The crypto market has faced sustained pressure in February, with prices struggling to build momentum amid declining stablecoin exchange reserves.

Bitcoin (BTC) has dropped by nearly 50% from its peak in October 2025 and by roughly 30% since the year began. Alongside the decline, there has been slower stablecoin growth, cautious interest rate signals from the Federal Reserve, and weaker U.S. manufacturing data.

Total market capitalization has fallen to around $2.3 trillion. At the same time, the Fear and Greed Index has slipped to cycle lows. Continued exchange-traded fund outflows have added to investor caution and reduced fresh capital entering the market.

Liquidity drain raises downside risks

On Feb. 26, CryptoQuant analyst TopNotchYJ warned that shrinking stablecoin reserves are becoming a major risk factor. Data shows that Tether (USDT) exchange balances fell from $60 billion to $51.1 billion in two months, a $9 billion decline that has tightened trading liquidity since January.

TopNotchYJ described the drop in USDT reserves as clear evidence of capital moving out of crypto markets. Stablecoins are the main source of trading activity, and falling balances usually signify a drop in investor confidence. Moving below $50 might put more selling pressure on major assets like XRP, ETH, and BTC. 

The number of active wallet addresses has also rapidly decreased, from about 376,000 to 263,000. This shows that retail investors and institutional investors are taking a backseat. Price rebounds typically lose strength when there are fewer market participants, as demand naturally softens.

A similar pattern is visible in trading behavior. The daily volume has dropped by more than 6% to roughly $339 million. This indicates little speculative activity in the market, but it does not suggest widespread panic selling. 

Short-term outlook and analyst views

Analysts remain divided, although most expect high volatility in the near term. Some warn that Bitcoin could slide another 20% to 30% if economic pressure continues, especially if support near $60,000 breaks. The $70,000 level continues to act as a major barrier to recovery.

Matthew Sigel of VanEck has described the recent decline as “orderly deleveraging.” He argues that leverage has cooled and that the market is adjusting rather than entering a full collapse.

Researchers at K33 Research see parallels with the late-2022 bottom. They point to fragile economic conditions and stagnant stablecoin supply as limits on short-term upside.

More positive views come from Bitwise Asset Management, which manages more than $15 billion. Their analysts continue to highlight Bitcoin’s long-term potential and see recent pullbacks as possible accumulation opportunities.

Several technical levels remain are now in focus. Support lies between $64,000 and $66,000, followed by $60,000 and the $50,000–$55,000 zone. Resistance is clustered near $70,000 and $80,000.

Until stablecoin reserves recover and user activity improves, analysts expect the market to stay vulnerable, with downside risks likely to persist in the coming weeks.

A bipartisan group of lawmakers in the US House of Representatives has introduced legislation aimed at halting prosecution of software developers who do not have custody or control of others’ crypto assets.

In a Thursday notice, Representatives Scott Fitzgerald, Ben Cline and Zoe Lofgren said that they would be sponsoring the Promoting Innovation in Blockchain Development Act in an effort to change how to handle criminal cases potentially involving blockchain developers.

The bill would clarify that Section 1960 under US federal law, on the “prohibition of illegal money transmitting businesses,” would apply only to actors with control of others’ digital assets.

At least two crypto advocacy organizations publicly supported the bill. The Blockchain Association called it a “critical step” to encourage US-based developers. The DeFi Education Fund (DEF) said the legislation would likely put a stop to prosecutions similar to those of Tornado Cash developer Roman Storm or the creators of the Samourai Wallet. 

“[The bill] makes it clear software developers who do not take custody of or control other people’s money can build neutral technology, here at home, without worrying about being criminally prosecuted as if they are a financial intermediary,” said DEF.

It’s unclear whether the bill, if signed into law, would put a stop to previously filed cases against developers. Storm was found guilty of running an unlicensed money transmitter business in August 2025, while Samourai Wallet founders Keonne Rodriguez and Will Lonergan Hill pleaded guilty to similar charges in July and were later sentenced to five and four years in prison, respectively.

Related: US ‘crypto capital’ claim tested by developer prosecutions

As of Thursday, Storm had yet to be sentenced or face a possible retrial for two other charges.

US Senate to potentially address blockchain bill

Lawmakers in the US Senate have already pitched their own bill for developer protection. In January, Senators Cynthia Lummis and Ron Wyden introduced the Blockchain Regulatory Certainty Act, to clarify that developers writing code or maintaining networks don’t meet the requirements for being criminally liable as an unlicensed money transmitter.

In the meantime, the Senate has been considering how to move forward with a comprehensive digital asset market structure bill sent from the House in July 2025.

The CLARITY Act passed the Senate Agriculture Committee in January, but has yet to be addressed with a markup in the Senate Banking Committee. It’s unclear whether the final bill potentially passed by the full chamber could address developer protections, which face pushback from some lawmakers.

Magazine: Clarity Act risks repeat of Europe’s mistakes, crypto lawyer warns