Bitcoin rose from $60,000 to more than $70,000 in less than 24 hours, largely erasing a brutal 14% drawdown that tested all market bottom predictions.
The speed of the reversal was so severe that it felt like a capitulation had been resolved, with the stock falling 12% in one session and 17% from the intraday low. However, the mechanisms underlying this backlash tell a different story. This was a stabilization between assets in response to a forced rebalancing of positions, not a belief-based flood of spot demand.
And the derivatives market remains crowded with downside protection, pricing in the possibility that $70,000 is a temporary price rather than a bottom.
Forced mitigation in the face of macro stress
According to data from CoinGlass, the cryptocurrency began trading around $73,100 on February 5, briefly rising, but fell to $62,600 by the close, with around $1 billion of leveraged Bitcoin positions liquidated during the day’s decline.
These numbers alone capture the chain of forced sales, but the overall picture was even worse.
According to CoinGlass, open interest in BTC futures fell to $49 billion from about $61 billion the previous week, meaning the market was already deleveraging when the final flush occurred.
The trigger was not specific to cryptocurrencies. Silver fell as much as 18% to around $72.21, pushing down related risk assets, with reports saying the decline was due to weakening risk sentiment due to a sell-off in tech stocks and a volatility shock in precious metals.
Deribit’s research confirmed the spillover effects, pointing to negative funding rates, an inversion of the term structure of implied volatility, crushing the 25-delta risk reversal skew to around -13%, and extremely bearish sentiment in derivatives.
These are classic “crowd scare” conditions, where positioning amplifies price movements in both directions.
The policy narrative gained further momentum. Reuters reports on market reaction to President Donald Trump’s selection of Kevin Warsh as Federal Reserve Chairman, saying traders are interpreting the selection as a sign of future balance sheet shrinkage and liquidity tightening.
Meanwhile, miners faced severe margin pressure. TheMinerMag reports that the hash price is expected to drop below $32 per petahash/second and the network difficulty is expected to drop by about 13.37% within two days. This safety valve does not arrive until price has already broken support.
Macro reversal and squeeze mechanism
February 6th began where February 5th ended, dropping to an intraday low near $60,000 before surging to a high near $71,422, but failing to break out three times before falling below $70,000.
The trigger was not within the cryptocurrency, but rather a sudden reversal of the tape between assets. Wall Street soared, with the S&P 500 up 1.97%, the Nasdaq up 2.18%, the Dow up 2.47% and the SOX Semiconductor Index up 5.7%.
Metal prices rebounded sharply, with gold rising 3.9% and silver 8.6%, while the dollar index fell 0.2%, indicating an easing trend in financial conditions.
Bitcoin moved mechanically in response to these changes. This correlation is not subtle. When technology stabilizes and metals rebound, BTC is pulled through shared risk exposure.
However, the intensity of the snapback also reflects the positioning of derivatives. Skew near -13%, negative funding, and an inverted volatility structure create a situation where macro easing can lead to short covering or forced rebalancing.
The rebound was caused by a liquidity event and amplified by the unwinding of crowded short positions.
Nevertheless, forward-looking signals remain bearish. We derive data that shows a large concentration of put open interest with strike prices between $60,000 and $50,000 expiring on February 27th.
Deliv’s Shaun Dawson told Reuters the downside demand was “extreme”. This is not hindsight analysis and the trader is clearly hedging against another leg of the decline even after the pullback.
Can you maintain $70,000? framework
The basis for maintaining over $70,000 is based on three conditions.
First, technology needs to remain stable, yields don’t tighten again, the dollar doesn’t tighten again, and the macroeconomic recovery needs to sustain.
Bounce was clearly cross-asset. BTC will not decouple if the stock price flips again.
Second, leverage must continue to cool without new forced selling. Open interest has already fallen significantly, reducing air pocket risk.
Third, once the difficulty adjustment is complete, we need to actually reduce stress for miners.
If the price holds within that window, the expected 13.37% decline could reduce marginal selling pressure and stabilize the hashrate.
Another shakeout case has three legs.
First, option positioning remains biased to the downside. The largest concentration of puts is $50,000, up from $60,000 in late February, which is not negative sentiment but a positive signal built into the market’s implied probabilities.
