Bitcoin’s Meltdown Isn’t Just a Crypto Event. It’s Hammering Stocks and Risk Appetite.
Feb 05, 2026, 4:09 pm EST
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Richard Farr, chief market strategist at Pivotus Partners, has a target of zero for the price of Bitcoin. (Dreamstime)
Key Points
About This Summary
- Bitcoin’s price has fallen 50% from its early October peak, dropping below $65,000 for the first time since October 2024.
- The cryptocurrency has shed over $1 trillion in value in 121 days, with an additional $700 billion lost across the broader digital-asset sector.
- The VIX volatility index has spiked more than 25% over the past five days, reflecting increased market fear amid Bitcoin’s decline and tech stock weakness.
No matter what kind of gains you’ve been sitting on, losing $8 billion a day still hurts. Tech stocks’ ugly slide makes the case.
Bitcoin, the world’s biggest cryptocurrency and the benchmark for investors’ willingness to take risks in digital assets, is up more than 70% over the past five years. The problem is that it has also shed more than $1 trillion in value over the past 121 days, casting a big shadow on other markets.
The price is down some 50% from its early October peak, putting Bitcoin
BTCUSD+0.95%below the $65,000 mark for the first time since October 2024 on Thursday.
That is the kind of market event that, when tied to a broader retreat in tech stocks, heighted volatility in precious metals, and a slump in the U.S. dollar, analysts might normally associate with a better-understood phenomena: the unwinding of the yen carry trade.
In that instance, investors who borrowed money at near zero interest rates in Japan, then put that cash to work in higher-yielding markets around the world, could be caught by a spike in yen value that forces the liquidation of those purchases.
It was feared to have started earlier this year, following both comments from Japan’s Ministry of Finance and hints from Treasury Secretary Scott Bessent of coordinated intervention to support the yen. The currency had plummeted against the dollar.
But what’s happening in Bitcoin might be just as damaging.
“While there are continued concerns about a further unwinding of the yen carry trade, we are already seeing cracks in the broad speculative bid that has fueled markets in recent months, as investors start to raise questions about the utility of cryptocurrencies,” said Dennis Follmer, chief investment officer at Waltham, Mass.-based Montis Financial.
“Bitcoin is in freefall with more pain likely to come, and that fear has spilled into broader markets, as well,” he added, noting the benchmark VIX volatility index has spiked more than 25% over the past five days.
And unlike the spectacular slide in the yen, Bitcoin’s relentless plunge won’t be affected by government intervention. Bessent made it clear this week.
“I don’t have the authority to do that, and as chair of FSOC, I don’t have that authority,” he told lawmakers when asked about the possibility of a Bitcoin bailout. The FSOC is the U.S. Financial Stability Oversight Council.
Nobel Prize-winning economist Paul Krugman notes that as Bitcoin prices have plummeted, the coin is losing its luster both as a hedge against currency debasement, as well as an alternative to gold, as it shifts from a favorite among libertarians to a political tool.
“How much of that reversal reflects Trump’s cratering approval and doubts about whether he can or will deliver the crypto-friendly policies the industry wants?,” Krugman asked in a Substack post on Thursday. “It must be part of the story. And crypto is unlikely to regain the level of political influence it had a few months ago.”
Now, markets are going to have to deal with the fallout from $1 trillion in lost Bitcoin value, as well as another $700 billion wiped out of the broader digital-asset sector. The challenge comes just as investors’ appetite for risk, and sentiment regarding tech stocks, face their sternest tests since the launch of ChatGPT in November 2022.
The Nasdaq has fallen more than 3.8% over the past month, and is pinned at the lowest levels since mid-November.
Software stocks are in freefall, underperforming the tech benchmark by the most since 2001. An index of the so-called Magnificent Seven tech stocks, which comprise around 40% of the S&P 500
SPX+1.97%’s market value, is down 4.8% since the start of the year.
How directly Bitcoin’s plunge is linked to the Nasdaq’s underwhelming performance, is difficult to gauge. That said, the latter peaked on Oct. 29, just three weeks after Bitcoin’s record high.
“Bitcoin prices have been moving in lockstep to tech stocks, so when there is fear, we see Bitcoin and tech stocks typically decline simultaneously,” said Paul Stanley, CIO at Granite Bay Wealth Management in Portsmouth, N.H.
“Investors tend to sell first and ask questions later, and Bitcoin is one of the prime asset classes to succumb to investor fear, especially given how much it has run up in recent years.”
The coin was pegged at $62,943 on Thursday afternoon, having fallen nearly 14% over 24 hours. That is another $210 billion in value evaporated, and an even deeper cut into investors’ appetite for risk.
Richard Farr, chief market strategist at Pivotus Partners, thinks he sees the bottom.
“Our Bitcoin price target is $0,” he said. “That’s not just for shock factor. It’s where the math takes us.”
Write to Martin Baccardax at martin.baccardax@barrons.com
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