Bitcoin Navigates a Market Shakeout as Leverage Unwinds

Bitcoin is grappling with significant market pressure as a wave of deleveraging reshapes its landscape. Although the cryptocurrency has managed a partial recovery from a plunge to approximately $60,000 in early February, underlying stresses persist, driven by the rapid unwinding of leveraged positions.

The recent downturn was characterized not by a single liquidation event but by a broad-based reduction in borrowed capital. Data from VanEck highlights a sharp contraction in the Bitcoin futures market, where open interest plummeted from $61 billion to $49 billion within just a few trading sessions—a decline exceeding 20%.

This pullback appears even more substantial in a longer-term context. After peaking above $90 billion in October 2025, the market has shed over 45% of its maximum leverage. The unwind accelerated last week, triggering liquidations worth $3 to $4 billion, with Bitcoin futures alone accounting for $2 to $2.5 billion of that total.

Institutional Flows Show a Mixed Picture

Institutional activity presents a contrasting narrative. On February 5, U.S. spot Bitcoin ETFs recorded their second consecutive day of outflows, totaling $545 million. Leading the sell-off was BlackRock's IBIT fund, which saw $373 million exit.

However, sentiment shifted decisively the following day. These investment vehicles attracted net inflows estimated between $330 million and $371 million on February 6. Once again at the forefront, BlackRock's fund gathered $232 million, marking its eleventh day of net positive inflows for the year 2026.

Should investors sell immediately? Or is it worth buying Bitcoin?

Commenting on the dynamic, Bitwise CEO Hunter Horsley told CNBC that institutional investors are viewing the price drop as a buying opportunity, having missed earlier entry points.

Fear Reaches Extreme Levels

Market psychology has deteriorated markedly. The Crypto Fear & Greed Index dropped to a mere 9 points on February 6, signaling extreme fear among participants. This followed a reading of 5 points the previous day, which represented the lowest level in a year. A modest recovery to 14 points was observed by February 9.

Concurrently, online searches for terms like "crypto capitulation" surged. Blockchain analytics firm Glassnode notes that wallets across all size cohorts have begun accumulating Bitcoin again, a behavior not seen since late November. Addresses holding between 10 and 100 BTC have been particularly active.

Key Technical Levels Under Scrutiny

From a chart perspective, Bitcoin is currently testing a crucial long-term support zone: the exponential 200-week moving average, situated near $68,339. This level has historically acted as a foundation for prices.

The weekly Relative Strength Index (RSI) sits at 28.18, a territory that has frequently preceded short-term rallies in past cycles. Furthermore, VanEck data indicates the 90-day volatility stands at approximately 38—roughly half the peak above 70 witnessed during the 2022 bear market. This suggests the current correction is unfolding with less panic than previous major downturns.