Bitcoin Market Swings: Analysts Debate Crash, Rebound, and the New Financial Frontier

Bitcoin is trading near $68,000 in late February 2026, roughly half its October 2025 all-time high of $126,000. The 50% drawdown has carved a fault line through the analyst community. On one side, Bloomberg Intelligence strategist Mike McGlone warns the pain is far from over, targeting $28,000 as a plausible floor. On the other, BitMEX co-founder Arthur Hayes argues the crash is merely a precursor to an AI-driven credit crisis that will force the Federal Reserve into emergency intervention — ultimately catapulting Bitcoin to new records. Between these poles sits a market grappling with record bearish dollar positioning, cratering ETF flows, and a structural shift in how Bitcoin correlates with traditional assets.

This article unpacks each thread in detail. We draw on Bloomberg, CoinDesk, Reuters, Bank of America, and Galaxy Digital research to examine where Bitcoin stands, where it might be heading, and what historical precedent suggests about the timeline for recovery.

The Anatomy of a 50% Crash

Bitcoin peaked at $126,000 in mid-October 2025, capping a rally fueled by spot ETF adoption, institutional inflows, and post-halving supply dynamics. By February 6, 2026, it had flash-crashed to $60,062 — a staggering 52% decline that ranks among the sharpest corrections in the asset's 17-year history.

The selloff was not a single event but a cascading sequence of failures across multiple market layers.

Macroeconomic Triggers

The catalyst came in October 2025 when President Trump threatened 100% tariffs on Chinese imports, triggering what analysts described as a "liquidity shock" across global risk assets. The announcement sent the S&P 500 tumbling 8% in a week, but Bitcoin — increasingly functioning as a high-beta proxy for risk sentiment — fell three times as hard. According to a CoinDesk report, Bloomberg's McGlone noted that Bitcoin's outsized response confirmed its role as "the canary in the speculative coal mine."

Institutional Outflows and Basis Trade Collapse

From November 2025 through January 2026, approximately $6 billion drained from U.S. spot Bitcoin ETFs in the longest redemption streak since these products launched. The culprit was not retail panic but institutional math: hedge funds had piled into the so-called basis trade — buying spot Bitcoin through ETFs while shorting Bitcoin futures to pocket the spread. At its peak in 2024, this arbitrage delivered 17% annualized returns. By early 2026, it paid less than 5%, making it uneconomical. As funds unwound, selling pressure cascaded through spot markets.

Adding to the pressure, stablecoins like Tether and USD Coin lost nearly $14 billion in total market capitalization between December 2025 and February 2026, with $7 billion vanishing in a single week — a clear signal that capital was fleeing the crypto ecosystem entirely, not simply rotating between assets.

The Bear Case: McGlone's Recession Warning and the $28,000 Target

Few analysts have been as persistently bearish as Bloomberg Intelligence senior commodity strategist Mike McGlone. In February 2026, he made headlines with a provocative call for Bitcoin to fall to $10,000 — a prediction that drew immediate backlash from market participants who called it "irresponsible" and "detached from on-chain reality."

McGlone subsequently revised his downside target to $28,000, but his underlying thesis remained unchanged. His argument rests on three pillars:

The Reverse Wealth Effect

McGlone contends that the era of easy speculation is over. Equity valuations have begun cooling, household balance sheets are tightening, and the "buy the dip" mentality that sustained crypto's rallies since 2020 has evaporated. "When people feel poorer, they stop gambling," he told Bloomberg TV. "Bitcoin is the last thing they sell, but they sell it eventually."

Price Distribution Analysis

The revised $28,000 target derives from a statistical observation: while Bitcoin's mean price since 2023 sits near $66,000, the mode — the price at which BTC has traded most frequently — clusters around $28,000. McGlone argues that in severe risk-off environments, assets revert not to their average but to their mode, the price where the most volume has historically changed hands. This makes $28,000, not $66,000, the true gravitational center of the current cycle.