Second, derivative signals remain fragile. The near-extreme skew, recent negative funding, and reversed volatility structure are consistent with a bailout rally amidst a fear regime rather than a trend reversal.
Third, ETF flow data shows sustained outflows. The Bitcoin ETF recorded monthly net outflows of $690 million as of February 5th.
Results for February 6 are not yet available, but this pattern suggests that institutional allocators have not shifted from risk aversion to re-engagement.
| signal bucket | metric | Latest reading/system (as of article writing) | Bullish confirmation (what changes are needed) | Continuing bearishness (what to fear) | sauce |
|---|---|---|---|---|---|
| derivatives | PERP funding rate | Negative (less than 0%) — “Extremely bearish” regime | funding flip to positive Staying positive across major venues (not a 1-2 hour blip) | funding remain negative / Whip saw with prices plummeting → Risk of “relief rebound” | Deribit Insights / Block Scholes, week 6 (less than 0% funding, negative BTC funding) |
| option risk | 25D Risk Reversal (Skew) | Short-term skew is low up to -13% (Surge in put demand) | skew rebound towards 0 (less demand for downside protection) and hold | skew remain deeply negative (Permanent Protection Bidding) | Deribit Insights / Block Scholes, Week 6 (25D RR “Minimum -13%”) |
| lever action | Futures Open Interest (OI) | Deleveraging/OI decline (Compulsory Liquidation Stage);Recent Report Highlights ~$55 billion Equivalent OI ends within 30 days | Hey stabilize (without rapid releveraging) while price is above $70,000 | Hey Rebuild now Entering a rally → another liquidation leg becomes more likely | Glassnode: Forced deleveraging + prolonged liquidation spike |
| flow | Spot BTC ETF Net Flow (Daily/Weekly) | net outflow: February 4th – $544.9 millionFebruary 5th – $434.1 million; February 6th has not yet been posted on tape | spill slow down to level groundthen moderate inflow (even “less negative” helps with thin liquidity) | spill accelerate (Another -$400 million to -$500 million day) → Repeated shakeout risk | Farside Investors Daily ETF Flow Chart |
| On-chain stress | Realized loss (7D average) | > $1.26 billion/day (7D SMA) — Surrender/forced sales remain elevated | realized loss reached a peak and then trended downward While the price remains in the $70,000 area (depletion of sellers) | loss Stay high or jump up →Distribution instead of accumulation | Glassnode Week On-chain Week 05 (“7D SMA… over $1.26 billion per day”) |
| mining | Hash Price + Next Difficulty Adjustment | Hash price < $32/PH/sec (lowest ever). Expected difficulty -13.37% Next adjustment (about 2 days) | Hardship relief has arrived and the hashrate stabilizes While BTC is above $70,000 (reducing stress/selling pressure for miners) | hash price further down / Hashrate drops further → Miner sales/financial drawdowns increase | TheMinerMag (hash price < $32/PH/s, difficulty prediction -13.37%) |
What $70,000 Really Means
Levels themselves are not magic. Its significance lies above the on-chain absorption cluster identified by Glassnode between $66,900 and $70,600.
Sustaining above $70,000 would suggest that the cluster has absorbed enough supply to stabilize price movements, at least temporarily. However, possession requires more than technical support. Spot demand needs to return while derivatives hedging eases and institutional flows stabilize.
The rebound from $60,000 was real, but its composition is important. Changes in the macro environment can reverse stabilization among assets.
Forced unwinding of positions causes a mechanical rebound, but does not necessarily lead to a sustained trend. And options traders are still pricing in a decent chance of heading towards $50,000 to $60,000 over the next three weeks.
Bitcoin has recovered to $70,000, but is already consolidating below that level, suggesting a pause before another test. Three conditions need to occur in sequence: macro risk appetite is maintained, ETF outflows slow or reverse, and derivatives sentiment normalizes. Short-term relief.
Although the market has seen a strong snapback, the forward curve and flow data suggest that traders are not betting on durability yet. The $70,000 level is not the final stage, but only the level at which the next stage of the discussion is determined.
(Tag translation) Bitcoin
