Weekly Crypto Market Update

Week Ending 5th February 2026

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HEADLINE

BTC US$68.9k. Extreme Fear Grips Markets Amid Broad Selloff

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IN MARKETS

Global risk assets continued their retreat this week as persistent inflation concerns and tightening monetary policy expectations weighed on sentiment across traditional and digital asset markets. Equity indices posted modest declines, with the S&P 500 down approximately 1.8% week-over-week, while Treasury yields remained elevated as markets priced in a more hawkish Federal Reserve stance through H1 2026.

Major cryptocurrencies experienced significant downward pressure during the 24-hour period ending 5th February. Bitcoin traded at US$68,930, declining 2.1% in the past day, while Ethereum showed greater weakness at US$2,019, down 4.6%. Alternative layer-one protocols faced similar headwinds, with Solana at US$83 (-4.4%) and XRP at US$1.41 (-2.6%). The broader selloff reflects deteriorating risk appetite and potential deleveraging activity across crypto derivatives markets.

Market microstructure indicators point to capitulation dynamics, with the Fear & Greed Index registering 11—firmly in "Extreme Fear" territory. This reading, among the lowest observed in the past twelve months, suggests significant bearish sentiment and potential oversold conditions. Historically, such extreme readings have preceded short-term bounces, though sustained recovery typically requires fundamental catalysts or improved macroeconomic conditions.

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FROM THE OTC DESK

The primary driver of recent price action appears to be broad-based risk-off sentiment rather than crypto-specific catalysts. While the scraped news sources indicate ongoing regulatory developments and institutional product evolution, no single headline event adequately explains the magnitude of the current selloff. Instead, the decline reflects macro positioning ahead of key economic data releases and continued uncertainty regarding central bank policy trajectories.

Price action suggests institutional participants are reducing exposure across the board, with Ethereum's outperformance to the downside (-4.6% versus BTC's -2.1%) indicating potential unwinding of ETH/BTC relative value positions. Support levels around US$67,500 for Bitcoin and US$1,950 for Ethereum are being tested, with liquidity profiles suggesting potential acceleration if these levels fail to hold.

OTC Desk Activity:

• Net selling pressure from discretionary macro funds reducing crypto allocations as part of broader risk reduction
• Increased hedging flows via put options and perpetual funding rates turning negative, indicating short positioning
• Stablecoin rotation into USDC and USDT as traders move to sidelines; limited spot accumulation at current levels

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KEY ECONOMIC CALENDAR

Thursday, 6 Feb, 21:30 SGT – US Initial Jobless Claims (Consensus 215k) Friday, 7 Feb, 21:30 SGT – US Non-Farm Payrolls (Consensus +180k) Friday, 7 Feb, 21:30 SGT – US Unemployment Rate (Consensus 4.1%) Wednesday, 12 Feb, 21:30 SGT – US Consumer Price Index (Consensus +2.8% YoY) Thursday, 13 Feb, 21:30 SGT – US Producer Price Index (Consensus +3.1% YoY) Friday, 14 Feb, 03:00 SGT – University of Michigan Consumer Sentiment (Preliminary) Wednesday, 19 Feb, 03:00 SGT – FOMC Meeting Minutes Release

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IN HEADLINES

Regulatory Clarity Remains Elusive as Policy Debates Continue

Despite expectations for clearer regulatory frameworks in 2026, the policy landscape remains fragmented across jurisdictions. US regulatory agencies continue debating classification standards for digital assets, with ongoing discussions between the SEC and CFTC regarding jurisdictional boundaries. The lack of definitive guidance has contributed to institutional caution, particularly among traditional finance participants evaluating crypto exposure. Market participants are closely monitoring Congressional committee activities, though no major legislative breakthroughs appear imminent in Q1 2026. This regulatory uncertainty compounds macro headwinds, limiting institutional capital deployment despite improved infrastructure and custody solutions.

ETF Product Evolution Continues Despite Market Weakness

The institutional product landscape continues maturing, with spot Bitcoin and Ethereum ETFs now representing significant on-chain holdings. While specific flow data was not detailed in available sources, the existence of these vehicles provides important price discovery mechanisms and liquidity channels during volatile periods. The ETF structure has fundamentally altered market dynamics compared to previous cycles, offering regulated exposure pathways for pension funds, endowments, and registered investment advisors. However, current market conditions suggest these vehicles are experiencing net outflows as broader portfolio rebalancing occurs across risk assets. The performance of crypto ETFs relative to underlying spot markets will be critical for assessing institutional conviction through this correction phase.

Asian Market Developments Signal Regional Divergence

Asian cryptocurrency markets continue demonstrating distinct characteristics from Western counterparts, with varying regulatory approaches and market structures. Hong Kong's progressive licensing regime for virtual asset service providers contrasts with more restrictive frameworks elsewhere in the region. Japanese institutional participation remains steady, supported by clear regulatory guidelines established in previous years. Korean markets show typical retail-driven volatility patterns, though specific volume data was not available in current sources. The regional divergence in regulatory clarity and market maturity creates arbitrage opportunities and complicates global institutional strategy formulation. Asian trading hours increasingly drive price discovery, particularly during periods of Western market closure.

Protocol Development and Network Upgrades Progress

Despite bearish price action, underlying protocol development continues across major blockchain networks. Ethereum's ongoing roadmap execution focuses on scalability improvements and validator economics optimization. Layer-two scaling solutions continue gaining traction, with transaction volumes and total value locked metrics showing resilience despite broader market weakness. Solana network stability has improved following previous outage concerns, though the recent 4.4% decline suggests investor skepticism persists. Cross-chain interoperability solutions and infrastructure improvements represent long-term positive developments that may support valuations once macro conditions stabilize. The disconnect between protocol fundamentals and price action highlights the current dominance of macro factors over crypto-native catalysts.

Institutional Research Focuses on Macro Correlation Dynamics

Recent institutional research emphasizes Bitcoin's evolving correlation profile with traditional risk assets. The current selloff demonstrates continued sensitivity to equity market movements and interest rate expectations, challenging narratives of crypto as an uncorrelated asset class. Analysts note that Bitcoin's correlation with the Nasdaq 100 remains elevated at approximately 0.65 over rolling 90-day periods, suggesting crypto continues trading as a risk-on asset rather than a macro hedge. This correlation structure has important implications for portfolio construction and risk management frameworks. Institutional allocators are reassessing position sizing and hedging strategies in light of these dynamics, with some reducing crypto exposure to maintain overall portfolio risk targets during periods of elevated volatility.

Derivatives Markets Signal Caution Ahead of Key Data

Options markets reflect defensive positioning, with put-call ratios elevated and implied volatility term structures showing near-term premium. Perpetual funding rates have turned negative across major exchanges, indicating short positioning and bearish sentiment among leveraged traders. Open interest in Bitcoin futures has declined approximately 12% from recent peaks, suggesting position reduction rather than aggressive directional betting. The basis between spot and futures markets has compressed, limiting cash-and-carry arbitrage opportunities that typically attract institutional flow. These derivatives market signals suggest traders are positioned for continued downside or range-bound conditions pending macro catalysts that could shift sentiment.

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Until next week, happy trading!