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Why Bitcoin Crashed Over 10% in One Week

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Despite BTC’s rebound from a brief dip to $60,000, retail investor sentiment remains firmly in the “extreme fear” zone.

The crypto market went through another round of wild swings in early February after Bitcoin suddenly plunged to the low-$60,000s in just a few hours on Feb. 5, dragging the rest of the market down with it, before bouncing back to near $70,000.

As of Monday morning, the largest cryptocurrency by market cap is trading around $68,860, down 3.2% in the past 24-hours and almost 12% over the past seven days.

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Bitcoin price vs. crypto liquidations as of early February. Source: Coinglass

Data from Coinglass shows more than $2 billion in leveraged crypto positions were liquidated in that short window on Thursday, mostly made up of long bets forced to close as prices fell. That wave of automatic selling pushed the slide further than fundamentals alone would suggest.

Jeff Park, a Bitwise portfolio manager, suggested on X on Thursday evening that a lot of the indiscriminate selling seemed to come from multi-strategy hedge funds running delta-hedged trades “possibly with growth equity correlations spillovers.”

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Hello from Hong Kong

Parker White, chief investment officer at DeFi Development Corporation, wrote in an X post several hours after Park that the market crash was probably triggered by the sudden collapse of Hong Kong hedge funds, as The Defiant previously reported.

Those funds held call options in IBIT, BlackRock’s spot Bitcoin exchange-traded fund and one of the largest in the market, which saw about $10.7 billion in trading that day — nearly double its previous record — with roughly $900 million in options premiums changing hands.

White suggested that Asia-based hedge funds had run a leveraged IBIT options trade funded in yen, added more leverage after losses, got hit by funding costs and silver trades, and then the final Bitcoin move triggered the collapse.

“We know that Asian traders, particularly in China, have been deeply involved in the Silver and Gold trade. Silver was down 20% today, which was the 2nd largest 1 day move in a very long time (largest on Jan 30). We also know that the JPY carry trade has been unwinding at an increasingly rapid pace,” White wrote.

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But if the liquidation actually happened, it won’t show up in 13F filings — quarterly reports that disclose institutional holdings — until 45 days after the quarter ends, so mid‑May is the earliest the full picture could emerge.

Tanisha Katara, founder of Katara Consulting Group, echoed the sentiment, noting in commentary for The Defiant that institutional products like ETFs can accelerate both rallies and sell-offs.

She noted that U.S. spot Bitcoin ETFs, which provide streamlined access to the crypto market for large financial players, are now also net sellers, showing that having a way in doesn’t guarantee long-term commitment. Katara told The Defiant:

“The digital gold narrative has been conclusively debunked by this cycle. Like Gold is up 72% while Bitcoin is down 28% over the same period. What’s left is the infrastructure thesis: stablecoins, tokenisation, DeFi primitives, governance systems, and programmable money.”

Adding to the chaos, South Korea’s Bithumb mistakenly gave away thousands of BTC during a promotion, briefly sparking heavy local selling, though the exact amount of dumped tokens remains unclear.

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As The Defiant reported earlier, users rushed to cash out their accidentally airdropped BTC and offramp funds, briefly sending the price of Bitcoin on Bithumb almost 18% below market price across other exchanges globally.

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BTC/KRW on Bithumb amid an accidental giveaway. Source: LookOnchain

The mishap already prompted South Korea’s Financial Supervisory Service to warn it will tighten oversight and impose tougher penalties on financial firms.

Further Declines Ahead

As crypto struggles, other global risk assets are also unstable. Kyle Rodda, senior financial market analyst at Capital.com, explained in commentary shared with The Defiant that “everything is the one trade in the markets right now,” with fundamentals acting more as triggers than as main drivers of daily swings.

“The week ahead will also be dominated by U.S. data, with a batch of inflation figures and Non-Farm Payrolls data released in coming days after the latter was delayed by the partial US Government shutdown. The narrative is less pronounced given the resilience of U.S. economic activity recently, but the markets continue to try and balance signs of a sluggish labour market with sticky prices,” Rodda added.

Georgii Verbitskii, founder of crypto investment app TYMIO, told The Defiant that the sell-off also reflected long-term holders trimming exposure. He noted that Bitcoin’s inflation-hedge narrative was being questioned short-term, and predicted that the market would likely go lower:

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“At this point, I don’t see strong catalysts for the upside. Most likely, Bitcoin will spend some time ranging between $55,000 and $67,000, possibly slightly higher. Looking further out, a deeper move toward the low $40,000s can’t be ruled out over the course of the year — especially given that 2026 is shaping up to be a challenging period across global markets.”

