Flipster Crypto Weekly (February 6)

Risk Breaks as Crypto Faces Its Sharpest Drawdown Since 2023

February 6, 2026

Crypto markets endured a decisive breakdown this week as selling pressure accelerated across spot and derivatives, erasing multiple technical levels and forcing large-scale deleveraging. What began as a controlled pullback turned disorderly, with volatility intensifying into the week’s close.

BTC fell from above $78,000 at the start of the week to briefly trade below $60,000 before stabilizing near $64,470. ETH followed, sliding from the mid-$2,300s to around $1,900. Bitcoin dominance fluctuated but remained elevated, ending near 58.7%, reflecting persistent capital concentration even as prices unraveled.

The tone shifted from cautious to defensive. Liquidity thinned, forced selling increased, and markets began repricing not just macro risk, but balance-sheet fragility across the crypto ecosystem.

Liquidations Accelerate as Key Levels Give Way

The sell-off intensified over the weekend after Bitcoin broke below $80,000, triggering one of the largest liquidation cascades since 2023. More than $2.6 billion in positions were wiped out within 24 hours on Sunday alone, reinforcing how stretched positioning had become following January’s extended consolidation.

By midweek, Bitcoin posted its worst single-day decline since the FTX collapse. Price briefly undercut major corporate cost bases, adding psychological pressure and fueling further downside as risk models adjusted.

Despite short-lived rebounds, rallies failed to attract follow-through. Market structure favored sellers, with volatility compressing into sharp intraday swings rather than sustained trends.

Corporate Crypto Treasuries Come Under Scrutiny

Balance-sheet exposure moved to the center of the narrative.

Strategy reported a $12.6 billion net loss after Bitcoin’s decline pushed its holdings deeper into unrealized losses. With BTC now trading below the firm’s average purchase price near $76,000, Strategy shares are down more than 70% year-on-year, unwinding much of the premium once associated with its accumulation strategy.

Elsewhere, BitMine chair Tom Lee addressed scrutiny around the firm’s $6.6 billion in unrealized Ethereum losses, framing drawdowns as an expected component of a long-duration ETH treasury approach. He compared the model to index-style exposure, arguing that mNAV mechanics help preserve capital through cycles without forcing asset sales.

The contrast highlighted a growing divide between short-term market repricing and long-horizon treasury strategies now being stress-tested in real time.

Macro and Policy Signals Add to Fragility

Macro uncertainty compounded the pressure.

This week’s calendar featured U.S. PMI data, an upcoming unemployment report, and earnings from major corporates including Palantir, Google, Amazon, and Strategy itself. While no single release triggered the sell-off, the concentration of macro catalysts contributed to risk reduction across asset classes.

In Washington, discussions between the White House, crypto trade groups, Coinbase, and banking representatives reopened debate around stablecoin rewards and market structure legislation. Crypto advocates characterized talks as constructive, while banks pushed back, citing deposit flight risks.

Progress remained procedural rather than decisive, offering little immediate relief for market sentiment.

Protocol and Market Structure Stress Emerges

Beyond price, structural stress surfaced across DeFi and infrastructure.

A loan backed by roughly 2.3% of AAVE’s circulating supply faced cascading liquidations as the token declined, underscoring how concentrated collateral positions remain a latent risk during fast drawdowns.

Ethereum co-founder Vitalik Buterin added a critical note on ecosystem design, stating that Ethereum’s rollup-centric roadmap has not delivered decentralization as quickly as expected. He emphasized that while the base layer continues to scale through upgrades such as enshrined ZK-EVM proofs, many L2s remain operationally centralized and overly dependent on Ethereum for differentiation.

Meanwhile, infrastructure experimentation continued. CME explored launching a proprietary “CME Coin” on a decentralized network, while Hyperliquid announced plans to introduce fully collateralized, range-settled outcome contracts via HIP-4, expanding derivatives use cases tied to prediction markets.

Prediction Markets and Tokenization Push Forward

Despite market weakness, speculative infrastructure continued to attract capital.

Prediction markets surpassed $12 billion in trading volume in January, while Opinion raised $20 million, signaling sustained investor appetite for event-driven financial products even amid broader drawdowns.

On the consumer side, MetaMask announced the addition of tokenized U.S. stocks, ETFs, and commodities through Ondo Global Markets, further blurring the line between traditional assets and on-chain access.

Crypto.com also spun out its original prediction markets app, reinforcing how this segment continues to expand regardless of spot price direction.

Outlook

This week marked a transition from controlled correction to structural repricing.

Leverage has been reduced, balance sheets exposed, and narratives reset. Corporate treasury strategies are now being evaluated through drawdowns rather than accumulation headlines, while DeFi risk models face renewed scrutiny.

Liquidity remains fragile. Volatility remains elevated. Conviction remains selective.

The market enters mid-February lighter, more defensive, and increasingly sensitive to both macro data and internal stress points.

For now, survival trades take precedence over expansion.

Disclaimer: This material is for information purposes only and does not constitute investment, financial, or legal  advice. Any references to market behaviour or strategies reflect observations of general market activity only. Flipster makes no recommendations or guarantees in respect of any digital asset, product, or service. Trading digital assets and digital asset derivatives comes with a significant risk of loss due to its high price volatility, and is not suitable for all investors. Readers should independently assess the risks and suitability of any transaction or strategy and where appropriate, seek independent professional advice before making any investment decision. Please refer to our Terms.