What factors have converged to precipitate the reemergence of crypto winter as epitomized by Bitcoin’s precipitous decline from its peak near $126,000 in October 2025 to approximately $60,033 by mid-February 2026, a contraction exceeding 52% and accompanied by the most adverse year-to-date performance on record for Ethereum with a 34% depreciation? The intricate interplay of macroeconomic stressors, deleveraging pressures within crypto markets, and deteriorating fundamentals in mining economics have collectively engendered a hostile environment for digital assets. The notable hashrate collapse, indicative of substantial miner capitulation resulting from mining profitability operating roughly 20% below breakeven, exemplifies the acute financial duress afflicting the foundational infrastructure, which in turn exacerbates network security concerns and heightens systemic risk perceptions. This confluence has diminished miner incentives, precipitated operational shutdowns, and triggered a cascade of liquidity contractions, thereby amplifying downward price momentum. The reliance on energy-intensive proof-of-work mining models has intensified operational costs, further pressuring miners during price downturns.
Simultaneously, the market has endured unprecedented liquidation events totaling $159.3 billion, with particularly severe episodes on October 10, 2025—coinciding with geopolitical tensions and tariff threats—and subsequent liquidations in early February that wiped out billions in leveraged positions, affecting approximately 200,000 traders and manifesting the fragile leverage structures underpinning price levels. The collapse in open interest by 58% from its peak in October 2025 further highlights this deleveraging pressure. This deleveraging was accompanied by a sharp contraction in BTC derivatives open interest, reflecting the broader market’s risk-off stance. Complicating the landscape, regulatory ambivalence and adverse policy signals, such as Treasury Secretary Bessent’s declaration of non-intervention capacity alongside China’s yuan-pegged stablecoin prohibition, curtailed institutional confidence, while the partial U.S. government shutdown impeded critical data dissemination.
Moreover, increased volatility indices, a negative Bitcoin-gold correlation of –0.27, and a Bitcoin-to-gold ratio declining to an all-time low of 16.68 elucidate a decoupling from traditional hedging assets and the erosion of previously anticipated diversification benefits, as evidenced by Bitcoin’s high correlation (0.75) with equities. The structural compression of futures basis and unwind of cash-and-carry arbitrage, coupled with persistent spot market selling driven by deleveraging cycles, have induced a lasting supply imbalance. Collectively, these multifaceted factors elucidate the profound complexities driving the resurgence of crypto winter, defying prior bullish paradigms and imposing critical reassessment of market dynamics. Importantly, the Crypto Fear & Greed Index plummeted to a near record low, reflecting extreme market pessimism during this period.
