What Caused the Feb 5 Crypto Crash? Bitwise Advisor Explains

Bitcoin tumbled 13% on Feb. 5, 2026, marking its worst 24-hour drop since June 2022. Ether and other major digital assets followed suit, amplifying the decline across the crypto market. The selloff hit companies with significant exposure to digital assets especially hard, with shares of public companies like Strategy, which holds a large bitcoin treasury, falling sharply.

Michael Saylor’s Strategy, a major corporate holder of bitcoin, reported a quarterly net loss of $12.4 billion, driven by an unrealized fair value loss of $17.4 billion on its digital assets. This loss came as bitcoin and ether prices collapsed following a late 2025 correction. The company said the decline had pushed bitcoin below its average purchase price for the first time in over two years.

The sell-off intensified investor concerns about the viability of the "digital asset treasury" (DAT) model, where companies hold large amounts of cryptocurrency as a store of value. Strategy's shares have dropped 68% in the past year, and rival DAT companies such as Nakamoto Inc. and Metaplanet also saw sharp declines.

Why Did This Happen?

Bitcoin's price correction accelerated in 2026 after hitting a peak in October 2025. A combination of macroeconomic factors contributed to the decline, including the Federal Reserve's pause in its rate-cut cycle and the nomination of Kevin Warsh as the next Fed Chair. Warsh's past hawkish stance has raised concerns that the Fed could adopt a tighter monetary policy, which is generally negative for high-risk assets like cryptocurrencies.

President Donald Trump's pro-crypto rhetoric had previously driven optimism in the sector, but recent developments have shaken investor confidence. Trump's promise to reform the Federal Reserve led to Warsh's nomination, which has been interpreted as a potential threat to crypto-friendly monetary policies.

How Did Markets React?

The sharp sell-off hit institutional and retail investors alike. Shares of Strategy and other DAT companies dropped significantly. Strategy's stock fell over 12% on Feb. 5, hitting $114 at one point, while Smarter Web Company and Nakamoto Inc. saw declines of nearly 18% and 9%, respectively.

Investors were also rattled by the broader market context. The CME Group announced plans to expand its crypto derivatives offerings and move to 24/7 trading, which some analysts argue could further fragment liquidity by drawing trading activity away from smaller platforms.

What Are Analysts Watching Next?

Analysts are closely monitoring how the Fed's new leadership and macroeconomic conditions will affect the crypto market. The transition of power to Kevin Warsh has introduced uncertainty, especially as the central bank's stance on interest rates remains a critical factor for risk assets.

In addition, the success of CME Group's new 24/7 trading model for altcoins like Cardano, Chainlink, and Polkadot could shape future liquidity patterns. These moves signal growing institutional interest in digital assets but also highlight the potential for increased volatility.

Market participants are also watching for further developments from companies with large crypto holdings. Strategy has stated it remains committed to its bitcoin strategy, but investors are concerned about the company's ability to weather further declines without having to sell its holdings.

The broader market is bracing for potential volatility as more institutional players enter the crypto space. The recent launch of a managed crypto yield strategy by Kraken Institutional and Bitwise Asset Management marks another step in the institutionalization of digital assets.