Broader Market Recession Signals

In a separate analysis published February 16, McGlone warned that Bitcoin's slide may be signaling broader trouble for the U.S. economy. He highlighted the deteriorating labor market, noting that consumer credit delinquencies have risen to levels not seen since 2011 and that small business confidence indices have cratered. If the U.S. tips into recession, he argues, Bitcoin — as a risk asset with no cash flows, dividends, or earnings — will be among the hardest-hit assets in investors' portfolios.

Critics, however, point to a fundamental flaw in McGlone's framework: his analysis treats Bitcoin purely as a speculative risk asset while ignoring its evolving role in institutional portfolios, sovereign reserve discussions, and decentralized finance infrastructure.

The Bull Case: Arthur Hayes, an AI Credit Crisis, and the Fed Put

If McGlone represents the bearish extreme, BitMEX co-founder Arthur Hayes occupies the opposite pole — but his bullish conclusion travels through a surprisingly dark scenario first.

In his February 2026 essay "This Is Fine," Hayes argued that Bitcoin's crash is not a symptom of crypto weakness but an early warning system for a much larger financial crisis — one driven by artificial intelligence displacing millions of American knowledge workers.

The AI Displacement Model

Hayes models a scenario where AI displaces just 20% of America's 72.1 million knowledge workers — roughly 14.4 million people. Using average household debt levels, he estimates this would trigger approximately $557 billion in consumer credit and mortgage defaults, equivalent to about half the severity of the 2008 financial crisis. The key insight is that this disruption would not emerge gradually; corporate AI adoption has been accelerating in a step-function manner, meaning layoffs could cluster in quarters rather than years.

Bitcoin as the Global Liquidity Fire Alarm

Hayes points to Bitcoin's divergence from the Nasdaq as evidence that the market is already pricing in this credit destruction event. While the Nasdaq has remained relatively stable in 2026, Bitcoin has plunged from $126,000 to $67,000. Hayes interprets this as Bitcoin functioning as what he calls the "global fiat liquidity fire alarm" — a real-time indicator of credit stress that traditional equity markets, propped up by passive flows and corporate buybacks, are slower to reflect.

"The divergence between Bitcoin and the Nasdaq is not random noise," Hayes wrote. "It is the market telling you that a massive credit destruction event is nigh. Bitcoin smells the smoke before the fire reaches Wall Street."

The Fed Response and New All-Time Highs

The crux of Hayes' bull case is that the Federal Reserve will have no choice but to intervene with emergency liquidity measures once the AI-driven credit crisis becomes apparent — similar to its March 2023 response to regional bank failures through the Bank Term Funding Program. When that intervention comes, Hayes predicts Bitcoin will "pump decisively off its lows" as the expectation of sustained money printing drives capital back into hard assets.

However, Hayes does not sugar-coat the near-term risk. He warns Bitcoin could fall further before the Fed acts, potentially breaking below $60,000 as "political dysfunction delays the central bank's response." The path to new all-time highs, he argues, runs through deeper pain first.

The Dollar Paradox: Record Bearish Bets and a Broken Correlation

Complicating both the bull and bear cases is a structural shift in how Bitcoin relates to the U.S. dollar — a relationship that has historically been one of crypto's most reliable macro signals.

Bank of America's February 2026 Fund Manager Survey revealed that investor positioning in the U.S. dollar has fallen to its most bearish level since at least early 2012, with net exposure at a record underweight. This extreme positioning is driven by expectations that the Federal Reserve will cut rates further in 2026 as the labor market deteriorates.

The Traditional Playbook

Under normal circumstances, this would be unambiguously bullish for Bitcoin. The asset has historically exhibited a strong inverse correlation with the U.S. Dollar Index (DXY): when the greenback weakens, Bitcoin tends to rise, and vice versa. The logic is straightforward — a softer dollar makes BTC cheaper in relative terms, and dollar weakness typically coincides with looser financial conditions that benefit risk assets.

