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Bitcoin, Ethereum, and XRP fell hard last week as a broad crypto sell-off ripped through the market. Total crypto value slid to $2.66T. At the moment, it is down by over -3% in the last 24 hours, erasing roughly $400Bn in less than a week.
Despite the slump, traders are closely monitoring some of the best cryptos to buy. If Bitcoin, for example, fails to find support at local support levels, the resulting sell-off may inflict more pain on some of the top Solana meme coins.
Considering this possibility, it is only right for traders and investors to ask clarifying questions: Why is crypto down? Is the crypto boom of 2024-2025 over? Time to brace for hard times in Q1 2026? As it stands, when uncertainty hits global markets, crypto behaves like a risk asset. Money moves out first, and it does so fast, negatively impacting sentiment and pushing the Fear and Greed Index below 20.
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Why is Crypto Down?
The current sell-off stems from multiple factors. Sentiment is already in the gutter, and until this state of affairs improves, even the best cryptos to buy will struggle for momentum. This poor sentiment is mostly due to renewed anxiety around US interest rates. News tied to a new Federal Reserve leadership appointment raised fears that rates will stay higher for longer.
Last week, Kevin Warsh was revealed as the nominee to lead the central bank when Jerome Powell’s term ends in May. The problem is: Warsh is a monetary hawk who prefers keeping interest rates high in order to curb inflation. When rates are high, the cheap money crypto thrives on evaporates. Therefore, having a Fed chair who prefers high rates explains why the market reverted to a “risk off” posture, forcing investors to pull capital out of volatile assets, including Solana, Bitcoin, and Ethereum.
If you want a guess as to what Kevin Warsh — who throughout the Obama years was a devout hawk — told the President to win the job of Fed Chair, I think this clip might give you a sense of it. (This is from late October.) pic.twitter.com/bThKqh4azR
— Justin Wolfers (@JustinWolfers) January 30, 2026
What’s more? The crypto market is reacting to a disruptive partial government shutdown that began in late January 2026. Often, every political gridlock leads to institutional caution as seen in Q4 2025. Then, in a quarter where crypto prices tend to historically rally, Bitcoin and some of the best cryptos to buy struggled, closing in the red. The caution is expected: When the US, which is deemed safe, begins to show cracks, institutions choose safety first by liquidating speculative positions and stacking up cash.
This explains why crypto fell alongside stocks. Bitcoin and Ethereum now move closely with US equities, which you can also see in why crypto is down today as macro fear hits.
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What’s Next? Will Crypto Recover?
Over the last five days, over $2Bn in leveraged positions have been liquidated. When prices fall too fast, as happened last week, exchanges force-sell positions to cover losses. That automatic selling adds fuel to the fire. XRP felt this pressure hard, with forced exits piling up fast. You can see the pattern in how XRP liquidations surge during market stress.
(Source: Coinglass)
Ethereum also dropped more than most large coins. Reports of large unrealized losses among institutional holders shook confidence. As the second most valuable coin and the backbone of crypto apps, when ETH stumbles, it hurts trust across the market. That’s why altcoins followed it lower. Ethereum ETF flows added pressure, too. Selling tied to funds tracking ETH made moves sharper, similar to recent Ethereum ETF outflows during past dips.
Presently, the Fear and Greed Index is below 20. That sits deep in “Extreme Fear” territory. This measures emotion, not value. Extreme fear often shows panic selling. It does not predict the bottom. It tells you emotions are running the market. That matters because emotional markets swing harder both ways. Technical indicators now show crypto is oversold. Last week, crypto prices dropped fast. Historically, that sets the stage for bounces, but timing them is hard.
Technically, Bitcoin should hold above $77,000, and if it doesn’t, $74,000 should hold. If the BTC USD price drops below $74,000 to the $70,000 level, then the downside will undoubtedly accelerate as panic sets in among traders and investors. Conversely, if crypto prices hold and the Bitcoin price bounces above $80,000, the selling pressure will cool.
On X, one trader says if Bitcoin accelerates and breaks $100,000, the crypto market will witness one of the biggest “short squeezes” ever.
GM. If Bitcoin reclaims the $100,000 level, we could see the biggest short squeeze ever. Almost no one is betting on Bitcoin to rise right now. pic.twitter.com/NcaZJWEpCh
— sunnydecree (@sunnydecree) February 2, 2026
Another quipped that the next target is $500,000.
#Bitcoin: $1 → $32 → $2 → $100,000 → $77,000
I was there for all of it.
You know what changed? Nothing.
Same FUD. Same panic. Same people selling the bottom.
See you at $500k.
— Davinci Jeremie (@Davincij15) February 1, 2026
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