（Singapore, 04.02.2026）A sharp selloff in cryptocurrencies has erased close to US$500 billion in market value in less than a week, highlighting how fragile investor confidence remains despite years of institutional adoption and a more supportive political backdrop in the United States.
According to CoinGecko data, the total value of the crypto market has fallen by US$467.6 billion since Jan. 29, with Bitcoin once again leading the downturn. The world’s largest cryptocurrency slid to its lowest level since Donald Trump won re-election in November 2024, undoing most of the gains made after the vote.
Bitcoin dropped as much as 7% on Tuesday to US$72,877, its weakest level in more than a year, before recovering slightly. By early Wednesday in London, it was trading around US$76,600, still far below the record highs reached in early October.
Despite a pro-crypto White House and continued institutional participation, Bitcoin has now fallen about 40% from its peak, reinforcing concerns that market optimism has been overtaken by tightening liquidity and persistent risk aversion.
The latest decline is closely tied to a prolonged unwinding of leveraged positions. The broader crypto market has struggled to recover since Oct. 10, when a wave of forced liquidations erased US$19 billion in leveraged bets following renewed volatility linked to US trade policy uncertainty. Since then, each attempted rebound has been met with selling pressure.
In the past 24 hours alone, more than US$700 million worth of crypto positions were liquidated in perpetual futures markets, according to CoinGlass. Since late January, cumulative liquidations have exceeded US$6.67 billion, magnifying price swings and weakening trader confidence.
Leverage Unwinds and Risk-Off Mood Weigh on Prices
Market participants say many traders had positioned for a rebound above US$80,000, expecting renewed institutional inflows to stabilize prices. Instead, as Bitcoin drifted lower, those bullish bets were forced out, accelerating the selloff.
Open interest in crypto futures has fallen sharply, suggesting traders are cutting exposure rather than stepping in to buy the dip. Funding rates for perpetual futures have also turned negative, a signal that bearish sentiment now outweighs bullish positioning.
The crypto downturn has coincided with heightened volatility across global markets. US equities retreated from near-record levels amid a selloff in technology stocks, while gold and silver rebounded after recent losses, and oil prices climbed on renewed geopolitical tensions involving the US and Iran.
In this environment, Bitcoin has failed to attract safe-haven demand, raising fresh doubts about its role as so-called “digital gold.” While precious metals found buyers during periods of uncertainty, cryptocurrencies continued to struggle.
Some investors have openly questioned Bitcoin’s defensive qualities. Veteran investor Michael Burry warned this week that the asset remains largely speculative, arguing that it has yet to prove itself as a hedge comparable to gold during times of market stress.
Institutional Flows Turn Choppy as Confidence Falters
Signs of wavering institutional conviction have also emerged. US-listed Bitcoin exchange-traded funds saw US$562 million in net inflows on Monday, followed by US$272 million in net outflows on Tuesday, according to data compiled by Bloomberg.
The uneven flows underline how quickly sentiment can shift, even among professional investors. While ETFs have broadened access to Bitcoin, they have also made it easier for large pools of capital to exit when volatility rises.
Michael Novogratz, chief executive officer of Galaxy Digital, said the market may be undergoing a psychological shift. “For a long time, there was almost a religious belief in holding Bitcoin no matter what,” he said on a recent earnings call. “Somewhere along the way, that fever broke, and you started seeing some selling.”
Losses have been even steeper among smaller digital assets. The MarketVector Digital Assets 100 Small-Cap Index has plunged nearly 70% over the past year, reflecting fading retail participation and weaker liquidity. Spot ETFs linked to altcoins have recorded billions of dollars in outflows since November, further pressuring prices.
For now, derivatives markets point to continued caution. Demand for downside protection remains elevated, and volatility has picked up after a prolonged period of calm. Traders say the lack of near-term catalysts suggests the market remains firmly in defensive mode.
While long-term supporters argue Bitcoin’s investment case remains intact, recent price action shows it continues to behave more like a high-risk asset than a store of value. As global investors navigate geopolitical risks and fragile risk appetite, cryptocurrencies appear set to remain volatile in the near term.
