Bitcoin experienced a sharp sell-off this week, plummeting to a low of $81,200, its weakest level since November. The decline, which extended losses from earlier in the week, was driven by a confluence of macroeconomic factors and market-specific pressures, rather than crypto-specific news.
The primary catalyst was a sudden and sustained surge in the U.S. dollar. Bitcoin had peaked near $91,000 late Wednesday, coinciding with the U.S. Dollar Index (DXY) hitting a multi-year low of 95.34. However, the dollar reversed course and began a steady climb. The move accelerated dramatically on Thursday evening following a leak that former Fed Governor Kevin Warsh, known for his hawkish views, was to be nominated as the next Federal Reserve Chairman. This triggered another surge in the dollar and a gap lower in Bitcoin's price.
Simultaneously, a massive $1 billion was withdrawn from U.S. spot crypto ETFs in a single session, according to data from SoSoValue. The outflows spanned Bitcoin, Ether, Solana, and XRP products, indicating a broad reduction in risk exposure across the digital asset space. This synchronized exit pointed to portfolio-level de-risking by institutional investors.
Analysts emphasized that tight global liquidity conditions, not just interest rates, are the dominant force behind the market's weakness. Thomas Perfumo, global economist at Kraken, noted that crypto continues to lag even after 2025 rate cuts, as overall liquidity remains constrained. The pressure was exacerbated by forced liquidations of over $1.8 billion in leveraged long positions within 24 hours, amplifying the downward move.
Adding another layer of pressure, bitcoin mining activity was disrupted by a severe U.S. winter storm, which forced large operators to curtail production. CryptoQuant reported the largest network hashrate drawdown since October 2021, with daily mining revenue dropping to a yearly low near $28 million, potentially adding sell-side pressure from miners managing cash flow.
Technically, failure to reclaim the $83,500 resistance level leaves the $80,000 region in focus. Bitcoin remains on track for a fourth consecutive monthly decline, which would be its longest such run since the 2018 bear market.
