Why Is Bitcoin Dropping: Slipping Below $80,000 Signals a Deep Crisis of Belief

Bitcoin has slipped below £58,536 ($80,000) for the first time since April 2025, fuelling questions over why Bitcoin is dropping amid a wider financial downturn. The cryptocurrency fell as much as 10% over the weekend, trading at around $76,000 by Sunday afternoon, down nearly 40% from its 2025 high of £92,338 ($126,198).

This break signals a deep crisis of belief, with demand drying up and no immediate catalysts for recovery. It fell nearly 11% in January, marking its worst start to a year since 2023.

Hawkish Fed Signals Weigh on Risk Assets

President Donald Trump‘s nomination of Kevin Warsh as Federal Reserve chair on Friday has rattled markets, seen as a hawkish move that could keep interest rates higher for longer. Warsh, a former Fed governor, emphasises monetary discipline, which analysts say frames cryptocurrencies as speculative excesses vulnerable when easy money withdraws.

Bitcoin dropped sharply following the announcement, with traders reassessing the outlook for liquidity. The nomination reshaped expectations for interest rates, a key driver of crypto prices. Combined with higher-than-expected inflation data, this has spurred fears of tighter policy, prompting investors to shift from riskier assets like Bitcoin to safer havens.

Additionally, broader deleveraging is at play. A massive sell-off in gold and silver on Friday has spilled over, as traders liquidate positions to cover losses. ‘Effectively, a deleveraging is happening, forcing traders to sell other assets,’ said Kyle Rodda of Capital.com.

Geopolitical Tensions and Trade Woes Add Pressure

Escalating US-Iran tensions and trade disputes are exacerbating the sell-off. Trump’s floating of 100% tariffs on Canada, alongside ongoing tariff implementations, has heightened macro uncertainty. A looming US government shutdown further unnerves investors. These factors have driven a risk-off sentiment, with Bitcoin failing to act as a hedge against geopolitical stress or dollar weakness.

The cryptocurrency market has seen £585 billion ($800 billion) wiped from its value since October’s peak, as leveraged positions unwind. Weekend trading, often thin on liquidity, amplified the drop, with over £1.1 billion ($1.6 billion) in liquidations intensifying the downturn. As one X post from trader Kyle Chassé put it, ‘This isn’t a Bitcoin story. It’s a liquidity story.’

Traders have noted that the rally fuelled by corporate purchases, such as those by MicroStrategy, has run out of steam, contributing to the scarcity of fresh buyers. Moreover, spot Bitcoin ETFs continue to see outflows, indicating waning conviction among institutional buyers, many now underwater on their positions.

Waning Investor Confidence and Market Dynamics

The absence of fresh buyers has turned what started as profit-taking into a more corrosive decline. Bitcoin has posted four straight months of losses, hovering near key support levels like £54,000 ($73,000). Strategists warn it’s too early to call a bottom, with sentiment shifting bearishly. ‘Current flows suggest sentiment has shifted meaningfully,’ according to 10X Research.

Options market dynamics, including heavy positioning around £65,900 ($90,000) calls on X, have capped upside attempts, while puts at lower levels have provided temporary support. As these expire, volatility could increase.

As of 2 February 2026, Bitcoin trades at £56,820 ($77,770), with no signs of immediate rebound. Analysts eye upcoming economic data for clues, but the crisis of belief persists, leaving the market vulnerable to further drops if macro headwinds intensify. Why Bitcoin is dropping remains tied to these intertwined factors, with recovery hinging on renewed liquidity and confidence.