Bitcoin staged a modest recovery during Asian trading on Friday, climbing about 5% to $66,144, after touching a 16-month low of $60,187 earlier in the week. Despite the bounce, the world’s largest cryptocurrency is still on course for a third consecutive weekly decline, as risk-averse sentiment and uncertainty over U.S. monetary policy continue to weigh on digital assets.
The latest turbulence intensified after MicroStrategy, the largest corporate holder of Bitcoin, reported a dramatically wider fourth-quarter loss, raising concerns about the stability of leveraged Bitcoin investment strategies.
Investor confidence in speculative assets has been undermined by the nomination of Kevin Warsh as the next potential Chair of the U.S. Federal Reserve. Warsh is widely regarded as less supportive of aggressive monetary easing and has previously criticized large-scale asset purchase programs.
Markets interpreted the nomination as a signal that the Fed could maintain a tighter balance sheet for longer, limiting liquidity and putting pressure on growth-oriented and speculative investments such as technology stocks and cryptocurrencies.
The announcement triggered broad selling across risk assets, with Bitcoin and major altcoins following the slide in U.S. equity markets.
Bitcoin’s recent performance has again highlighted its growing correlation with technology shares. As the Nasdaq and other tech-heavy indices retreated on rate concerns, digital assets mirrored the move, reinforcing the view that crypto remains highly sensitive to macroeconomic conditions rather than acting as a safe-haven asset.
A major catalyst for this week’s volatility was the earnings report from MicroStrategy Inc. (NASDAQ: MSTR). The company disclosed a staggering $12.4 billion net loss for Q4, compared with $670.8 million a year earlier. The loss was largely attributed to the decline in the market value of its vast Bitcoin holdings.
MicroStrategy has built its corporate strategy around accumulating Bitcoin, financing purchases through debt issuance and equity sales under the leadership of executive chairman Michael Saylor, one of the most prominent advocates of the cryptocurrency.
As of February 1, MicroStrategy held 713,502 BTC at an average acquisition cost of $76,052 per coin. With Bitcoin currently trading well below that level, the company faces significant unrealized losses, fueling speculation that it could be forced to liquidate part of its holdings to meet debt obligations.
Following the earnings release, MSTR shares plunged 17%, reflecting investor anxiety over the sustainability of the firm’s Bitcoin-centric model.
Bitcoin has now lost more than 50% from its record high reached in October and has wiped out all gains recorded since the market rally that followed Donald Trump’s 2024 election victory.
What was once hailed as the beginning of a new bull cycle has turned into one of the sharpest corrections in recent years, reminding traders of the asset’s notorious volatility.
Analysts note that the current drawdown resembles previous bear phases, where macro headwinds and leverage unwinding combined to push prices far below perceived fundamental value.
The broader cryptocurrency market mirrored Bitcoin’s weakness:
Ether (ETH) rose nearly 5% in Friday’s session to $1,916 but is still down around 22% for the week.
XRP and BNB gained 7% and 3% respectively on the day, yet both remain close to 20% lower week-on-week.
Solana is heading for a 24% weekly drop, while Cardano has fallen about 13.5%.
Among memecoins, Dogecoin lost 13% this week, and $TRUMP slid roughly 23%.
These figures underscore the breadth of the selloff and the fragile state of investor sentiment across the digital-asset spectrum.
Market participants point to shrinking liquidity and excessive leverage as key drivers behind the violent price swings. Billions of dollars in leveraged positions have reportedly been liquidated over recent weeks, accelerating downward momentum each time Bitcoin breached technical support levels.
With trading volumes thinning, even moderate sell orders have had an outsized impact on prices, increasing the risk of further capitulation events.
Technical analysts are closely monitoring the $60,000 zone, which acted as a temporary floor this week. A decisive break below could open the door to deeper declines, while a sustained move above $70,000 would be needed to restore bullish momentum.
Upcoming U.S. inflation and employment reports will likely dictate the next move. Any signs that the Fed may maintain a restrictive stance could reignite selling pressure, whereas softer data might provide relief to risk assets.
The latest turmoil highlights several lessons for market participants:
Crypto remains a high-risk asset class heavily influenced by global liquidity conditions.
Corporate strategies tied to Bitcoin, such as MicroStrategy’s, can magnify both gains and losses.
Diversification and disciplined risk management are essential during periods of macro uncertainty.
While long-term believers view the correction as a potential accumulation opportunity, short-term traders face a challenging environment dominated by volatility and headline risk.
Bitcoin’s rebound from a 16-month low offers a glimmer of hope, but the cryptocurrency is far from out of the woods. Uncertainty over U.S. monetary policy, combined with MicroStrategy’s massive quarterly loss, has kept pressure on the market and pushed digital assets toward one of their worst weekly performances in years.
Whether this marks the final stage of the correction or the beginning of a deeper downturn will depend largely on macroeconomic developments and investor appetite for risk in the weeks ahead.
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