Bitcoin Dominance Reaches Four-year High
Bitcoin kicks off February with significant losses as fears of a new US trade war ripple through the crypto and broader risk asset markets.
Crypto traders were met with a sea of red as February began—a month historically strong for Bitcoin.
Data from TradingView shows Bitcoin (BTC/USD) dropped by as much as $6,000 since the weekly close, hitting its lowest point since January 13 and revisiting the bottom of a trading range established in November.
Before these losses accumulated, trader CrypNuevo had anticipated the downturn, citing order book liquidity and the market’s tendency to fill the “wick” from January lows.
“In terms of liquidations, we can say that the liquidity is to the downside. $94.7k is the main liquidation level so it’s very possible that price pushes all the way there,” he shared on X, adding:
“Then, once we get there, the wick at $91k can act as a magnet. Careful trying to catch a falling knife.”
According to CoinGlass, cross-crypto liquidations over the past 24 hours reached $2.23 billion.
“Wild times in this range,” trader Roman commented, reflecting on the volatility, adding:
“I won't lie, I didn’t expect to see lower 90s again, but here we are. Bull divs, Stoch Reset, & sitting in range low support area. Would make sense to see us bounce here soon.”
Roman, like others, remains hopeful that Bitcoin could rebound without breaking below its established range.
“Can’t emphasize enough how bullish this is for $BTC in this context,” trader Credible Crypto wrote on X after BTC/USD stabilized at key support levels, and further noted:
“Loving the strength on the King right now. Will continue to monitor this and look for signs of the next impulse beginning.”
Meanwhile, altcoins have suffered even steeper declines.
Trader and analyst Skew highlighted “capitulation wicks,” with many tokens plunging over 20%. He predicts the upcoming week will be “very interesting.”
Bitcoin’s dominance in the crypto market cap briefly surged to 64.3% on February 3, marking its highest level in nearly four years.
The primary driver of market anxiety this week is the escalating trade war between the US and its key partners, including Canada, Mexico, China, and potentially the EU.
President Donald Trump has implemented 25% tariffs on Canada and Mexico, asserting that the long-term benefits will outweigh short-term economic pain.
“We may have short term some little pain, and people understand that. But long term, the United States has been ripped off by virtually every country in the world,” he told reporters on February 2.
Risk assets were caught off guard, with US stock futures plunging and the S&P 500 losing $1 trillion in value after markets opened.
The Kobeissi Letter noted the markets had surrendered last week’s modest recovery, which followed concerns over China’s AI firm DeepSeek.
“1 week ago, markets collapsed on DeepSeek fears on Sunday night. The gap down was largely bought into the open on Monday,” they wrote on X, adding:
“Today, markets are trading back at those lows. Will the gap down hold this time?”
Crypto markets faced even steeper declines, with major altcoins dropping over 20% within 24 hours.
Bitcoin managed to stabilize near $90,000, at the lower boundary of its multi-month trading range.
“Ethereum just fell -37% in 60 hours since the trade war headlines mid-day on Friday,” Kobeissi noted, calling the drop “insane.”
The total crypto market cap declined by up to 21% in three days, erasing $760 billion.
The US dollar was the sole beneficiary, with the US Dollar Index (DXY) climbing to nearly 110, its highest since January 13.
Barchart pointed out that the crypto market is now approaching levels unseen since November 2022, the depths of the last bear market.
The trade war has derailed what was expected to be a relatively quiet week for US macroeconomic data, with key manufacturing reports and employment numbers now adding to market volatility.
Additionally, 20% of S&P 500 companies are set to report earnings this week, while several Federal Reserve officials will speak, potentially signaling future interest rate decisions.
“This week is all about earnings and the labor market,” summarized The Kobeissi Letter.
Market expectations for the Fed to adopt a more dovish stance at its March meeting remain low, with CME Group’s FedWatch Tool placing the odds of a modest 0.25% rate cut at just 15%.
Looking ahead, Arthur Hayes, former CEO of BitMEX, warned that conditions could worsen before improving.
He suggested that a shift may only occur when the US resumes quantitative easing to inject liquidity.
“The beatings shall continue until moral improves,” Hayes posted on X, adding:
“The pain stops when a TradFi outfit is on the verge of bankruptcy. Then the Fed reluctantly joins team Trump and prints dat money. And then you better be ready to buy crypto like you have never bought before.”
Last week, Fed Chair Jerome Powell, under pressure from the Trump administration to cut rates, hinted that rate cuts could happen even if inflation hasn’t fully returned to the 2% target.
As the market reels, traders are looking for signs of where Bitcoin might bottom
A key metric is the Short-Term Holder (STH) cost basis, representing the average purchase price of BTC held for up to 155 days.
This figure often acts as support in bull markets and resistance in bear markets.
Data from Glassnode shows the STH cost basis at just under $92,000 as of February 2.
“Bitcoin's Short-Term Holder (STH) cost-basis model is crucial for gauging sentiment among new investors,” Glassnode shared on X.
They warned that if BTC drops below this level, it could:
“signal waning sentiment among new investors - which is often a turning point in market trends.”
Unsurprisingly, crypto market sentiment has deteriorated amid this uncertainty.
The Crypto Fear & Greed Index plunged 32 points in just three days, hitting its lowest level since October.
“Big declines in sentiment & positioning across the board,” observed Andre Dragosch, head of research at Bitwise, adding:
“Good time to start adding exposure in Bitcoin imo.”
The stock market’s equivalent Fear & Greed Index was slightly higher at 46/100, already reflecting “fear” before Wall Street’s opening.
Jesse Cohen, global markets analyst at Investing.com, noted how swiftly sentiment can shift:
“Remember folks, market sentiment can turn on a dime — one Trump tweet is all it takes,” he reminded his X followers.
Sources:
https://cointelegraph.com/news/btc-dominance-nears-4-year-high-5-things-bitcoin-this-week
https://www.tradingview.com/symbols/BTCUSD/?exchange=BINANCE
https://x.com/CrypNuevo/status/1886136116815757807
https://www.coinglass.com/LiquidationData
https://x.com/Roman_Trading/status/1886231286014005405
https://x.com/CredibleCrypto/status/1886256767144964508
https://x.com/52kskew/status/1886244710072963292
https://x.com/KobeissiLetter/status/1886202398508495344
https://x.com/KobeissiLetter/status/1886248808134082917
https://x.com/Barchart/status/1886257227654385905
https://x.com/KobeissiLetter/status/1886042349333287172
https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html
https://x.com/CryptoHayes/status/1886279879261573344
https://studio.glassnode.com/charts/btc-on-chain-cost-basis?zoom=all
https://x.com/glassnode/status/1877809216800330169
https://alternative.me/crypto/fear-and-greed-index/
https://x.com/Andre_Dragosch/status/1886295271467888917
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