Market Deep Correction Followed by Technical Recovery: Bitcoin's $70,000 Battle and Altcoin Liquidity Crisis

Mid-February 2026, the cryptocurrency market is stabilizing after a deep correction. Bitcoin, after testing the $70,000 psychological level, rebounded slightly to fluctuate between $69,000 and $71,000. Ethereum fell below $2,000, hitting a new low since May 2025, while XRP retreated below $1.40. Market sentiment shifted from extreme greed at the start of the year to panic, with ETF capital outflows, tightening macro liquidity, and seasonal weakness exerting triple pressure. At this stage, a defensive allocation is recommended, focusing on the effectiveness of key support levels and waiting for clear trend reversal signals.

1. Macro Environment: Liquidity Tightening and Policy Expectations Shift

Since the beginning of 2026, the crypto market has faced severe macro headwinds. The Federal Reserve maintained a hawkish stance in January, leading to a re-pricing of interest rate expectations, and the US dollar index strengthened, exerting systemic pressure on risk assets. In early January, the Trump administration announced tariffs on countries supporting Greenland, which was later canceled, but policy uncertainty triggered risk-averse capital to withdraw from crypto markets.

More critically, spot Bitcoin ETF net outflows persisted in late January, ending two months of net capital inflow. Institutional withdrawals removed the most important marginal buy-side support, causing Bitcoin to lack momentum above $90,000, ultimately triggering chain reactions of selling. As of February 13, Bitcoin price had fallen to around $66,500, down over 26% from the early-year high.

The total global cryptocurrency market cap shrank from $2.97 trillion to $2.57 trillion, evaporating about $410 billion. This correction is close to the market lows of August 2024, indicating the market is in the mid-term bear market's deep waters.

2. Bitcoin (BTC): Key Support Level Battles and Leverage Liquidation

Price Performance: As of February 15, Bitcoin traded near $69,487, up 0.85% in 24 hours, but overall still in a downtrend. Since early January’s high above $90,000, BTC has declined approximately 23%, reaching an intraday low of $70,052 on February 5, the lowest since November 2024.

Technical Analysis: On the weekly chart, Bitcoin has broken below the critical support of the 200-week moving average (200 WMA) at about $68,000 — the first test of this long-term trend line since 2020. If the weekly close fails to hold this level, the next target points to the 100% Fibonacci extension at around $52,000. On the daily chart, RSI has fallen near 30 into oversold territory, and MACD shows a death cross, indicating downward momentum has not fully exhausted.

Market Structure: The early February crash triggered over $775 million in leverage liquidations, mostly long positions. This forced selling created a negative feedback loop of "decline-liquidation-further decline," sharply shrinking market liquidity. Currently, order book depth on exchanges is at multi-year lows, and large sell orders can easily cause violent price swings.

Capital Flows: Despite stabilization in price, ETF outflows have not reversed. Institutional caution suggests the market still needs time to rebuild confidence. Notably, the options market still holds large open interest in call options at the $100,000 strike, indicating some long-term funds are still positioning for a second-half rally.

3. Ethereum (ETH): Ecosystem Pressure and Valuation Rebuilding

Price Performance: Ethereum has suffered one of the largest declines among major assets in this correction. As of February 13, ETH traded at $1,949, down over 39% from the $3,200 level at the start of the year, hitting a new low since May 2025. On February 5, it briefly dropped to $2,068, nearly an 8% single-day decline.

Technical Pattern: ETH has broken below the 78.6% Fibonacci retracement at $2,149, which has now turned from support into strong resistance. If it cannot quickly recover above $2,150, the next target is the February 6 low of $1,747, with an extreme possibility of testing the $1,500 round number. Daily RSI and MACD both show bearish alignment, indicating weaker technical momentum than Bitcoin.

Fundamental Concerns: ETH’s decline reflects worsening macro conditions and exposes structural issues within its ecosystem. DeFi protocol TVL (Total Value Locked) continues to shrink, Layer 2 solutions divert fee revenue from the mainnet, and the narrative of ETH as an "ultrasound money" is questioned. Meanwhile, the ETH/BTC ratio has fallen to around 0.029, a multi-year low, indicating capital is shifting from Ethereum to Bitcoin or other assets.

