Bloodbath! $BTC breaks through historical support levels, with trillions in market value evaporating. Is this dip an opportunity or a meat grinder?

The market temperature has plummeted to freezing point in a very short period. Starting from the morning of February 5th, the price of $BTC dropped from around $73,000, reaching a low of $60,000 the next morning, a nearly 18% decline within 24 hours, then rebounded to the $64,000 region. This means that the price range of $BTC has once again fallen below the 2021 bull market peak of $69,000.

The altcoin market has also not been spared. $ETH fell from $2200 to $1750, while $SOL dropped from a low of $92 to below $68. Data shows that the total market capitalization of all cryptocurrencies shrank from $3.21 trillion to $2.22 trillion within a month, evaporating nearly $1 trillion. In the past 24 hours, total market liquidations reached $2.688 billion, with long positions liquidated at $2.3 billion.

Global risk assets are also under pressure. The S&P 500 index fell by 1.23%, and the Nasdaq index declined by 1.59%. Related listed companies such as Strategy saw a single-day plunge of 17%, down more than 76% from its July 2025 high. Spot gold fell by 4%, and silver prices plummeted by 19%. The cryptocurrency fear and greed index dropped to 9, near a one-year low, clearly indicating an “extreme fear” state.

For many traders, the $69,000 level carries all the memories of the previous bull market, and its breach has a strong psychological impact. In past market cycle narratives, each bear market bottom was higher than the previous bull market peak, which was considered a rule. But the 2022 trend challenged this notion for the first time.

After $BTC hit a new high in November 2021, it entered a long downward channel. This round of decline broke previous highs again, seemingly confirming that regardless of macro changes, its inherent cyclical forces still operate. Similar to the fall below $20,000 in 2022, this breach of a key psychological level was another heavy blow to market confidence.

So what happened after the last peak was broken? This might offer some insights for the current “foolish attempt to catch the bottom.” In mid-June 2022, after reaching the top, there was about a 220-day decline, with $BTC falling below $20,000, the peak of the 2017 bull market. That month saw a nearly 43% drop, marking a rare retracement in years.

This decline meant that even investors who bought at the 2017 peak and held long-term entered a loss position. The cycle belief that “the bear market won’t break the previous high” was thoroughly shattered, and market confidence was severely damaged. After breaking down, support did not appear immediately; selling pressure continued, and the price bottomed out around $17,600 on June 18.

On-chain data shows that whale addresses reduced holdings, long-term holders began to waver, and the fear index pointed to “extreme fear.” This phase was characterized by falling prices accompanied by significantly increased trading volume, indicating many investors chose to exit.

The price collapse was caused by a combination of macro headwinds and internal industry risks. On the macro side, the Federal Reserve launched an aggressive rate hike cycle to combat inflation, tightening global liquidity, putting all risk assets under pressure, with $BTC and the Nasdaq showing high correlation and declining together.

Internally, a series of black swan events erupted. From the Terra/LUNA ecosystem collapse in May to the liquidity crises and bankruptcies of institutions like Three Arrows Capital and Celsius in June, leverage in the market was violently liquidated. These forced liquidations created a death spiral, providing direct selling pressure for $BTC. The breach of $20,000 was the result of these internal risks converging and exploding.

From June 2022, when $BTC broke below $20,000, to the final low of about $15,500 after the FTX exchange collapse in November of the same year, the market experienced a prolonged five-month bottoming and consolidation period. Multiple rebounds occurred during this time, but none could effectively hold above $20,000.

FTX’s collapse can be seen as the final blow, completing the last phase of deleveraging. A key signal was that during the extreme panic caused by FTX, $BTC’s price did not significantly break below June’s low, indicating that market support in that price range had strengthened. It can be considered that the core chip turnover and pressure testing were completed in the $17,000 to $20,000 zone.

Subsequently, the market entered a long period of volume contraction and bottoming recovery. It wasn’t until early 2023, with macro rate hike expectations easing and new narratives emerging, that $BTC regained the $20,000 level, starting a new upward cycle. By then, it had been 210 days since its initial fall below $20,000.

After breaking the level, the bottom was not immediately seen; usually, there is a phase of oscillation and failed rebounds, followed by deeper declines amid credit shocks, eventually forming a bottom in a lower range, and then months or even longer periods of repair. The path from 2022 to 2023 is a typical example of this pattern.

So, can we buy the dip now? If we mechanically compare with history, immediately buying at the first breach of key support levels is often dangerous. It usually means a fierce panic sell-off has just begun, not ended. Although the price in June 2022 looked tempting, the downward momentum was far from exhausted.

The true bear market bottom is more a long period than an exact price point. This zone is characterized by a phase of sustained volume decline and narrowing price fluctuations after a sharp drop. Market sentiment shifts from panic to numbness and despair, with social media falling silent.

Final confirmation of the bottom often requires a major stress test, usually marked by the collapse of large institutions. The FTX collapse in November 2022 played this role. When the market resisted the deadly bad news without making a significant new low, it was a high-confidence signal that most sellers had been cleared out.

Looking at historical data, $BTC’s retracement from all-time highs to bear market lows has been gradually converging: about 93% in 2011, 84% in 2015, 83% in 2018, and about 76% in 2022. Based on this trend, some analysts estimate that the bottom of this bear market might be around a 70% retracement.

Regarding how to operate, analyst Phyrex Ni offers a reference framework based on market sentiment. He has long used the VIX fear index to judge $BTC’s bottoming timing. His strategy roughly involves several stages: when VIX is below 20, market volatility is normal; below 25, it signals early panic, which can be observed.

When VIX exceeds 25, it is usually driven by events; after the event ends, a rebound often occurs, and one can consider starting to build positions. When it exceeds 30, it often corresponds to extreme events, with higher success rates for buying. When VIX exceeds 40, the market begins spreading bear market talk, and increasing investments at this stage has shown good historical backtest results. Values above 50 are very rare; the last time was in April 2025, and historical data shows that after this zone, short-term large upward trends often appear.

According to his view, the current VIX is at 22.56, in the observation zone, so whether to buy or not is fine. Exceeding 25 or 30 is indeed a more cautious timing, but in the past two to three years, VIX exceeding 30 has been infrequent.