Short-term Bitcoin holders are selling off at a loss — but is this capitulation or just deleveraging?

Bitcoin’s slide through the $65,000 mark and approaching $60,000 appears like a stress test that the market has postponed for a long time. The rapid decline was enough to force positions to reconfigure, while the breadth of the move shifted the discussion away from explanations based on a single factor.

Even mainstream media are describing this as Bitcoin’s worst trading week since late 2022, when the price temporarily tested the $60,000 zone before bouncing back above $65,000.

The key question now isn’t whether this is a “surrender,” but: how far have the signals typically associated with exhausted selling appeared, and what confirmations are still missing if we want a more convincing explanation than a rebound due to rebalancing.

“Surrender” is an appealing concept because it implies an ending, but markets rarely operate that way. Instead, they provide a scoreboard: how leverage is forced out, how risk measures fluctuate, whether capital flows remain stable or worsen, and on-chain data showing whether recent buyers are selling at a broad loss.

Cross-market risk-off context triggers high-beta crypto sell-off

To understand why crypto was heavily sold, we need to start with the broader market picture. Before February 5, US equities had clearly shifted into risk-off mode. The Nasdaq 100 dropped about 4.6% in just three sessions, while the S&P 500 lost around 2.6% in the same period.

Simultaneously, the VIX index surged approximately 33%. Such volatility often tightens overall market liquidity and increases leverage costs precisely when speculative positions are most fragile.

Chart showing CBOE S&P 500 Volatility Index (VIX) from February 2 to February 6, 2026 (Source: TradingView) This context is crucial because it shows crypto being traded as a high-beta risk asset, rather than a closed ecosystem. When risk appetite declines broadly, crypto sell-offs are often less about specific news and more about a flight from positions built during calmer market periods.

Price movements of Bitcoin can be easily traced back to unwinding leveraged and speculative positions, combined with the weakening of other risk assets. This is the first component of any real “deleveraging”: trading must be sufficiently crowded and liquidity thin enough that some sellers are forced to sell.

Deleveraging signals: liquidations, open contracts, and funding cooling down

The second component is clearly reflected in liquidation data—an indicator of forced selling. Early in the week, the market saw over $3.3 billion liquidated after other risky assets also declined sharply.

Chart showing cryptocurrency liquidations in February (Source: CoinGlass) While individual figures should be approached with caution, the overall pattern is noteworthy. A true deleveraging often leaves traces: open contracts shrink, funding rates cool, and liquidations cluster during the same period as a “false foot” drop.

These conditions can create a short-term trading bottom, though not necessarily a sustainable one.

ETF capital flows: a key link between traditional market sentiment and crypto demand

The third factor is ETF capital behavior—now the clearest bridge between crypto and traditional risk sentiment.

In January, Bitcoin ETFs experienced over $3 billion in net outflows, partly explaining why the downtrend persisted rather than quickly reversing when prices fell. From January 20 to February 5, ETF flows continued to be negative by about $3.5 billion, even including the $561.8 million inflow on February 2.

This pattern isn’t a final verdict by itself, but it highlights a core market issue. During a sell-off, reliable dip buyers are needed. When the main capital channel remains negative, rebounds tend to be shallow and heavily dependent on external conditions.

ETF data also helps distinguish two common “surrenders” often conflated. First is surrender via capital outflows, when investors withdraw funds after reaching their tolerance threshold or risk re-evaluation. Second is surrender by holders, when selling pressure from underlying positions is strong enough to overpower other demand sources, clearly reflected in realized losses.

In reality, these phenomena may not occur simultaneously. Capital can flow out steadily without panic, while leveraged traders are the ones forced to exit. Conversely, there can be actual capital withdrawal waves, where flows remain negative even after leverage has been wiped out.

On-chain pressure check: short-term holder SOPR and profit supply

Here, on-chain metrics are useful if used judiciously. One of the simplest short-term behavior indicators is the SOPR of short-term holders, reflecting whether coins recently held are being sold at a profit or loss.

Data shows short-term holder SOPR dropped to around 0.93 on February 5. A value below 1.0 indicates recent buyers are realizing losses, and falling into the 0.9 range often coincides with a “weak hands” phase where traders are forced out of the market.

The 30-day moving average of SOPR hovers around 0.985, indicating that at that moment, the value was below the short-term trend. This doesn’t confirm a bottom has formed but confirms the decline has moved past light profit-taking and entered a zone where many new investors must exit at a loss.

Chart showing Bitcoin short-term holder SOPR from January 6 to February 5, 2026 (Source: CryptoQuant) Another on-chain perspective is the profit supply ratio. This index dropped from about 55.26% on February 4 to nearly 52.11% on February 5. A decline of over 3 percentage points in a single day suggests a significant correction that pushed a notable portion of investors from profit to loss.

Deleveraging phases are often characterized by rapid shifts: a large group of “comfortable” investors suddenly falling into negative territory, raising the question of whether they can withstand volatility or will be forced to sell due to timing, leverage, or risk limits.

Missing confirmations for a sustainable deleveraging

In summary, the events of February 5–6 show the market experienced clear “pain.” The link between crypto and the risk-off mood in equities tightened, forced selling due to leverage unwinding intensified, persistent ETF outflows continued to erode marginal demand, and on-chain data confirmed recent buyers are selling at a loss.

However, what remains unclear—and makes this more of a thinking exercise than a neat story—is whether the market has yet to see the typical confirmations following a sustainable deleveraging.

Exhaustion of selling is a process, not a moment. In “clean” surrender events, sharp liquidation peaks are often followed by rapid declines in liquidation volume even as prices remain volatile. Open contracts stabilize after a strong contraction, funding rates stay low while prices stop making new lows, implying sellers have completed their work.

On the capital side, watch for ETF withdrawals to slow down or at least stop accelerating. Otherwise, each rebound could easily turn into a new supply opportunity.

Therefore, the rebound above $70,000 on February 6 should be viewed as an informational signal, not a conclusion. In a highly volatile environment with recent consecutive declines, rebounds can come quickly once positions are cleaned out, but they can also fade fast if underlying demand hasn’t returned.

Next phase monitoring framework: capital flows, forced selling, and risk conditions

The key point isn’t a specific price target but a framework for analyzing upcoming developments without imposing narratives on every small fluctuation.

If ETF capital outflows continue significantly, the market still faces headwinds unseen in previous cycles. If liquidation intensity diminishes and remains low while prices move sideways, it signals the forced selling phase is winding down. If short-term holder SOPR recovers toward 1.0 and profit supply stabilizes, it indicates recent buyers are no longer panic-selling. And if equities regain balance and volatility subsides, crypto could have room to recover even without a specific catalyst.

Stories of “surrender” are always tempting because they promise a clear ending. But markets rarely follow that expectation. What they provide are observable pressure signals, and last week combined many factors simultaneously: strong risk-off, deleveraging, persistent ETF outflows, and on-chain evidence of recent buyers incurring losses.

Whether this becomes a turning point depends on what happens after the violent phase, when forced selling subsides and the market must prove it can attract marginal demand again. That’s the real question to watch, as it marks the boundary between a mere rebound and the start of a new price regime.