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In early February 2026, Bitcoin saw its sharpest weekly drop in three years. The price fell to around $60,000 —
roughly half the record highs reached in autumn 2025. As is typical, the broader crypto market followed Bitcoin lower.
Against this backdrop, investors and analysts began looking for the factors that may have triggered another market “cooldown”, according to
The Wall Street Journal. Below are five of the most commonly cited explanations — expanded in more detail.
1) “New shiny toys”: capital shifts to other hyped risk markets
Crypto markets run heavily on attention. When new high-risk instruments appear, some traders and speculators shift their focus to where the
biggest moves are and where the story feels newer. In that environment, demand for crypto assets can weaken even without a single dramatic catalyst.
The “new toys” most often mentioned inсlude prediction markets, AI-related equities, and
precious-metals futures. The underlying mechanics are fairly straightforward:
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Same audience. Many participants who typically trade crypto can easily migrate to other “risk-on” segments —
they care about volatility, liquidity, and the ability to rotate positions quickly. -
Competition for liquidity. When there are multiple hot themes at once, capital is not unlimited:
some margin and cash gets reallocated, reducing net buy pressure in crypto. -
Novelty effect. New markets create a sense of “early entry”, while crypto can start to feel like an “already played” narrative —
especially after a strong rally is followed by a sideways or down phase.
The result can be a market regime where the steady flow of new buyers isn’t strong enough — and without that, even ordinary selling pressure
(especially with leverage) can push prices down more aggressively.
2) Too many crypto products: “paper” exposure replaces direct ownership
Wall Street and the traditional financial systеm have seen a surge of products that provide crypto exposure without requiring direct ownership:
exchange-traded funds, derivatives, structured products, and “turnkey” solutions for investors.
This doesn’t increase the number of coins in circulation, but it may change perception and investor behavior:
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Scarcity feels less unique. When access to price exposure is one click away through an intermediary product,
some investors view the market as more “conventional” and less distinctive than when buying and self-custodying coins was the norm. -
Derivatives take a larger share. As futures and other derivatives grow, the market becomes more influenced by
liquidation cascades, margin requirements, and sharp moves during thin liquidity — all of which can amplify volatility in both directions. -
Harder to read real demand. When a meaningful part of demand flows into products that don’t involve wallets and on-chain transfers,
the structure of flows changes: during stress, sell pressure can show up faster than sustained spot buying.
The skeptical argument is that more “layers” between investors and the underlying asset can reduce Bitcoin’s appeal as a straightforward scarce asset “in pure form”.
3) A new Fed chair: expectations of tighter policy and a stronger dollar
Another major factor is the macro backdrop. Trump’s pick for Fed chair, Kevin Warsh, is often viewed as favoring tighter monetary policy
and a stronger dollar, WSJ notes. A tighter regime typically makes life harder for alternative “risk-on” assets, including crypto.
Here’s why:
-
Rates and yields compete with risk. When yields on relatively “safe” instruments rise, some capital prefers fixed income over volatile assets —
especially in uncertain periods. - A stronger dollar pressures alternatives. When the dollar strengthens, investors often reduce exposure to assets seen as “alternative” hedges.
- Risk appetite falls. If markets expect tougher policy, traders tend to reduce leverage, cut high-risk positions, and de-risk portfolios.
A key nuance: investors also expect rate cuts from Warsh, which could support markets. In other words, this factor isn’t linear —
it depends on what expectations are priced in versus what actually happens. Warsh has also spoken positively about Bitcoin in the past
and suggested its price can signal whether policymakers are “doing the right thing.” So some market participants see not only risk, but also potential support
if policy rhetoric turns out softer than expected.
4) Regulatory uncertainty: the market wants clear rules of the game
Regulation remains one of the key variables shaping whether major financial institutions will integrate digital assets into mainstream services.
In 2025, the U.S. passed a stablecoin bill, the Genius Act, establishing a baseline framework for fiat-pegged tokens.
The market is now waiting for the Clarity Act, which is expected to set a more comprehensive rulebook for the broader crypto industry.
WSJ reports that Congress was close to approving the bill, but the process stalled due to disagreements between banks and crypto exchanges. Until the framework is clear,
several practical issues remain:
-
Financial firms delay product launches. Banks and public companies need clarity on compliance, reporting, custody, risk management, and liability.
Without it, “do nothing” often becomes the safest choice. -
Institutions want legal certainty. Even where client demand exists, large players are reluctant to scale without clear legal guardrails —
the cost of mistakes is too high. -
Fewer growth drivers. When “big money” slows its entry, markets rely more on retail flows and short-term traders —
and those cohorts are quicker to step back during drawdowns.
In short, uncertainty doesn’t always cause the drop, but it can slow recovery by reducing the pace at which fresh institutional capital arrives.
5) Profit-taking: “taking chips off the table” after a strong rally
The simplest explanation is profit-taking. After the post-2024-election rally — driven in part by Trump’s promises to make the U.S.
the “crypto capital of the world” — Bitcoin gained nearly 80%. In such conditions, many traders do the same thing:
they scale out in parts, rotate profits into less volatile assets, and reduce overall risk.
Why profit-taking can look like a “crypto winter”:
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Psychology around all-time highs. After a record peak, markets become sensitive to negative headlines,
and participants often prefer to lock in profits rather than risk giving them back. - Leverage cascades. If a large share of the market is leveraged, selling can trigger liquidations and accelerate the downside.
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Rotation within crypto. During broad declines, capital shifts between higher-risk altcoins and more liquid assets,
amplifying choppiness and dispersion.
6) Comparing past “crypto winters”: no single major blowup so far
Previous drawdowns usually had a clear trigger. In 2018, Bitcoin dropped about 80% after the ICO bubble burst.
In 2022, confidence was hit by the collapse of TerraUSD and Luna (around $40 billion),
followed by a chain of bankruptcies culminating in the downfall of FTX.
This time, experts note, the current “crypto winter” hasn’t been accompanied (so far) by major bankruptcies or scandals that would directly undermine trust
in the market’s infrastructure. That matters because a collapse in trust is what made past recoveries slower and more painful.
At the same time, many still see supportive long-term drivers:
- Infrastructure continues to improve — services, tools, custody, and user access are becoming more familiar and reliable.
- Stablecoins keep growing and serve as a technological bridge between fiat and crypto.
- Institutional interest hasn’t disappeared — it may be more cautious, but it hasn’t gone away.
That’s why some analysts expect this cooldown to end sooner than prior “crypto winters” — if it’s primarily a mix of flow reallocation, policy expectations,
and profit-taking, rather than a systemic crisis of confidence.