The cryptocurrency market has entered a period of extreme bearish sentiment following a sharp decline that saw Bitcoin (BTC) drop to approximately $60,500, its lowest price point since October 2024. This sell-off has pushed the total market capitalization of all cryptocurrencies down to $2.2 trillion.
Market sentiment has deteriorated dramatically, with the Crypto Fear and Greed Index plummeting to a score of 5 out of 100. This represents the most fearful reading in over three years and indicates extreme pessimism among investors. The downturn has resulted in significant financial pain for leveraged traders, with data showing that more than 580,000 traders were liquidated of over $2.5 billion in the past 24 hours, with long positions bearing the brunt of the losses.
Analysts from Santiment warn that the mild price rebound observed on Friday, February 6, 2026, could be a dead-cat bounce, a temporary recovery before a continued decline, as the crowd remains overwhelmingly bearish. The analysis suggests that falling liquidity and a broader macro bear trend are signaling that Bitcoin may be approaching a potential accumulation zone.
The sell-off is attributed to a confluence of factors. Investors are rotating out of risk assets like cryptocurrencies and into perceived value assets, evidenced by the slump in the tech-heavy Nasdaq 100 Index and simultaneous record highs for value-focused ETFs. Further pressure comes from significant outflows from cryptocurrency ETFs; spot Bitcoin ETFs have shed over $689 million in assets year-to-date, marking their fourth consecutive month of net outflows, while Ethereum ETFs have seen over $149 million exit.
Despite the bleak outlook, some technical indicators are flashing potential recovery signals. Bitcoin's Relative Strength Index (RSI) has dropped to an oversold level of 27, a reading not seen since November 2022. Historically, Bitcoin has rebounded after reaching such oversold conditions. Furthermore, the extreme fear reading on the market sentiment index has often preceded the start of new bull runs in the past.
