Crypto Markets Plunge Overnight: Bitcoin Drops Below $78,000 in Sharp Selloff

February 04, 2026

Cryptocurrency markets suffered a brutal overnight rout Tuesday into Wednesday, with Bitcoin tumbling more than 8 percent to lows near $77,800 before partial recovery attempts brought it back above $79,000. The leading digital asset erased roughly $6,500 from its value in hours, dragging the broader market down in a synchronized wave of liquidations and panic selling that wiped out tens of billions in market capitalization.

The selloff accelerated in Asian and early European trading sessions, catching many leveraged positions off guard and triggering cascading margin calls across exchanges.

Liquidation Cascade Hits Hard

Data from major tracking platforms showed over $1.4 billion in cryptocurrency positions liquidated within a 12-hour window, with long bets accounting for nearly 90 percent of the forced closures. Bitcoin alone saw more than $800 million in liquidations, while Ethereum and major altcoins contributed the rest.

The rapid decline breached several key technical support levels, including the $82,000 zone that had held as a floor in recent weeks. Stop-loss orders clustered below prior swing lows amplified the downward momentum, turning what began as moderate selling into a full capitulation event.

Macro Triggers and Sentiment Shift

Several overlapping factors appeared to ignite the drop:

• Renewed strength in the U.S. dollar index, which climbed sharply against major currencies after comments from Federal Reserve nominee Kevin Warsh suggested a focus on preserving institutional credibility and avoiding overly dovish policy shifts.
• Profit-taking after Bitcoin's strong run through late January, when the cryptocurrency briefly approached $105,000 amid earlier safe-haven narratives tied to geopolitical tensions.
• Reports of significant outflows from spot Bitcoin exchange-traded funds, with daily redemptions exceeding $700 million in some tracking estimates, signaling institutional de-risking.
• Broader risk aversion in traditional markets, where technology stocks and growth sectors faced pressure ahead of key U.S. employment data later this week.

Ethereum fell around 9 percent to trade near $2,550, while prominent altcoins posted losses ranging from 10 to 18 percent. The total cryptocurrency market capitalization contracted by more than 7 percent in the session.

On-Chain and Market Signals

On-chain analytics revealed accelerated selling from long-term holders near previous resistance zones, though some large addresses continued accumulating at lower levels. Funding rates on perpetual futures flipped deeply negative, indicating bearish sentiment dominance among leveraged traders.

Technical indicators moved into oversold territory on shorter timeframes, raising the possibility of a short-covering bounce if selling exhaustion sets in. However, failure to reclaim $82,000 quickly could open the path toward deeper support near $75,000 or even $70,000 in more pessimistic scenarios.

What Comes Next

With U.S. nonfarm payrolls data due later this week and ongoing uncertainty around Federal Reserve leadership transition, cryptocurrency traders brace for continued volatility. The overnight plunge served as a stark reminder of the asset class's high-beta nature and sensitivity to dollar movements and macro policy signals.

While some market participants view the correction as a healthy reset after an overheated advance, others warn that persistent dollar strength and risk-off flows could prolong the downturn. For now, the digital asset space remains locked in a tense consolidation phase, with traders watching closely for signs of stabilization or further downside pressure in the sessions ahead.