The cryptocurrency market is plunging as Bitcoin ends February on a bearish note amidst Trump’s tariffs, Bybit hack, and massive selling by institutions.
Plunging prices have market sentiments turning to ‘Extreme Fear’ based on the Crypto Fear & Greed Index, which has a reading of 10 on a scale of 1 to 100. Just last week, the market sentiments were ‘Neutral’ at 49. Meanwhile, last month, the index had a reading of 72 (‘Greed’) and 94, signifying ‘Extreme Greed’ in November.
The sentiments reflect the market condition perfectly, with a -22.14% drawdown. It is actually the worst February since 2014, when BTC went down about 31%.
This is also the reddest month for Bitcoin since June 2022, when the world’s largest cryptocurrency’s performance was -37.28%. According to crypto data provider Santiment, Bitcoin whales and sharks have dumped ~6,813 coins since last week, which is the largest drop since last July.
Similar data is presented by IntoTheblock, which noted that addresses holding between 10k and 100k BTC were the primary sellers during this dip.
At the same time, significant deleveraging is taking place, with short-term traders’ account balances dropping to levels not seen since October 2024. IntoTheblock noted:
“By flushing out excessive speculation, the market may have formed a healthier base for sustained upward momentum.”
A decline in BTC price means a crash in altcoins, which have already been performing badly for months now. And with Bitcoin’s negative performance, they have been simply obliterated.
The market rout started this week when the BTC price was around $96K, only for it to fall below $78,400 on February 28. With that, the total cryptocurrency market cap has fallen down to $2.7 trillion. The crypto market is currently in a precarious situation, and it’s hard to say if this is the bottom.
The $1.57 trillion market cap of Bitcoin is now down 28% from its all-time high (ATH) of 109,000 hit on January 20, the day Donald Trump was inaugurated as the 47th President of the United States.
The correction level is fast intensifying, already above this cycle’s average drawdown of -8.54%; it is now also surpassing the maximum drawdown of -26.25%, though still nowhere near past cycle’s crashes.
According to Glassnode, there is an air gap in realized supply between $70K and $88K, with these ranges having lower realized supply concentration due to strong trends leading to price appreciation that tends to outpace capital inflows.
With Bitcoin price plunging to the level last seen in mid-November, during its uptrend following Trump’s win, “recent investors are experiencing severe psychological stress.”
A decline in new investor profitability also means “significant unrealized losses, a condition historically leading to capitulation events or forced sell-offs during market downtrends.”
Additionally, Short Term Holder Spent Output Profit Ratio (STH-SOPR), which measures whether short-term holders are selling at a profit or loss, has dropped significantly under the one standard deviation threshold (-0.01), suggesting a notable increase in loss realization as many recent buyers are exiting positions at a loss. Glassnode stated:
“Historically, deep SOPR contractions have led to at least temporary market stabilization as weaker hands exit. However, under current macroeconomic conditions, the risk remains that the price decline could extend further if no strong demand catalyst emerges.”
While the pain is severe right now, not all hope is lost yet. Trader Bob Louaks believes we are very much in the bull market, and the ongoing dip is simply a correction that prepares the largest crypto asset for a more aggressive move, as seen in the last leg of bull cycles.
Data provider IntoTheBlock also noted that despite the selling, Bitcoin addresses are busy accumulating more BTC, which indicates that traders are utilizing the dip to add to their BTC positions.
Spot Bitcoin ETFs Record Massive Outflows
It’s been more than a year since Spot Bitcoin exchange-traded funds (ETFs) were approved by the US Securities and Exchange Commission (SEC) in early January. During this period, these ETFs registered substantial inflows that helped BTC prices reach new heights.
But of course, this journey wasn’t all up only. There have been periods where these investment vehicles experienced significant outflows for several days straight.
For instance, last year in March, there were five consecutive days of outflows, which increased to seven in late April-early May and then to eight in June and late Aug-early Sept, according to data from Farside. The rest of the days weren’t all inflows, but they still dominated.
February is yet again seeing that trend, but it’s worse than that because not only have there been eight consecutive days of outflows, but they were massive, at $3.26 billion.
But that’s not all. This entire month was dominated by outflows, with inflows only sprinkled in. There were four days of inflows in February, totaling a mere $644.6 million, while the total outlaws for the month have been about $4.3 billion, which explains the negative BTC price action.
On February 25, every single Bitcoin ETF issuer recorded outflows, which also marked the largest outflow ever at $1.138 billion. Also, there have been no new inflows whatsoever in the last four days of February.
With that, the cumulative total net inflow now sits at $36.85 billion, while total net assets held by all US Spot Bitcoin ETFs are $94.30 billion, representing 5.69% of the Bitcoin market cap.
This shift comes after Abu Dhabi’s sovereign wealth fund reported $436 million in Bitcoin ETF holdings via BlackRock (BLK +3.48%) IBIT. The State Wisconsin Investment Board also reported $321 million in IBIT. So, while the current trend shows institutions selling their Bitcoin, the broader trend is a positive one where a growing number of wealth funds are now embracing cryptocurrency investment.
