Introduction
Bitcoin plunged to $60,000 in one of its sharpest daily drops ever before rebounding toward $65,000, sparking a fierce debate among traders over the sustainability of the recovery. On-chain data from analytics firm Santiment reveals extreme fear among retail investors, a pattern historically linked to short-term price bounces. As the market digests over $2.2 billion in long liquidations and a historic $10,000 daily drop, analysts are divided on whether this marks a fleeting dead cat bounce or the beginning of a genuine rally back toward the $70,000 level.
Key Points
- Bitcoin's drop to $60,000 marked its first-ever daily decline of more than $10,000, accompanied by over $2.2 billion in long liquidations.
- Santiment data shows a surge in bearish social media calls often appears near short-term price rebounds, suggesting retail fear may be fueling the bounce.
- The current downturn is developing faster than the 2022 bear market, with Bitcoin falling 23% in 83 days after losing its 365-day moving average versus 6% in early 2022.
A Historic Sell-Off and Fear-Driven Rebound
Bitcoin’s price action on February 6 delivered a seismic shock to the cryptocurrency market. The asset plummeted to around $60,000, a move described by The Kobeissi Letter as BTC’s first-ever daily decline exceeding $10,000. This dramatic sell-off, which capped weeks of heavy downside pressure, swiftly reversed course, with Bitcoin rebounding toward the $65,000 level. The sharp volatility triggered a significant shift in market sentiment. According to data from Santiment, social media mentions calling for Bitcoin to go “lower” or “below” shot up immediately after the drop to $60,000. The analytics firm noted this pattern often appears near short-term price rebounds, suggesting that extreme retail fear may have been the catalyst for the uptick.
The context of the sell-off is critical. As previously reported by CryptoPotato, the move wiped out gains seen following Donald Trump’s re-election and dragged the broader altcoin market sharply lower. Major cryptocurrencies like XRP fell 13% on the day, while Ethereum (ETH), Solana (SOL), and BNB also posted steep losses. Santiment posited that the sell-off may have shaken out enough retail investors to justify a quick rally back up to the $70,000s, framing the central question: “Is this nothing but a dead cat bounce?” The answer lies beneath the surface, in the complex dynamics of on-chain and derivatives data.
The Mixed Signals Beneath the Surface
While the price chart shows a rebound, a deeper analysis of market structure reveals conflicting narratives. On-chain and derivatives data paint a decidedly mixed picture. DeFi commentator Marvellous highlighted a divergence in positioning: so-called “smart money” has taken a net short position, while whales and public figures are adopting long positions. This split indicates a lack of consensus on the market’s next direction. Marvellous argued the rebound looked more like a mechanical response to massive liquidations than a sign of renewed bullish conviction, noting that aggregate open interest remained elevated and funding rates had stayed flat.
The scale of the liquidation event is a key factor. The sell-off liquidated over $2.2 billion in long positions, a forceful clearing of leveraged bets. Trader Sykodelic emphasized this point by highlighting a lopsided liquidation map, claiming the market had cleared most long positions. The data showed roughly $29 billion in shorts versus only about $100 million in longs over a one-year view, suggesting a market heavily skewed toward bearish bets following the purge. This concentration of short positions is a double-edged sword; it can provide fuel for a sharp upward move if the market turns, but it also reflects deep-seated pessimism.
Assessing the Damage and the Path Forward
The short-term bounce does little to mask the heavy technical damage inflicted on Bitcoin. At the time of the report, Bitcoin was trading around $65,000, down nearly 9% in 24 hours and more than 21% over the past seven days. Zooming out, the losses stand close to 30% across the previous month. This pushes BTC about 48% below its all-time peak from October 2025, when it surpassed the $126,000 mark. Analysts from CryptoQuant provided a sobering historical comparison, noting that the current downturn is developing faster than the 2022 bear market. Their data shows Bitcoin fell 23% within 83 days of losing its 365-day moving average, compared with only a 6% decline over the same period in early 2022.
Sentiment toward both Bitcoin and Ethereum has turned “extremely bearish,” according to Santiment. The firm noted that such conditions can coincide with short-lived relief rallies when retail fear stays elevated. This leaves traders at a crossroads. One camp sees the extreme fear, bearish sentiment, and high concentration of short positions as the perfect setup for a sustained squeeze and a move back toward $70,000. The opposing camp, however, warns that without a significant collapse in open interest and a period of prolonged sideways trading to rebuild a healthier foundation, the recent bounce may be merely mechanical—a precursor to another painful test of lower support levels. The market’s next move will determine which narrative prevails.
📎 Related coverage from: cryptopotato.com
