Understanding Why Crypto Markets Are Selling Off: Exploring the Root Causes Behind Recent Volatility

The cryptocurrency market has entered a period of significant stress in early February 2026, with major digital assets experiencing notable declines. Bitcoin is trading around $67.56K with a 24-hour pullback of 1.11%, while Ethereum has fallen 2.30%, Solana retreated 3.47%, and XRP slid 2.20%. These moves reflect not a single shock to the system, but rather the culmination of weeks of leverage being systematically cleared from derivatives markets. Understanding why crypto is crashing requires looking beyond daily price movements to examine the structural forces reshaping market conditions.

The Liquidation Cascade: How Forced Selling Perpetuates Market Decline

When traders use leverage to amplify their positions, they accept a critical risk: if the market moves against them, their positions automatically close at predetermined price levels. This mechanism, designed as a risk control, becomes a market accelerant when applied across thousands of traders simultaneously. Over the past 24 hours alone, approximately $237 million worth of Bitcoin long positions were liquidated, converting leveraged bets into immediate sell orders. This forced selling adds downward pressure that triggers further price declines, which in turn activates more liquidations at lower price thresholds.

The scale of this process reveals the magnitude of leverage withdrawal underway. Weekly liquidations reached approximately $2.16 billion, while the monthly total exceeded $4.4 billion. These figures demonstrate that today’s market stress is the continuation of a longer deleveraging cycle rather than an isolated event. As Bitcoin—which dominates derivatives markets—falls, the entire altcoin sector follows, as traders reduce exposure across their entire portfolios regardless of individual asset fundamentals.

Deleveraging Across the Board: Understanding the Weeks-Long Unwinding

Open interest in perpetual futures contracts serves as a key barometer for leverage levels in crypto markets. In just the past 24 hours, this metric declined 4.4%, representing roughly $26 billion in liquidated exposure. Examining the full monthly trend reveals even more significant deleveraging: total derivatives open interest is down approximately 34% from peak levels. This extended drawdown indicates that leverage has been clearing systematically for weeks, suggesting that crypto derivatives markets are stabilizing at lower risk levels.

Beyond mechanical liquidations, sentiment factors have intensified the selling pressure. Large holders, including sophisticated trading entities like Strategy, face unrealized losses on their Bitcoin holdings exceeding $900 million. In fragile market conditions, the mere possibility of forced asset sales from major players amplifies risk aversion across the board. This dynamic transforms rational hedging behavior into a self-reinforcing cycle of defensive positioning.

The pressure extends beyond crypto alone. Traditional stock markets in Europe have weakened amid concerns about monetary policy tightening, creating a broader risk-off environment that pulls digital assets lower alongside equities. When fear indicators spike across multiple asset classes, investors tend to reduce exposure indiscriminately, prioritizing cash preservation over yield-seeking.

Critical Support Levels: What Must Hold for Market Stabilization

Bitcoin’s near-term fate depends critically on technical support around the $75,000 level. Holding this threshold could provide breathing room for the market to stabilize and attract contrarian bids. A decisive break below would shift focus toward $70,000 as the next meaningful support zone. For the broader cryptocurrency market, recovery hinges on two conditions: Bitcoin must demonstrate its ability to stabilize, and the rate of liquidations must decelerate as traders rebuild confidence.

Until these conditions materialize, elevated volatility and failed bounce attempts should be expected. Relief will likely require a multi-day period of price stabilization at key technical levels, allowing fear indicators to normalize and positioning data to reset to healthier levels.

Today’s crypto market weakness reflects why crypto is facing renewed selling pressure—a combination of cascading liquidations, weeks of accumulated leverage unwinding, concentrated unrealized losses among major holders, and a global risk-off mood. This is systemic deleveraging in motion, not panic from a single catalyst. Whether conditions improve depends entirely on Bitcoin’s ability to hold support and demonstrate that the liquidation cycle has run its course.