Just earlier this month, BlackRock CEO Larry Fink said that many are considering investing in Bitcoin. This includes the operators of a sovereign wealth fund, which he said were debating whether to have a 2% or 5% allocation to BTC.
“If everybody adopted that conversation. It would be $500,000, $600,000, $700,000 for Bitcoin.”
– Fink
According to Fink, “crypto is a currency of fear,” explaining that “if you’re frightened of the debasement of your currency or the economic or political stability of your country, you can have an international-based instrument called Bitcoin that can overcome those local fears.”
For now, though, the market is taking a risk-off approach. And according to asset manager CoinShares’s weekly report, last week, crypto investment products recorded outflows of about half a billion dollars. This brings the outflows in the two weeks to $924 million, following an 18-week run that totaled $29 billion. Region-wise, the outflows were dominated by the US, while Europe continued to see healthy inflows, most notably in Germany and Switzerland.
James Butterfill, Head of Research at CoinShares, noted the following:
“We believe investors are exercising caution following the US Presidential inauguration and the consequent uncertainty around trade tariffs, inflation, and monetary policy.”
In terms of assets, Bitcoin was the primary focus of these outflows, followed by XRP, Solana, Ethereum, and Sui.
Spot Ethereum ETFs May Finally See Some Action
While Bitcoin prices have been seeing a huge drawdown, that has come after a strong rally that finally gave us a six-figure BTC. Ethereum, in contrast, has only experienced a decline with no upside.
Now, February marks Ether’s third consecutive red month with a negative performance of -35.77%, which followed January’s -1.28% and December’s -9.75%, according to data from Coinglass.
As of writing, ETH/USD is trading at $2,085, down 57.2% from its ATH of $4,880 hit more than three years ago in Nov. 2021. Meanwhile, ETHBTC is at 0.02654, slightly higher than the four-year low of 0.02353 earlier this month.
For Ethereum, there is simply no reprieve from bad news. On February 21, Bybit suffered a massive security breach in which the North Korean Lazarus Group drained 403,996 ETH from the platform’s Ethereum cold wallet.
The attack, Bybit CEO Ben Zhou explained, was executed through a “Musked UI,” where a fraudulent interface deceived signers into approving a malicious transaction. Since then, Bybit has replenished its Ethereum holdings. While Bybit assured users that other cold wallets remained secure, the market reacted with heightened volatility and panic withdrawals, leading to a significant decline in Bybit’s Bitcoin and Tether reserves.
When it comes to Spot Ethereum ETFs, they also had a rough start when they first began trading in late July. It wasn’t until October that net outflows became sporadic, though inflows were still not huge enough to help prices.
December was actually a good month for Ethereum ETFs, though the ETH price still remained subdued. In fact, in early December, the price was above $4K, and since then, it has been down only for Ether.
As for February, Ethereum ETFs had six consecutive days of outflows, totaling over $315 million. In this month, there were only two other days that ETFs had outflows that brought the total to almost $379 million.
While outflows are meager, inflows aren’t significant either. They were only about $481 million for this entire month, and there haven’t been any inflows in the last six days.
With that, the cumulative total net inflow of Spot Ethereum ETFs now sits at $2.86 billion, while the total net assets held by all issuers is $8.27 billion, representing 3.04% of Ether market cap.
The good thing is that BlackRock’s ETHA has finally taken over Grayscale’s ETHE in total assets, though barely. This means inflows can finally start to have some positive effect on ETH prices. Another positive thing for Ether in the coming future can be staking.
A couple of weeks ago, NYSE Arca filed a proposed rule change to enable the issuer to offer institutional buyers the ability to stake ETH and earn rewards.
The SEC has now started reviewing NYSE Arca’s proposal to allow staking for Grayscale’s Ethereum ETF (ETHE) and its Ethereum Mini Trust ETF (ETH), both of which are currently trading in the market. The decision for the same is expected before the end of May.
While some are skeptical about staking approval changing anything for ETH as the yield is pretty unattractive, others are of the view that it will be huge for ETH prices as investors will be getting a yield on an ‘appreciating’ asset.
For now, it’s up to regulators to decide if the ETF issuers’ application to allow staking will be permitted. Back in March last year, Grayscale, along with Fidelity, proposed the same, but they faced regulatory complexities. This time, however, the outcome is expected to be different under the Trump administration, which has promised regulatory clarity to the industry.
“We’ve been in discussions with the ETF providers, and they’re already working hard on that, so they expect that to be greenlit reasonably soon.”
– The Consensys founder, Joe Lubin Lubin, said in an interview with Cointelegraph earlier this month
Kean Gilbert of liquid staking provider Lido DAO is of the same view and shared at the Digital Assets Forum in London this month that staking-enabled Ethereum ETFs can materialize by the end of this year.
According to Gilbert:
“The current inability to stake ETF-held Ethereum represents a significant opportunity cost for institutional investors. We’re seeing strong demand for solutions that combine the regulatory clarity of ETFs with the yield-generating capabilities of Ethereum staking.”
Staking can finally make Ethereum ETFs attractive for institutions that have been piling into Bitcoin. This may also help reignite the crypto industry’s interest in the blockchain that pioneered smart contracts but has been facing serious competition from the fast and cheaper Solana, which has been the leading force of on-chain mania this time.
