NEW YORK, February 5, 2026, 19:04 EST
- Bitcoin dropped roughly 16%, slipping to near $61,350 in Thursday’s session, while ether slid about 15%.
- Traders blame the drop on concerns that Fed chair nominee Kevin Warsh might accelerate quantitative tightening.
- Binance Research warns that “plumbing constraints” could limit QT, highlighting repo-market stress as a major risk.
Bitcoin plunged roughly 16% on Thursday, dropping to near $61,350—its lowest point since late 2024—as the digital asset selloff intensified. Ether tumbled about 15%, slipping to approximately $1,812.
The recent drop has put U.S. monetary policy under the microscope after President Donald Trump nominated former Fed governor Kevin Warsh to take the helm of the central bank once Jerome Powell’s term ends in May, subject to Senate approval. Investors are concerned Warsh might accelerate quantitative tightening, or QT — the Fed’s process of shrinking its bond holdings — which can sap liquidity and pressure speculative trades.
Binance Research pushed back in its weekly market note, saying traders may be “overpricing” the chance of a swift QT ramp-up. The financial system, it argued, has less capacity to handle balance-sheet runoff than in previous cycles. Analyst Michael JJ highlighted “plumbing constraints” like a near-empty Fed reverse repo facility—a key tool that used to absorb cash—and heavy Treasury funding demands that restrict how fast the Fed can pull back. https://www.binance.com/en/research/analys…
About $1 billion in bitcoin positions were wiped out in the last 24 hours, according to CoinGlass, as leveraged trades got forced out amid falling prices. Data from CoinGecko showed the global crypto market has lost roughly $2 trillion since peaking in early October. “It’s clear the crypto market is now in full capitulation mode,” said Nic Puckrin, investment analyst and Coin Bureau co-founder. Meanwhile, Manuel Villegas Franceschi of Julius Baer cautioned that the market “fears a hawk” in Warsh, and a shrinking Fed balance sheet offers little support for crypto. https://www.reuters.com/business/bitcoin-s…
CryptoPotato, referencing Binance Research, noted bitcoin fell below $73,000 on Feb. 4 as investors rushed to raise cash, offloading assets they could liquidate fast. Binance’s team labeled crypto an “end-of-liquidity-chain” asset—one of the first to face cuts when margin calls hit other markets. https://cryptopotato.com/binance-research-…
Binance’s caution includes a key warning: the constraint narrative can reverse if bank reserves start to dwindle. Blockchain.News flagged Binance Research’s take that once reserves fall below the “lowest comfortable level of reserves” (LCLoR) — a critical red line for banks — lenders may pull back sharply, pushing repo rates much higher. https://blockchain.news/flashnews/quantita…
The repo market is where banks and funds borrow cash using Treasury securities as collateral, often for just one night. When repo rates surge, short-term funding quickly dries up, pushing stress far beyond the crypto sector.
Binance Research noted that the Fed’s overnight reverse repo buffer has mostly depleted, cutting the system’s wiggle room if QT presses on and reserves start shrinking. The report emphasized that reserve levels and repo rates are now the key metrics to monitor.
Ether slipped to just above $1,800, dragging other major tokens down as investors pulled back from riskier assets. Deutsche Bank analysts pointed to institutional ETF flows as a key factor behind the market’s shaky mood, keeping sentiment on edge.
The selloff has reignited a familiar narrative on crypto’s edges. Blockonomi published a press release promoting a group of AI-themed token presales, suggesting potential rate cuts under Warsh could trigger a “smart money” shift. The release made clear the content came from a third party. https://blockonomi.com/deepsnitch-ai-dsnt-…
The notion that QT is physically limited doesn’t guarantee a safety net. Should reserves edge down to the LCLoR threshold and funding pressures emerge in repo markets, risk assets could be hit by another round of forced selling — particularly as leverage is already being pulled back.
Traders are keeping an eye on bitcoin’s ability to hold steady between $60,000 and $70,000, while also monitoring short-term funding markets for signs of early strain. The tape is moving on QT expectations, repo rates, and liquidation figures.
