $2.5 billion concentrated in Bitcoin futures, indicating meaningful but not climactic forced selling.

A Tail-Event Move in Terms of Speed

While the magnitude of the drawdown has been orderly relative to leverage reduction, the speed of the move has been extreme.

On February 5, Bitcoin registered a -6.05σ move on the rate-of-change Z-score, placing it among the fastest single-day crashes in crypto history. In simple terms, σ measures how unusual a move is, and a reading this large means the drop was far bigger and faster than what normally happens. For context:

• COVID crash: -9.15σ
• FTX collapse: -4.07σ
• February 5, 2026: -6.05σ

Source: Crash velocity and ROC Z-score analysis sourced from MarketVector Indexes, research shared by Martin Leinweber as of 2/5/26. Past performance is no guarantee of future results.

This places the recent selloff firmly in tail-event territory. Among the 15 fastest crashes on record, February 5 ranks near the extreme end of the distribution. Historically, events of this velocity tend to exhaust panic selling rather than initiate prolonged cascades, particularly when not accompanied by systemic failure.

Distance From Trend Reaches an Extreme

The most striking signal emerges when viewing Bitcoin’s distance from its long-term trend.

Bitcoin is currently trading -2.88σ below its 200-day moving average, a level not observed at any point in the past 10 years, including during COVID or the FTX collapse. In historical terms, 0.0% of observations have been further below the 200-day moving average.

For comparison:

• BTC: -2.88σ (0.0% of history)
• SOL: -2.05σ (0.3% of history)
• ETH: -1.50σ (5.8% of history)

Source: Distance-from-trend Z-score analysis based on MarketVector Indexes, via research shared by Martin Leinweber as of 2/5/26. Past performance is no guarantee of future results.

This places Bitcoin at an unprecedented distance from its long-term trend, reinforcing the view that price has become statistically disconnected from underlying trend dynamics.

Drawdowns Are Deep but Not Generational

From a drawdown perspective, Bitcoin is now approaching a 50% peak-to-trough decline:

• BTC: -47.5% (worst: -83.6%)
• ETH: -60.7% (worst: -94.0%)
• SOL: -69.5% (worst: -96.3%)

Source: Drawdown distributions and historical comparisons sourced from MarketVector Indexes research shared by Martin Leinweber as of 2/5/26. Past performance is no guarantee of future results.

While these are severe declines, they do not yet represent generational lows. However, the key distinction is that drawdowns of this depth are now coinciding with extreme velocity, extreme distance from trend, and compressed volatility, a combination that historically marks late-stage stress rather than early-cycle deterioration.

Volatility Is Lower Than Prior Bitcoin Bear Markets

Importantly, this drawdown has occurred alongside materially lower realized volatility than in prior bear markets. 90-day realized volatility currently sits near 38, roughly half the levels observed during the 2022 bear market, when realized volatility exceeded 70 and Bitcoin ultimately declined approximately 78% peak to trough.

The combination of a deep price drawdown and materially lower volatility suggests that a significant portion of downside risk has already been absorbed. Absent a new, Bitcoin-specific negative catalyst, relative value dynamics may begin to assert themselves.

Positioning and Mean Reversion Signals Align

Short-term positioning metrics reinforce the view that stress is becoming late-cycle in nature.

Current 7-day declines rank in the 99^th percentile of historical outcomes:

• BTC: -22.2% (worse than 98.9% of history)
• ETH: -29.7% (worse than 99.0% of history)
• SOL: -32.0% (worse than 98.8% of history)

Source: Drawdown distributions and historical comparisons sourced from MarketVector Indexes, research shared by Martin Leinweber as of 2/5/26. Past performance is no guarantee of future results.

When markets reach the far tails of negative outcomes, mean reversion becomes increasingly probable. This is echoed in derivatives markets, where funding rates across ETH and SOL have turned negative and Bitcoin funding has compressed sharply, signaling de-risking via position reduction rather than aggressive short formation.

Momentum indicators reflect similar stress. On Bitcoin futures continuation charts, RSI has fallen below 21, an extreme oversold level that has historically preceded periods of stabilization and relief rallies.

Narrative Pressure Without Structural Damage

The selloff has been amplified by deterioration in adjacent risk narratives. Weakness in the AI trade has spilled into crypto, particularly impacting miners pursuing AI and high-performance computing strategies. As financing conditions tightened, miners faced pressure to sell Bitcoin to support balance sheets and capex, adding incremental spot supply at a fragile moment.

At the same time, governance concerns and renewed discussion of long-term risks, including quantum computing and post-quantum security, have re-entered the conversation. Notably, quantum-related equities have sold off alongside broader risk assets, making it difficult to reconcile existential threat narratives with market-implied timelines.

Crucially, none of these dynamics point to a failure of the underlying crypto infrastructure. Stablecoin adoption continues to accelerate, institutional tokenization efforts are expanding, and market plumbing has functioned as designed throughout the selloff.

This remains a macro-driven bear market, not a technology-driven one.

What This Setup Suggests for Bitcoin

Taken together, the data paints a consistent picture:

• Historic crash velocity
• Unprecedented distance from long-term trend
• 99^th percentile downside moves
• Deep, but non-terminal drawdowns

Source: Short-term return distribution analysis sourced from MarketVector Indexes, via research shared by Martin Leinweber as of 2/5/26. Past performance is no guarantee of future results.

Multiple signals are aligning. Even if this is not the bottom, the evidence increasingly supports the formation of a localized bottom.

Statistically:

• Velocity panic appears exhausted
• Distance from trend is unsustainable
• Mean reversion is probable

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