It’s Getting Crowded: Surge in Altcoins ETFs
Now that the majors, Bitcoin and Ethereum, have secured ETFs, market participants are turning their eyes to other altcoins. In fact, this is fast becoming a crowded space as issuers rush to file ETF applications for all kinds of digital assets, including meme coins.
This includes Solana (SOL), XRP, Litecoin (LTC), Dogecoin (DOGE), Polkadot (DOT), Cardano (ADA), and Hedera (HBAR).
Among these, Solana is the most prominent asset and the leading L1 of this bull cycle. After leading the meme coin frenzy these past two years, which helped send SOL prices from sub-$10 in Nov. 2022 to the peak above $293 in Jan. 2025, this blockchain is facing a setback. Too many meme coins, value abstraction by bad actors, pump-and-dump schemes, scams, and rugpulls have caused the SOL price to dump 56.4% in just over a month to now trade at $130.
Amidst this, the SEC has acknowledged Solana-based ETF filing by 21Shares, Bitwise, VanEck, and Canary Capital. Franklin Templeton has also joined this race, having filed the documents for Franklin Solana Trust. The SEC is already soliciting public comments on a proposal to list and trade the Grayscale Solana Trust upon its conversion into an ETF.
Bloomberg ETF analysts Eric Balchunas and James Seyffart believe Solana-based ETFs have as high as 70% chance of being approved. However, they see the likelihood of Dogecoin ETFs being approved by the SEC at 75%, while for XRP ETFs, they put the odds at 65%.
These odds account for the SEC and Commissioner Hester Peirce’s Crypto task force untangling “some of the security vs. commodity implications from lawsuits by the end of 2025.”
However, analysts believe one crypto has the highest chance of getting greenlit by the regulator, and that’s Litecoin. They argue that this faster alternative to Bitcoin has the most straightforward path toward SEC approval, as its S-1 and 19b-4 forms have already been filed and acknowledged. Also, it is identified as a commodity by the Commodity Futures Trading Commission (CFTC).
The price of Litecoin, with its 9.9 billion dollar market cap LTC, has been struggling, trading at $116, down 72% from its ATH of $410, much like ETH was hit during the last bull run. However, even that ATH was only about 10% higher than its 2018 peak.
The final deadline for the SEC to decide on the Solana, Litecoin, Dogecoin, and XRP ETFs is in October, though a Litecoin ETF could launch before then.
Even if any of these altcoin ETFs get approved, the market needs to significantly lower its expectations. We have already seen lackluster performance in Ethereum ETFs, so the entry of yet another product will only fragment interest and capital.
While the ETF structure, which provides institutions simplified access to crypto in a regulatory-compliant manner without needing to hold the digital asset itself, could attract the attention of wealth managers looking to diversify, these altcoins don’t have much to offer, not to mention their highly volatile.
According to Seyffart, “Issuers will try to launch many, many different things and see what sticks.” This means we’ll “see a long tail of ETFs holding digital assets in the long run, and the ones that don’t garner interest or flows will simply liquidate.”
After Brutal February, What’s Next?
While sentiments in the crypto industry are fearful right now amidst the market-wide rout, there is still some good news, primarily on the regulatory front.
ETF approval will take time, but the SEC has already established a dedicated task force and has ended its investigation into Uniswap Labs without pursuing enforcement action.
Uniswap Labs, the creator of the world’s largest DEX, first received a Wells notice in April of last year. The regulator was investigating whether Uniswap operated as an unregistered securities exchange and if its UNI token was an illegal securities offering.
Last week, Coinbase, the largest CEX in the US, also stated that the regulator planned to withdraw its lawsuit against it, putting an end to the years-long legal battle.
The SEC sued Coinbase along with Binance and Kraken back in 2023. The target of the lawsuits was Coinbase facilitating trading in tokens registered as securities and its “staking” program. On Thursday, the SEC officially announced that it is “dismissing” the matter.
“The war against crypto, at least as it applies to Coinbase, is over.”
– Coinbase Chief Legal Officer Paul Grewal said in an interview
These moves mark a complete overhaul of the SEC’s approach to regulating crypto under the current Republican leadership. While Trump, who pledged to be a “crypto president,” has been a net negative for crypto prices, he has actively worked to bring regulatory clarity to the sector as promised, which could foster growth and innovation.
As for price, in the short term, the market is going to take its time to reset. After all, Bitcoin price soared 560.6% since the 2022 lows to a new ATH in Jan. 2025. Also, deep pullbacks during bull markets are nothing new.
As trader Loukas noted:
“Unless you believe Bitcoin has topped for the 4-yr cycle, all we have here is the lower range oscillation of the shorter duration cycles.”
So, February has been a complete bloodbath, driven by institutional selling and macroeconomic concerns. While short-term pain is evident, historical trends show that deep corrections often pave the way for stronger rallies. Once enough time has passed, sentiments shift, and institutional accumulation resumes, prices will rebound. But for now, caution remains the focus as the market waits for the next catalyst to drive it forward.
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