Speaking with The Defiant, Ryan Li, CEO of Surf, an AI tool built for crypto, pointed out that sentiment among retail investors is “extremely low right now, firmly in ‘extreme fear’ territory and on par with the November lows.”

Data from the Greed & Fear Index shows that even with Bitcoin bouncing back to $70,000 over the past 24 hours, investors are indeed still stuck in “extreme fear.”

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MSTR and ASST have big upside after major declines, says B. Riley

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Michael Saylor hints at another bitcoin purchase despite market turmoil

Investment bank B. Riley initiated coverage of bitcoin treasury firms Strategy (MSTR) and Strive (ASST) with buy ratings, setting price targets of $175 and $12, respectively.

Strategy was trading at $141.82 at publication time, Strive at $8.67.

The sector was pressured after bitcoin fell more than 45% from about $126,000 in October 2025 to roughly $69,000 in early March 2026, compressing market-to-NAV premiums and slowing the equity issuance that had fueled bitcoin accumulation, the bank said in a report published Monday.

The correction has weighed on crypto-linked equities and funds. The decline in BTC prices and broader risk-asset sentiment has contributed to volatility in shares of companies exposed to digital assets, including corporate bitcoin holders and crypto-focused investment vehicles.

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Strategy remains the largest bitcoin treasury company, holding 738,731 BTC. The company, led by Executive Chairman Michael Saylor, made a massive bitcoin purchase last week, adding 17,994 bitcoin to its holdings for a total cost of $1.28 billion, or $70,946 per coin.

The company has built a “digital credit platform” combining common equity and five series of perpetual preferred shares yielding 8% to 11.5%, backed by about $2.25 billion in cash reserves, according to analyst Fedor Shabalin.

The analyst noted that Strategy’s shares trade around 1.2 times mNAV, well below a roughly 3.4x peak in 2024, presenting an attractive entry point.

mNAV is a metric used to value bitcoin treasury companies by comparing a company’s market capitalization to the value of its underlying bitcoin holdings and related assets.

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Strive, meanwhile, combines a bitcoin treasury of about 13,100 BTC with an asset-management business overseeing roughly $2.5 billion. The analyst pointed to its low leverage, a preferred share yield of about 12.5%, and a valuation discount, with the stock trading at around 0.9x modified NAV.

Preferred securities issued by the companies could attract yield-focused investors, given that the payouts exceed many traditional income alternatives, the report added.

Read more: Strategy logs record STRC equity issuance on Monday, buys estimated 1,420 bitcoin

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DeFi lending platform Aave sees $27 million liquidations after wstETH price glitch

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(AAVE liquidations over last 24 hours/ Chaos Labs)

About $27 million was liquidated on the decentralized lending platform Aave over the last 24 hours, in what some market participants say may have been caused by a temporary pricing issue involving the token wstETH.

Blockchain data flagged by risk-management firm Chaos Labs shows a spike in liquidations in the past 24 hours. Some observers believe the event may have been linked to a price update in an oracle system that Aave uses to determine the value of collateral.

(AAVE liquidations over last 24 hours/ Chaos Labs)
(AAVE liquidations over last 24 hours/ Chaos Labs)

Oracles are services that feed price data from the outside world into blockchain applications. Lending protocols like Aave rely on them to decide when a borrower’s collateral is no longer sufficient to back their loan — at which point the position can be liquidated.

While such scenarios are rare, most recently, a price-oracle setup misconfigured by DeFi lender Moonwell briefly valued Coinbase Wrapped ETH (cbETH) at about $1 instead of roughly $2,200, leaving the protocol with nearly $1.8 million in bad debt.

In Aave’s case, some say the issue may have involved wstETH, a token issued by Lido that represents staked ether. Because it accrues staking rewards over time, one wstETH is typically worth slightly more than one ETH.

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According to a post from LTV Protocol on X, at the time of the liquidations, Aave’s oracle appeared to value wstETH at roughly 1.19 ETH, while the broader market valued it closer to 1.23 ETH.

Volume remained relatively low for wstETH trading pairs, with just $10 million being traded over the past 24 hours, so it is unlikely any astute traders capitalized on the pricing mismatch before it snapped back.

