The cryptocurrency market is grappling with one of its most severe corrections in early 2026, as Bitcoin comes under significant selling pressure. A combination of political uncertainty in the United States and substantial outflows from exchange-traded funds has triggered widespread investor anxiety, with a historic wave of liquidations underscoring the current market fragility.
A Critical Technical Juncture
Analysts point to a precarious technical situation for the leading digital asset. The cryptocurrency is currently trading in a critical zone that will likely determine whether a price floor can be established. Market experts warn that further declines are possible if macroeconomic conditions fail to stabilize. Bitcoin’s price now sits approximately 32 percent below its 52-week high, highlighting the extent of the recent weakness.
The Catalysts: Policy Shifts and Regulatory Gridlock
Two major political developments in the U.S. are primarily responsible for the negative sentiment. First, the nomination of Kevin Warsh as the new Federal Reserve Chair has unsettled markets. Observers have dubbed this the “Warsh Effect,” noting the former Fed governor’s reputation as an advocate for higher real interest rates and a leaner central bank balance sheet. Risk-sensitive assets like Bitcoin have reacted sensitively to this news.
Compounding the issue is a partial U.S. government shutdown. Key regulators, including the Securities and Exchange Commission (SEC), have shifted to essential operations only. This has frozen important decisions on new cryptocurrency products, directly impacting 16 pending applications for spot Bitcoin ETFs and further dampening investor morale.
Should investors sell immediately? Or is it worth buying Bitcoin?
Billions Wiped Out in Market Liquidation
Data reveals a staggering market cleanse over the weekend. In a single 24-hour period, positions worth $2.2 billion were liquidated—marking the largest such event since October of the previous year. Approximately 335,000 traders were affected. The sell-off hit bullish speculators particularly hard, with long bets totaling $1.6 billion being forcibly closed. This downward momentum is amplified by institutional caution; U.S. spot Bitcoin ETFs alone recorded net outflows amounting to billions of dollars in January.
A Focus on Washington
Despite the turbulence, market participants are looking toward a key meeting scheduled for Monday at the White House. The summit between cryptocurrency firms and banking representatives will center on the proposed “CLARITY Act” and the contentious issue of whether stablecoin issuers should be permitted to pay interest. However, the potential for this gathering to deliver immediate positive impulses remains uncertain given the ongoing government shutdown.
Investors are now watching closely to see if these combined pressures will lead to a sustained downturn or if the market can find its footing in the coming sessions.
Ad
Bitcoin Stock: Buy or Sell?! New Bitcoin Analysis from February 1 delivers the answer:
The latest Bitcoin figures speak for themselves: Urgent action needed for Bitcoin investors. Is it worth buying or should you sell? Find out what to do now in the current free analysis from February 1.
Bitcoin: Buy or sell? Read more here...