A brutal wave of liquidations has slashed crypto’s market cap by roughly half since October 2025: is the bottom really in?
Fire Hustle, a crypto market analyst, is now pushing back against the “crypto is dead” headlines after one of the sharpest draw-downs in the asset class’s history, arguing that last week’s crash looks more like a leveraged liquidation event than a fundamental breakdown of the space.
In a detailed market breakdown, she notes that total crypto market capitalization has been cut in half since October 2025, sliding from around $4 trillion, while Bitcoin plunged from an all-time high near $126,000 to briefly touch the $50,000 range. Altcoins, she says, “suffered the most,” with some enduring months of draw-downs before this latest leg lower.
Leveraged ETF Options & The “Negative Gamma” Cascade
The analyst singles out derivatives as a likely trigger. She points to a late-January move by the SEC and Nasdaq to quietly remove position limits on Bitcoin and Ethereum ETF options, skipping the usual review process and opening the door to “absolutely massive leveraged positions” in products like BlackRock’s iShares Bitcoin Trust (IBIT).
IBIT then logged a record trading day, with over $10 billion in volume and about $900 million in options premiums.
According to Fire Hustle, one or more large funds appear to have become overextended on these options and “couldn’t handle Bitcoin’s price falling this far down,” setting off a blowup that forced dealers to dump spot exposure in a classic negative gamma spiral. Nearly $1 billion in leveraged positions were liquidated in just a few hours.
She compares the resulting chain reaction to a highway pileup: one big position loses control, then “suddenly you’ve got 20 vehicles involved” as forced selling pushes prices lower, triggers more liquidations, and amplifies fear across the market.
Macro Stress, ETF Outflows & Signs Of a Potential Capitulation Low
The crash did not occur in a vacuum.
The host notes broader “risk-off” behavior across markets: tech stocks sliding, gold and silver snapping back after a strong run, and geopolitical headlines crowding out crypto coverage in his feed. In that environment, he argues, Bitcoin still trades like a risk asset, especially when spot Bitcoin ETFs are seeing “billions in outflows” and some long-term holders are taking profits.
Yet she emphasizes the violence of the snapback: after Bitcoin dropped roughly 16% on February 5, the bounce from the low $60,000s was “pretty strong,” hinting at heavy buy interest.
Several indicators, she says, now resemble mid-2020 conditions.
The ISM manufacturing index has moved back above 50, signaling expansion after a long contraction, while Bitcoin’s weekly and monthly RSI readings have fallen to levels last seen at major bear market bottoms in 2014, 2018 and 2022. Daily RSI briefly mirrored March 2020, just before the last explosive cycle.
She also highlights shifting dominance dynamics: Bitcoin dominance has rolled over from a peak in a way that echoes late 2019-early 2020, while altcoin dominance is beginning to rise as Bitcoin shows weakness — a pattern that historically preceded alt seasons.
Unlike 2020, the U.S. Federal Reserve is not flooding markets with liquidity.
But the analyst points to a different tailwind: deeper regulatory clarity, growing stablecoin adoption, institutional treasuries holding crypto, and a pipeline of additional spot ETFs awaiting approval.
In her view, these trends mean the selloff is “a mechanical event” — driven by leverage, ETF flows and macro fear — rather than a reversal of crypto’s structural trajectory.
For investors, the takeaway is uncomfortable but familiar: forced deleveraging can create sharp, temporary dislocations.
If support in the low $60,000s holds and macro conditions don’t deteriorate further, this episode may end up being remembered less as the death of the cycle and more as a capitulation that flushed out the riskiest positions.
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