Bitcoin’s slide through $65,000 and toward $60,000 felt like a stress test the market had been postponing. The move was sharp enough to force a reset in positioning, and broad enough to pull the conversation away from single-catalyst explanations.
Even mainstream media described the week as Bitcoin’s worst weekly performance since late 2022, with price briefly testing the $60,000 area before rebounding back above $65,000.
The most important question we can ask here isn’t whether this was capitulation, but which of the signals that usually accompany seller exhaustion showed up in this selloff, and which confirmations are still missing if you’re looking for an explanation that’s better than just a rebound driven by positioning.
Capitulation is a tempting label because it implies finality, but markets rarely oblige. They offer a scoreboard instead: leverage that gets forced out, risk measures that jump, flows that either stabilize or accelerate, and on-chain behavior that shows whether recent buyers are selling at a loss in size.
Cross-asset risk-off set the stage for a high-beta crypto selloff
Start with the cross-asset backdrop, because it helps explain why crypto traded like a high-beta risk position rather than a closed ecosystem.
In the days leading into Feb. 5, equities were already leaning risk-off. Nasdaq 100 saw a decline of about 4.6% over three sessions, while the S&P 500 dropped about 2.6% over that same window.
At the same time, the VIX saw a jump of roughly 33%. These are the kinds of shifts that tighten liquidity across markets and make leverage expensive right when speculative positions are most exposed.
That context matters because it points toward a familiar mechanism. When risk appetite is falling broadly, a selloff in the crypto market tends to be less reactive to a single crypto headline and more to positioning built during calmer conditions.
We can easily trace Bitcoin’s decline to the unwinding of leveraged and speculative positions and to weakness in other risk assets. That’s the first ingredient in any true washout: the trade has to be crowded enough, and liquidity has to be thin enough, so that some sellers become forced sellers.
Deleveraging signals: liquidations, open interest, and funding cooldowns
You can see the second ingredient in liquidation data, which acts like a thermometer for forced activity. Earlier in the week, the market saw over $3.3 billion in liquidations after a selloff in other risk assets.
Even if you treat any single liquidation figure with caution, the pattern matters. A washout that clears leverage tends to leave footprints.
Open interest compresses, funding rates cool, and liquidations cluster around the same window that price makes an air-pocket move. Those conditions can create a tradable low, even if they don’t guarantee a durable one.
ETF flows as the key bridge between TradFi sentiment and crypto demand
The third ingredient is the behavior of ETF money, which has become one of the clearest bridges between crypto and traditional risk sentiment.
Bitcoin ETFs saw more than $3 billion in withdrawals in January, a figure that helps explain why weakness persisted rather than snapping back on dips.
From Jan. 20 through Feb. 5, ETFs saw $3.5 billion in net outflows, even after counting the $561.8 million inflow on Feb. 2.
That pattern isn’t a verdict by itself, but it clarifies the market’s problem. In a selloff, you want reliable dip buyers. When the dominant flow channel is net negative, rebounds tend to be thinner and more conditional.
ETF flows also help separate two different kinds of capitulation that often get blurred together.
The first is flow capitulation, where redemptions accelerate as investors hit pain thresholds or reduce exposure for risk management.
The second is holder capitulation, where underlying selling becomes large enough to overwhelm other sources of demand and show up in realized loss measures.
In practice, you can have one without the other. Outflows can be steady without being panicked, while leveraged traders are the ones getting forced out.
Or you can see a genuine investor exodus where flows stay negative even after leverage has already been cleared.
On-chain stress checks: short-term holder SOPR and supply in profit
This is where on-chain metrics help, as long as they’re used with restraint.
One of the most interpretable stress gauges for short-term behavior is the short-term holder SOPR, which measures whether coins moved by recent holders are being sold at a profit or at a loss.
CryptoQuant data showed short-term holder SOPR fell to about 0.93 on Feb. 5. A reading below 1.0 implies recent buyers are realizing losses, and a dip into the low 0.9s often shows periods when weaker hands are getting shaken out.
SOPR’s 30-day moving average sat near 0.985, meaning the spot reading was below its short-term trend. That doesn’t prove a bottom is in, but it does show that by Feb. 5, the selloff had moved beyond mild profit-taking and into a regime where many recent entrants were exiting at a loss.
A second on-chain angle that helps translate price into behavior is the share of supply in profit. Supply in profit was about 55.26% on Feb. 4 and dropped to roughly 52.11% on Feb. 5.
A three-point move in a day is meaningful because it tells you the drawdown was severe enough to push a fresh slice of the market from green to red.
Broadly, washout phases are characterized by the transition happening quickly. A large cohort that had been comfortable becomes underwater, and the question becomes whether they can hold through volatility or whether they’re forced out by time, leverage, or risk limits.
What confirmation is still missing for a durable washout
Taken together, those ingredients describe what the Feb. 5 to Feb. 6 move clearly did.
It tightened the link between crypto and the broader risk-off move in equities. It triggered forced selling consistent with deleveraging.
It occurred against a backdrop of net-negative ETF flows that had already been draining marginal demand.
It pushed short-term holders deeper into realized-loss territory and knocked the share of profitable supply down toward the low 50s.
If you were looking for signs that the market experienced real pain, they’re there.
What’s less clear, and what makes this a useful thought experiment rather than a neat story with a bow on it, is whether the market has shown the kind of confirmation that usually follows a durable washout.
Seller exhaustion is a process, not a moment. In cleaner capitulation events, you often see a sharp liquidation spike followed by a rapid drop in liquidation volumes even if price remains volatile.
You see open interest stabilize after a steep contraction. You see funding rates stay subdued while price stops making fresh lows, suggesting that sellers have already done their work.
On the flow side, you want to see ETF outflows slow, or at least stop accelerating, because persistent redemptions can turn each rebound into a supply event.
That’s why the move back above $70,000 on Feb. 6 is best treated as information, not a conclusion.
In environments where implied volatility has jumped, and equities have absorbed a multi-day hit, rebounds can arrive fast as positioning gets cleaned up, but they can fade just as fast if underlying demand hasn’t returned.
A framework for the next phase: flows, forced selling, and risk conditions
The practical takeaway isn’t a price target. It’s a framework for reading the next phase without forcing a narrative onto every move.
If ETF flows remain meaningfully negative, it means the market is still fighting a headwind that didn’t exist in earlier cycles.
If liquidation intensity drops and stays lower while price holds a range, that’s a sign the forced-selling phase is ending.
If short-term holder SOPR begins to climb back toward 1.0 while supply in profit stabilizes, that suggests recent buyers are no longer exiting in a rush.
If equities regain their footing and volatility retreats, crypto gets breathing room even without a crypto-specific catalyst.
Cross-asset data already shows how tightly these regimes can line up. By Feb. 5, the VIX was up about a third in three sessions, and the Nasdaq 100 had slid more than 4.5% from Feb. 2.
Capitulation stories are tempting because they promise a clean ending, but the market rarely offers one.
What it does offer is a set of observable stress signals, and this week delivered several at once: a sharp risk-off move, a leverage flush, persistent ETF outflow pressure, and on-chain evidence that recent buyers were selling at a loss.
Whether this becomes a turning point depends on what happens after the violence, when forced selling should subside, and the market has to show it can attract marginal demand again.
That’s the question worth tracking, because it’s the one that separates a rebound from the start of a base.