Aave spokesperson didn’t reply to CoinDesk’s request for comments.

(24-hour trading volume of wstETH/ CoinMarketCap)
(24-hour trading volume of wstETH/ CoinMarketCap)

Earlier in the day, risk firm LlamaRisk briefly published a post on the AAVE forum, attributing the liquidations to an issue with Chaos Labs’ risk oracle, before deleting it.

Chaos Labs later said the underlying oracle itself reported the correct market values, and that the liquidations were instead triggered by a configuration issue in the protocol’s CAPO risk oracle, which is designed to place limits on how quickly the value of yield-bearing tokens such as wstETH can increase.

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According to Chaos Labs, the incident was caused by a mismatch between stale parameters stored in a smart contract, including a reference exchange rate and its associated timestamp. Because those values were not updated in sync, the CAPO system temporarily calculated a maximum allowed exchange rate that was lower than the real market value of wstETH.

That effectively caused the protocol to treat wstETH as about 2.85% less valuable than it actually was, pushing some borrowing positions below their safety thresholds, triggering liquidations.

Chaos Labs said the protocol incurred no bad debt, though liquidators — traders or bots that repay risky loans in exchange for discounted collateral — captured roughly 499 ETH in liquidation bonuses and profits from the temporary price discrepancy.

A Lido contributor told CoinDesk, “We are aware of the liquidations due to an incorrect wstETH to USD price reported by this oracle mechanism. The cause has nothing to do with wstETH itself, how it works or the Lido protocol which continue to operate normally.”

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Oliver Knight contributed reporting to this story.

Read more: Aave governance rift deepens as major governance group exits $26 billion DeFi protocol

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Kalshi Suffers Court Loss in Ohio over Sports Betting Lawsuit

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Law, CFTC, Court, Kalshi, Prediction Markets

The prediction markets platform argued for an injunction against Ohio authorities, claiming that federal commodities laws superseded state laws on sport event contracts.

An Ohio federal court has denied a motion filed by prediction markets platform Kalshi for a preliminary injunction against Ohio state authorities over allegations that the company was operating in violation of gambling laws.

In an order filed Monday, US District Court for the Southern District of Ohio Chief Judge Sarah Morrison denied Kalshi’s request for an injunction that would have blocked the Ohio Casino Control Commission and state attorney general from regulating contracts on the platform, specifically for sports betting.

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According to the judge, Kalshi had failed to show that the sports event contracts available on the platform were subject to the “exclusive jurisdiction” of the Commodity Futures Trading Commission (CFTC).

“Even if this Court were to find that sports-event contracts are swaps subject to the CFTC’s exclusive jurisdiction, Kalshi has not shown that the [Commodity Exchange Act, or CEA] would necessarily preempt Ohio’s sports gambling laws,” said the opinion and order, adding:

“Kalshi argues that Ohio’s sports gambling laws are field and conflict preempted by the CEA when it comes to sports-event contracts traded on its exchange […] Kalshi fails to establish that Congress intended the CEA to preempt state laws on sports gambling.”

Law, CFTC, Court, Kalshi, Prediction Markets
Source: Courtlistener

The denial pushed back against the narrative from CFTC Chair Michael Selig, who said in February that the federal regulator had “exclusive jurisdiction” over prediction markets and threatened lawsuits against any authority claiming otherwise. Kalshi and prediction platforms face lawsuits in other US states over similar allegations involving unlicensed sports betting.

“This Court does not endeavor to explain why the CFTC has not exercised its authority […] with respect to the sports-event contracts,” said the Monday filing in Ohio. “But the agency’s inaction is not proof that the sports-event contracts are regulated by or permissible under the CEA—and the Court has concluded they are not.”

Related: CFTC chair backs blockchain-based prediction markets as ‘truth machines’

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In a statement to Cointelegraph, a Kalshi spokesperson said that the company “respectfully disagree[d] with the Court’s decision, which splits from a decision from a federal court in Tennessee just a few weeks ago, and will promptly seek an appeal.”

CFTC guidance on prediction markets could be looming

Last week, Selig said that the federal regulator was working to provide guidance regarding prediction markets “in the very near future.” The CFTC chair is the sole Senate-confirmed commissioner in a panel normally consisting of five people.

Magazine: The debate over Bitcoin’s four-year cycle is over: Benjamin Cowen

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