BTC dominance nears 4-year high: 5 things to know in Bitcoin this week

Bitcoin starts February down heavily as a wave of fear infects crypto and risk assets thanks to a new US trade war.

• BTC/USD nears $90,000 as a mass crypto sell-off sees altcoin “capitulation wicks” and billions of dollars in liquidations.

• The US trade war wreaks havoc on stock market futures as traders brace for what US President Donald Trump agrees will be a “little pain.”

• The trade war’s impact on the Federal Reserve’s plan for inflation is already on the radar.

• Bitcoin (BTC) short-term holders see a fresh test of their aggregate cost basis.

• Sentiment collapses as “fear” returns to crypto — the Crypto Fear & Greed Index is down over 30 points in three days.

Altcoin “capitulation” boosts Bitcoin dominance

A sea of red greets crypto traders at the start of February — traditionally one of Bitcoin’s best-performing months.

Data from Cointelegraph Markets Pro and TradingView confirms as much as $6,000 of downside on BTC/USD since the weekly close.

The pair hit its lowest levels since Jan. 13, returning to the bottom of a trading range in place since November.

Before the daily losses mounted, trader CrypNuevo predicted the downside based on order book liquidity and the market’s desire to fill the “wick” formed by the January lows.

“In terms of liquidations, we can say that the liquidity is to the downside. $94.7k is the main liquidation level so it’s very possible that price pushes all the way there,” he wrote in a thread on X. 

“Then, once we get there, the wick at $91k can act as a magnet. Careful trying to catch a falling knife.”

The latest data from monitoring resource CoinGlass puts 24-hour cross-crypto liquidations at a giant $2.23 billion.

“Wild times in this range,” fellow trader Roman continued. 

“I won't lie i didn't expect to see lower 90s again but here we are. Bull divs, Stoch Reset, & sitting in range low support area. Would make sense to see us bounce here soon.”

Roman joined those expressing hope that Bitcoin could find its footing and rebound without violating the range.

“Can’t emphasize enough how bullish this is for $BTC in this context,” trader Credible Crypto wrote in an update for X followers after BTC/USD halted its downturn at familiar support.

“Loving the strength on the King right now. Will continue to monitor this and look for signs of the next impulse beginning.”

Looking at altcoins, trader and analyst Skew identified “capitulation wicks” as many tokens collapsed by 20% or more.

The week ahead, he forecast, will be “very interesting.”

Bitcoin’s share of the total crypto market cap briefly spiked to 64.3 on Feb. 3, marking its highest level in nearly four years. 

Trade war angst floods crypto, stocks

There is one topic on every crypto market participant’s mind this week: the snap trade war between the US and its neighbors, as well as China and perhaps later the EU.

President Donald Trump has followed through on his vow to impose 25% tariffs on Canada and Mexico, a move which he said would ultimately be worthwhile.

“We may have short term some little pain, and people understand that. But long term, the United States has been ripped off by virtually every country in the world,” he told reporters on Feb. 2, quoted by Reuters and others.

Risk assets were seemingly wholly unprepared for such an eventuality. Stocks felt the pain immediately, with futures diving — the S&P 500 lost $1 trillion in value after the futures open.

Reacting, The Kobeissi Letter noted that markets had given up the relief bounce that followed another dip a week ago, this coming courtesy of an AI threat from China’s DeepSeek.

“1 week ago, markets collapsed on DeepSeek fears on Sunday night. The gap down was largely bought into the open on Monday,” it wrote in part of ongoing X analysis. 

“Today, markets are trading back at those lows. Will the gap down hold this time?”

In a grim signal for traders, crypto markets fell far harder, with many major altcoins shedding 20% or more over 24 hours.

Bitcoin managed to stem its losses, returning to the bottom of its multimonth trading range near $90,000.

“Ethereum just fell -37% in 60 hours since the trade war headlines mid-day on Friday,” Kobeissi noted, calling the drop “insane.”

The combined crypto market cap also fell by up to 21% over three days, equal to $760 billion.

Only the US dollar benefitted from the rout, with the US Dollar Index (DXY) spiking to nearly 110, its highest level since Jan. 13. 

Beyond that, finance and trading resource Barchart noted, lies an area not seen since November 2022 — the pit of the crypto bear market.

Macro fallout extends to Fed

The burgeoning trade war is upending what was due to be a relatively quiet week for US macroeconomic data.

Various manufacturing prints combine with employment numbers as the main sources of potential risk-asset volatility. The week will also see 20% of S&P 500 firms report earnings. 

On top of this, various Federal Reserve officials will speak, potentially shedding light on the future course of interest rate policy.

“This week is all about earnings and the labor market,” trading resource The Kobeissi Letter summarized.

Market odds of the Fed returning to a more dovish stance at its next meeting in March remain low. The latest estimates from CME Group’s FedWatch Tool show that chances of a minimal 0.25% rate cut at barely 15%.

Taking a longer-term view, Arthur Hayes, former CEO of crypto exchange BitMEX, warned that the outlook may get worse before it gets better. The pivot point, he said, would be the US unleashing liquidity via quantitative easing.

“The beatings shall continue until moral improves,” he predicted on X. 

“The pain stops when a TradFi outfit is on the verge of bankruptcy. Then the Fed reluctantly joins team Trump and prints dat money. And then you better be ready to buy crypto like you have never bought before.”

Last week, Fed Chair Jerome Powell, already under pressure from the Trump administration to cut rates, said that this could be done without waiting for inflation to return to the Fed’s 2% target.

Bitcoin speculators grilled in key support test

Amid the panic, market participants are considering where Bitcoin may put in a local bottom.

Of particular interest, as ever during bull market reversals, is the aggregate cost basis of Bitcoin speculators.

Known as short-term holders (STHs), these entities have hodled a given unit of BTC for up to 155 days, and are more sensitive to short-term volatility. 

Their cost basis frequently functions as support during bull markets and resistance during bear markets — and currently, the phenomenon is clearly visible.

Data from onchain analytics platform Glassnode puts the average cost basis, also known as realized price, for the STH cohort at just under $92,000 as of Feb. 2, the latest date for which data was available at the time of writing.

“Bitcoin's Short-Term Holder (STH) cost-basis model is crucial for gauging sentiment among new investors,” Glassnode stated in an X thread last month.

Glassnode warned that if BTC price were to flip the STH cost basis back to resistance, this could:

“signal waning sentiment among new investors - which is often a turning point in market trends.”

Crypto sentiment nosedives

Crypto market sentiment is predictably weak amid an atmosphere of uncertainty across risk assets.

Related: Bitcoin seals first $100K+ monthly close with BTC price due ‘big move’

This is reflected in the Fear & Greed Index for both crypto and traditional markets, with the former diving 32 points in three days. In so doing, the Index reached its lowest level since October.

“Big declines in sentiment & positioning across the board,” Andre Dragosch, European head of research at asset management firm Bitwise, wrote in an X response. 

“Good time to start adding exposure in Bitcoin imo.”

The Fear & Greed Index’s stock market equivalent stood two points higher than crypto at the time of writing at 46/100, this already characterized as an overall mood of “fear” prior to the Wall Street open.

Jesse Cohen, global markets analyst at Investing.com, noted how quickly the atmosphere can change.

“Remember folks, market sentiment can turn on a dime — one Trump tweet is all it takes,” he told X followers.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.