Bitcoin on Verge of Repeating 2021 Crash as Retail Investors’ Panic Selling Spreads

▲ Bitcoin (BTC)

As Bitcoin (BTC) investors lock in historically large losses comparable to the massive crash of 2021 and exit the market, a record wave of sell-offs is casting a deep shadow of panic selling across the broader digital asset market.

According to crypto-focused media outlet Cointelegraph on February 13 (local time), Bitcoin investors realized losses totaling $2.3 billion over the past week, marking one of the largest capitulation events in Bitcoin’s history. An analyst at on-chain data firm CryptoQuant assessed that the scale of the losses rivals the 2021 market crash, the 2022 Luna and FTX collapses, and the mid-2024 correction. The analyst noted that this event ranks among the top three to five largest loss events since Bitcoin data has been recorded, describing the market’s asset reallocation process as extremely painful.

Bitcoin has plunged დაახლოებით 50% from its all-time high of $126,000 recorded last October and is currently trading near $66,600. On February 6, it fell to the $60,000 level, heightening investor anxiety, before staging a modest rebound as it struggles to secure support. However, market experts point out that most of the realized losses stem from panic-driven selling by short-term holders, suggesting that the deleveraging process is still ongoing.

Nick Ruck, Director at LVRG Research, stated that the recent sell-off clearly reflects the large-scale exit of short-term investors under macroeconomic pressure and rapidly shifting sentiment. He added that the phenomenon of short-term holders accepting heavy losses and leaving the market can also serve as a necessary cleansing process to establish a market bottom. According to CryptoQuant’s analysis, Bitcoin’s realized price around $55,000 has historically been closely associated with bear market bottoms, with previous cycles showing stabilization only after declining an additional 24% to 30% below that level.

The Bitcoin market now stands at a precarious crossroads between a temporary technical rebound and a prolonged downturn. An IT Tech analyst warned that while extreme spikes in realized losses have typically been followed by rebounds, this episode could also mark the beginning of a deep and gradual decline. Although a relief rally may appear in the short term, analysts caution that it could take considerable time to fully reverse the broader downtrend.

Investors are closely watching whether Bitcoin can defend the critical psychological threshold of $55,000 while focusing on protecting their assets. With persistent supply-demand imbalances and ongoing macroeconomic uncertainty, the potential impact of additional sell-offs remains significant. Whether Bitcoin can build a new support base after this large-scale capitulation or fall into a deeper slump will likely be determined by price movements in the coming days.

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