Crypto markets are showing early signs of stabilization after one of the sharpest liquidation-driven drawdowns in recent months, but analysts say the selloff marks a deeper transition rather than a simple volatility spike, as Bitcoin (BTC) and Ethereum (ETH) increasingly trade as macro-sensitive risk assets. Bitcoin rebounded toward $67,000 after briefly slipping close to $60,000, while Ethereum clawed back ground near $1,900 following a steep decline that erased roughly 40% from its early-January highs.

The bounce followed a wave of forced deleveraging that wiped out $2.4 billion in leveraged positions in just 24 hours, placing the event among the largest liquidation episodes on record, according to CoinGlass data.

Market participants say the scale of the unwind suggests capitulation dynamics may be approaching exhaustion, even as risks tied to macroeconomic data and policy uncertainty remain elevated.

Leverage Reset Dominates Price Action

Much of the recent downside has been driven by leverage rather than a fundamental reassessment of crypto’s long-term prospects.

Ethereum, in particular, has borne the brunt of the adjustment, with derivatives positioning shrinking sharply as open interest fell to roughly 61% of end-December levels.

Jake Kennis, a research analyst at Nansen, said Ethereum’s decline below $2,000 reflects sustained selling pressure amplified by leverage unwinds and liquidity constraints.

He noted that when psychologically important levels break, larger holders and structured products can accelerate downside moves, pushing prices lower than fundamentals alone would suggest.

Ethereum is now trading roughly 60% below its all-time high reached just five months ago, while Bitcoin is hovering near long-term technical support levels not seen since before its 2023 breakout.

Kennis said markets are now watching closely for signs of a local bottom forming, particularly in Bitcoin, after the asset tested its 200-week exponential moving average.

Macro Forces Take the Lead

Analysts agree that the selloff is being driven less by crypto-specific stress and more by a broader risk-off environment.

Higher real rates, tighter liquidity, and renewed focus on Federal Reserve balance-sheet restraint have weighed on high-beta assets across markets.

According to Nexo Dispatch analyst Dessislava Ianeva, Bitcoin’s drawdown coincided with capital rotating into safer and more liquid assets such as U.S. Treasuries and cash.

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She noted that U.S. spot Bitcoin ETFs recorded $43.4 million in net outflows on February 5, reflecting short-term defensive positioning rather than a structural exit by institutions.

Despite the outflows, ETF holdings still account for about 6.3% of Bitcoin’s total market capitalization, suggesting that institutional exposure remains meaningful even as near-term flows fluctuate.

Ethereum and major altcoins have moved increasingly in lockstep with Bitcoin, with correlations across large-cap tokens rising well above 2025 averages.

Ianeva said this points to a macro- and liquidity-driven market, where individual narratives matter less than broader financial conditions.

Signs Of Stabilization Beneath The Surface

While prices remain volatile, some indicators suggest market structure may be improving.

Funding rates in Ethereum have turned marginally positive, open interest has stabilized, and derivatives positioning appears more orderly after the recent flush.

Bitcoin’s implied volatility has eased from recent peaks, even as uncertainty remains elevated.

Put-call ratios and funding rates are beginning to normalize, signaling that the most aggressive speculative positioning may already have been cleared.

Abra founder and CEO Bill Barhydt described the current environment as an “anti-everything trade,” driven by policy uncertainty, delayed crypto legislation, and a lack of government-provided liquidity.

However, he said the conditions now resemble one of the most oversold Bitcoin setups in years.

“We believe this is mostly played out at this point,” Barhydt said, adding that while a final capitulation move below $60,000 cannot be ruled out, “the bottom is likely in or very close to being in.”

From Cyclical Trade To Macro Asset

Analysts caution that any sustained recovery will likely depend on macro catalysts rather than technical rebounds alone.

Upcoming U.S. inflation data, labor market indicators, and central bank guidance are expected to shape risk appetite across asset classes in the coming weeks.

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