Long-term Perspective: Despite short-term pressure, staking yields for ETH (~3-4%) still provide some price support. If the Federal Reserve shifts to rate cuts in the second half, DeFi ecosystem recovery could drive ETH out of its independent cycle. Current prices are approaching valuation lows seen in the 2024 bear market, with long-term investment value gradually emerging.

4. Altcoin Market: Liquidity Drought and Risk Release

XRP: As one of the best performers early in the year, XRP fell from a high of $2.40 to below $1.36, a decline of over 43%. Despite a rally in January driven by ETF expectations and regulatory positives, and being dubbed CNBC’s "Hottest Trading Asset of 2026," lack of sustained capital inflow caused a rapid price drop. XRP has now broken below the key support of $1.50; if it loses $1.30, further downside to around $1.25 (October 2024 flash crash low) is possible.

Solana (SOL): SOL declined from $137 at the start of the year to below $110, roughly a 20% drop. As a high-performance blockchain, Solana’s DeFi and meme coin ecosystems have cooled, but the network fundamentals remain solid. If Bitcoin stabilizes, SOL could lead a rebound with its high elasticity.

Meme Coins: Dogecoin (DOGE) found temporary support at the $0.10 level, but trading volume has shrunk, indicating reduced retail participation. New meme tokens like PEPE have experienced sporadic surges but lack sustainability, with high speculative risk.

Overall Assessment: The altcoin market is undergoing a typical "deleveraging" phase. Historically, when Bitcoin’s market share exceeds 60%, it signals the end of the altcoin season. Currently, Bitcoin’s dominance is about 54.2%, slightly rising but not at extreme levels, suggesting some structural opportunities remain in select altcoins, though picking winners is more challenging.

5. Trading Strategy: Focus on Defense, Wait for Opportunities

Position Management: Keep total exposure at a defensive level of 30%-40%, with Bitcoin allocation no less than 60%, Ethereum 20%-30%, and 10%-20% in cash or stablecoins for flexibility. Avoid leverage in high-volatility phases; current market conditions suggest leverage should not exceed 2x.

Key Price Levels to Watch:

• Bitcoin: Resistance at $73,000 (previous consolidation lower boundary) and $78,000 (downtrend resistance). Support levels at $68,000 (200 WMA) and $65,500 (78.6% Fibonacci retracement). A daily close above $73,000 can signal a short-term trend reversal.

• Ethereum: Resistance at $2,150; support at $1,750 and $1,500. Wait for daily bullish confirmation before heavy bottom-fishing.

Dollar-Cost Averaging (DCA): Long-term investors may consider deploying gradually in the $65,000-$70,000 range, with single investments not exceeding 5% of investable funds, spaced at least a week apart. For ETH, wait for clear stabilization signals before entering.

Hedging Risks: Holders of spot positions can hedge downside risk via put options or small short positions. On options markets, Bitcoin March puts with a strike of $60,000 can offer effective protection.

Hotspot Avoidance: Stay away from low-cap altcoins, high-leverage contracts, and unverified new projects during this liquidity drought. Such assets are prone to "flash crashes" or liquidity traps.

The crypto market in February 2026 is in a "bottoming" phase. In the short term, macro liquidity tightening, ETF outflows, and seasonal factors remain suppressive, with no clear technical reversal signals yet. However, from a long-term cycle perspective, current prices have largely priced in negative expectations, and the supply contraction post-Bitcoin halving will gradually manifest in the second half of the year.

Investors should remain patient and avoid impulsive decisions during lows. History shows that market bottoms often form at the most pessimistic moments, and opportunities favor long-term believers prepared in advance. Keep an eye on signals such as Federal Reserve policy shifts, spot ETF capital flows, and on-chain data (exchange balances, long-term holder ratios), which are key indicators of market turning points.

Risk Warning: Cryptocurrency markets are highly volatile. This analysis is for informational purposes only and does not constitute investment advice. Please make decisions cautiously according to your risk tolerance and do not invest more than you can afford to lose.