From Geopolitical Tension to Liquidity Tightening, BTC Is Pulled Into a Disorderly Market

KEYTAKEAWAYS

TABLE OF CONTENTS

• KEY TAKEAWAYS
• A SHARP SELLOFF RETURNS TO THE MARKET
• GEOPOLITICAL RISKS RESURFACE AS MIDDLE EAST TENSIONS RISE
• A HAWKISH FOMC FORCES A RESET OF LIQUIDITY EXPECTATIONS
• RISK OFF SPREADS ACROSS ASSETS, NOT JUST CRYPTO
• ETF OUTFLOWS REMOVE A KEY SOURCE OF MARKET SUPPORT
• NOT A BLACK SWAN, BUT A FORCED DE RISKING EVENT
• DISCLAIMER
• WRITER’S INTRO

CONTENT

A SHARP SELLOFF RETURNS TO THE MARKET

A sharp selloff has appeared once again.

According to OKX market data, from last night to early this morning Beijing time, Bitcoin fell rapidly from around 88,000 dollars to a low near 81,200 dollars. The 24 hour decline exceeded 7 percent. Ethereum dropped from around 2,940 dollars to a low near 2,690 dollars, with a 24 hour decline close to 10 percent. Solana fell from around 123 dollars to near 112 dollars, down more than 8 percent in 24 hours.

Coinglass data shows that total liquidations reached 1.094 billion dollars in the past 12 hours. Long liquidations accounted for 1.021 billion dollars. Nearly 240,000 traders were liquidated in the past 24 hours.

This decline was not triggered by a single negative event. It was the result of multiple risk factors being released at the same time.

GEOPOLITICAL RISKS RESURFACE AS MIDDLE EAST TENSIONS RISE

The sudden escalation of geopolitical tension was one of the earliest factors priced into the market.

Recent reports indicate that the U.S. aircraft carrier Abraham Lincoln and its strike group entered a full blackout state and cut external communications. This type of operation is usually considered a standard procedure before major military actions. As a result, markets began to speculate that potential actions involving Iran had entered a highly sensitive phase.

At the same time, statements from Iran also shifted toward a wartime posture. Iran’s First Vice President Aref stated that since the current government took office, the country has remained in a state of readiness. He said Iran would not initiate a war, but if conflict is forced upon it, the country will respond firmly in self defense. He emphasized that the outcome of any war would not be decided by the enemy and that preparations for a wartime scenario must be made.

Even though no direct conflict has occurred, this kind of environment is already enough to influence market behavior. When liquidity is tight and risk appetite is already declining, geopolitical uncertainty is quickly priced in. Capital tends to reduce directional exposure rather than continue to hold high volatility assets.

A HAWKISH FOMC FORCES A RESET OF LIQUIDITY EXPECTATIONS

The Federal Reserve remains a central factor in the crypto market downturn.

At the January FOMC meeting, the Fed kept the benchmark interest rate unchanged at 3.50 percent to 3.75 percent. The statement emphasized that the unemployment rate remains stable and inflation is still elevated. While the decision itself was largely in line with expectations, it marked an emotional turning point for the market.

Any remaining hopes for an early rate cut or policy pivot were effectively removed. For risk assets, this type of moment often does not appear as a new negative headline. Instead, it appears when previously priced in optimism can no longer be extended.

Since 2025, Bitcoin has repeatedly pulled back after FOMC meetings. This pattern reflects the same mechanism. The policy stance does not suddenly turn more hawkish. The market simply accepts that liquidity will not arrive earlier than expected.

When positions are crowded and leverage is high, confirmation of this reality is enough to trigger risk release. It is not the first domino. It is the moment when unstable structures lose their final support.

RISK OFF SPREADS ACROSS ASSETS, NOT JUST CRYPTO

This selloff is not limited to crypto.

In U.S. equities, declining indices signaled a clear shift toward lower risk appetite. The Nasdaq 100 fell about 1.6 percent. The S&P 500 declined around 0.75 percent. The Dow Jones Industrial Average also moved lower by about 0.2 percent. Technology stocks showed particular weakness and dragged overall sentiment down.

At the same time, precious metals also experienced sharp moves. After a strong rally, gold saw a rapid pullback as profit taking emerged. Silver also retreated quickly from recent highs, with a notable decline.

This shows that capital is not rotating from risk assets into traditional safe havens. Instead, investors are reducing exposure across multiple asset classes at the same time.

When equities fall, crypto weakens, and precious metals also pull back, the signal is clear. Risk appetite is shrinking broadly. In this environment, Bitcoin cannot stand apart. It is not widely treated as a true safe haven and its high volatility often makes it one of the first assets to be reduced when risk aversion rises.

ETF OUTFLOWS REMOVE A KEY SOURCE OF MARKET SUPPORT

Capital flow data completes the picture of this decline.

Bitcoin spot ETF data shows continued capital outflows. Over the past week alone, spot Bitcoin ETFs recorded consecutive net outflows. Several days saw daily outflows exceeding hundreds of millions of dollars. Total net outflows have surpassed 1 billion dollars.

More importantly, these outflows were not a one time event. They occurred over multiple days and showed a clear trend. This suggests that institutional capital is not stepping in to buy the dip. Instead, it is reducing overall risk exposure and waiting for clearer macro and market signals.

Without ETF inflows, the market lacks a buffer. As prices fall, there is no consistent source of buying support. Selling pressure must be absorbed by existing capital. Once key levels break, selling quickly dominates while bids lag behind. Prices are then forced lower to find a new balance.

NOT A BLACK SWAN, BUT A FORCED DE RISKING EVENT

The essence of this Bitcoin decline is not a single unexpected shock. It is the result of multiple risks converging and forcing a broad repricing of risk assets.

Geopolitical uncertainty has intensified. Liquidity expectations have been revised lower. ETF outflows continue. Without stable structural buyers, the crypto market was pushed into an active de risking phase.

When long term capital and passive buying are absent, markets often move lower to force trend strategies and leveraged positions out. This process clears risk in its first stage.

During this decline, Bitcoin broke below the widely watched 100 week moving average near 85,000 dollars. This level had repeatedly acted as a support zone over the past year and was a default defense line for many trend models and leveraged positions.

The market has now completed an initial round of rapid deleveraging and emotional reset. However, true stabilization still depends on two conditions. First, whether key technical levels can be reclaimed and held. Second, whether risk capital is willing to return and participate in price discovery.

Until then, high volatility and low confidence are likely to remain the dominant features of the market.