A surprising leadership transition at the U.S. Federal Reserve, combined with heightened geopolitical tensions, has placed significant downward pressure on Bitcoin and the broader cryptocurrency market at the start of the week. This confluence of factors is driving investors away from risk-sensitive assets, with digital currencies experiencing pronounced and immediate selling pressure.
Geopolitical Tensions Compound Market Anxiety
Beyond monetary policy concerns, several geopolitical developments have further dampened investor sentiment. Reports of an explosion at Iran’s Bandar Abbas port, alongside a partial U.S. government shutdown that commenced over the weekend, have contributed to a classic “risk-off” environment. Historically, cryptocurrencies have shown heightened sensitivity during such periods of global uncertainty.
Technical indicators reflect the bearish momentum. Bitcoin touched a 52-week low of $84,570.41 on Friday, marking a daily decline of -5.15%. The Relative Strength Index (RSI) reading of 38.1 underscores the sustained selling pressure.
Fed Leadership Shift Alters Monetary Policy Outlook
The initial catalyst for the market’s nervousness was the appointment of former Fed Governor Kevin Warsh as the next chair of the U.S. central bank. Market analysts, cited by Reuters, view Warsh as a candidate potentially less supportive of risk assets. This has fueled concerns that monetary policy could adopt a tighter stance in the future.
For crypto markets, this often translates into a clear pattern: reduced risk appetite, lower leverage utilization, and consequently, accelerated selling. This effect is magnified during periods of thin liquidity.
Thin Liquidity and Liquidations Exacerbate Decline
The downward move was amplified over the weekend as large sell orders had an outsized impact in a low-liquidity environment. Market participant Chris Soriano of BridgePort described a phenomenon of “Phantom Liquidity” to CoinDesk, where forced liquidations of leveraged positions meet shallow order books, causing buy orders to vanish and prices to drop erratically.
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Supporting this, data referenced by PANews shows nearly $2.2 billion in crypto futures were liquidated within a 24-hour window. The breakdown highlights the concentration:
– Approximately $679 million in Bitcoin futures liquidations
– Roughly $961 million in Ethereum futures liquidations
– A broad decline was also observed in major altcoins including Solana, BNB, XRP, and Dogecoin
Sustained ETF Outflows Signal Institutional Retreat
Adding to the selling pressure is a continued withdrawal of institutional capital. According to Farside Investors, U.S. spot Bitcoin ETFs recorded net outflows of $1.61 billion in January 2026—marking the third-largest monthly withdrawal on record. Notably, about $1.49 billion of that total exited in the week leading to January 30.
A critical detail from SosoValue, cited by Bloomingbit, indicates this is the first instance of three consecutive months of net outflows since the launch of spot ETFs in January 2024. Among individual funds, BlackRock’s IBIT saw the largest weekly outflows at $947.2 million, followed by Fidelity’s FBTC with $191.5 million.
Regulatory Meeting Offers a Glimmer of Focus
Attention now turns to a potential source of future clarity. The White House is scheduled to host banking and crypto industry executives on Monday, February 2, as reported by Reuters. The agenda centers on breaking the deadlock in U.S. crypto regulation, with specific disputes around stablecoin rewards in the CLARITY Act expected to be discussed. The Blockchain Association has confirmed its participation.
In the near term, the market’s direction remains heavily contingent on the overarching risk sentiment. Key factors include the Fed transition, the flow of geopolitical news, and whether the ETF outflows establish a persistent trend or begin to subside following the weekend’s volatility.
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