Market Analyzes Drivers of Recent Crypto Crash as Wintermute Strategists Predict Faster Recovery

Bitcoin dropped to a 15-month low below $65,000 on February 7, 2026, as part of a broader selloff in the crypto market. Over $2.6 billion in positions were liquidated within 24 hours, with long positions accounting for most of the losses. The decline came amid heightened political tensions and regulatory uncertainty.

The Democratic Party faced backlash after posting a tweet that mocked crypto losses, sparking accusations of partisan insensitivity. The post included a chart showing Bitcoin's drop and an image of Donald Trump. Executives, including Caitlin Long of Custodia Bank, criticized the message for dismissing investor pain across party lines.

Crypto advocates warned that the tweet could alienate pro-crypto voters ahead of the 2026 midterms. Patrick Witt of the President's Council of Advisors for Digital Assets and Tyler Winklevoss of Gemini both called the message politically damaging. Pro-XRP attorney John Deaton linked the crash to broader economic issues, accusing both parties of poor fiscal stewardship.

What Caused the Recent Market Downturn?

Several factors contributed to the recent selloff. Macroeconomic uncertainty, including the nomination of Kevin Warsh for Federal Reserve Chair, raised concerns about future monetary policy. Additionally, a sharp correction in the precious metals market and leverage liquidation events amplified the decline.

Bitcoin's price has fallen about 39% from its October 2025 peak, while Ethereum dropped more than 50%. Wintermute analysts argue that the current bear market, though severe, could end faster than previous cycles due to its macro-driven nature rather than structural industry failures.

What Are Analysts Predicting for Recovery?

Bitwise CIO Matt Hougan labeled the current environment a 'full crypto winter' since January 2025, masked by institutional inflows. Institutional support, including ETFs and digital asset treasuries, cushioned the decline but did not reverse the trend. Hougan expects the cycle to end closer to its conclusion than its beginning, citing historical parallels with 2018 and 2022.

Bernstein analysts predict a recovery in the first half of 2026, with Bitcoin potentially bottoming around $60,000. They argue that the current correction is a late-cycle bearish phase rather than a prolonged winter. The firm sees factors like strategic crypto reserves and regulatory clarity as potential catalysts.

How Are Institutional Players Responding?

Institutional participation remains a key factor in the market's resilience. Despite the downturn, digital asset treasuries and ETFs continued to hold significant buying pressure. BlackRock's recent deposit of Bitcoin and Ethereum on Coinbase signaled ongoing institutional interest.

Meanwhile, stablecoin adoption and infrastructure improvements have helped absorb some of the selling pressure. Binance's recent security enhancements and Tether's open-source Bitcoin mining OS indicate ongoing innovation in the sector.

Crypto companies, such as Strategy, have also faced challenges as their stock prices decline. Strategy's stock has fallen nearly 75% from its November 2024 high, reflecting broader market jitters.

Market observers remain cautious. Michael Burry, the investor known for predicting the 2008 crisis, warned that a continued Bitcoin drop could force large-scale sell-offs in gold and silver as institutional investors seek to offset losses.

The market remains in a phase of exploration after two months of sideways movement. Analysts suggest that a reversal may occur once macroeconomic clarity improves, particularly with regard to the Fed's policy path. Until then, the market remains in a bearish consolidation phase.

What Catalysts Could Spark a Recovery?

Several potential triggers for a market rebound exist. Stronger global economic growth could reignite risk appetite. Regulatory progress, such as the passage of the CLARITY Act, could also provide a boost. Additionally, early signs of sovereign Bitcoin adoption might attract new institutional buyers.

The Fed's decision to cut interest rates has been a mixed signal. While lower rates support the job market, they could also signal a more cautious stance on liquidity expansion, which digital assets rely on.

The current environment remains volatile, with Bitcoin fluctuating near $75,000. A sustained close below $74,500 could indicate further downward pressure, according to some analysts. However, institutional flows and regulatory clarity could provide the necessary support for a turnaround.

The market is watching for signs of a bottoming process. Analysts like McGlone have suggested Bitcoin could fall to as low as $10,000, with $50,000 as the first target. For now, however, the market remains in a period of uncertainty and testing.