The 2025-2026 Correlation Breakdown

But since early 2025, something unprecedented has occurred. Bitcoin has developed an unusually positive correlation with the dollar, with their 90-day rolling correlation reaching 0.60 — meaning both assets have been falling in tandem rather than moving inversely. This suggests Bitcoin is no longer functioning as a dollar hedge but instead behaving as a liquidity-sensitive risk asset that suffers when global capital flows contract, regardless of which direction the dollar moves.

The implications are significant. If the traditional inverse correlation reasserts itself, record bearish dollar positioning could fuel a Bitcoin rally. But if the new positive correlation holds, a further dollar slide — especially one driven by economic weakness rather than risk-on sentiment — could drag Bitcoin lower with it. Meanwhile, the extreme crowding of bearish dollar bets creates the conditions for a sharp short squeeze: if the dollar bounces unexpectedly, forced covering could roil every correlated asset, including Ethereum and the broader crypto market.

Bitcoin ETF Flows: Reading the Institutional Tea Leaves

The spot Bitcoin ETF complex — which was supposed to be the gateway drug for institutional adoption — has become a barometer of exactly how conflicted large allocators are about crypto's near-term direction.

The numbers paint a picture of institutional ambivalence. From November 2025 through January 2026, Bitcoin ETFs shed a record $4.57 billion. But the outflows have not been uniform. BlackRock's iShares Bitcoin Trust (IBIT) continues to command nearly 50% of all RIA-allocated crypto ETF capital, with $54.12 billion in assets under management representing approximately 786,300 BTC as of early February 2026.

February's Mixed Signals

February has been a month of whiplash. On February 18, Bitcoin ETFs saw $133.3 million in daily net outflows, led by IBIT shedding $84.2 million. But just two days later, on February 20, the same products recorded $88.1 million in net inflows, with IBIT contributing $64.5 million. This bipolar flow pattern suggests institutions are not making directional bets but rather tactically rebalancing around key price levels.

A critical observation: despite a 50% price drawdown from the October highs, total BTC held across all ETFs has only declined by approximately 6%. This means institutions are broadly holding their positions even as prices halve, a behavioral signal that contrasts sharply with the 2022 bear market when Genesis, BlockFi, and other institutional vehicles collapsed entirely.

Rotation, Not Capitulation

Adding nuance, Solana spot ETFs recorded $2.4 million in net inflows during the same period when Bitcoin ETFs were bleeding. This intra-crypto rotation suggests that at least some institutional capital is not exiting the asset class but repositioning within it — a qualitatively different signal than outright capitulation.

The Great Convergence: Galaxy Digital's Structural Bull Case

While McGlone and Hayes debate the cycle, Galaxy Digital's Steve Kurz offers a longer-term framework that transcends any single price prediction. Kurz, the firm's president of asset management, describes what he calls the "great convergence" — the fusion of crypto as an asset class with crypto as a technology stack.

Beyond Speculation: Crypto as Financial Infrastructure

Kurz argues that stablecoins, tokenization, and blockchain integration with traditional finance are accelerating regardless of Bitcoin's price. The infrastructure layer — custody solutions, compliance frameworks, bank and fintech integrations — continues to advance even during drawdowns. This buildout creates a structural floor beneath the market that did not exist during the 2018 or 2022 corrections.

"The gap between subdued prices and steady institutional interest is the most bullish signal in crypto right now," Kurz told CoinDesk. He does not expect a V-shaped recovery but rather range-bound trading followed by gradual gains as institutional capital deepens and the convergence between blockchain technology and traditional finance continues.

Galaxy's Strategic Positioning

Galaxy has positioned itself across the entire crypto value chain — from crypto rails and on-chain infrastructure to public markets and asset management — betting that the convergence will create value at every layer, not just at the speculative asset level. For 2026, the firm expects consolidation, maturation, and continued infrastructure buildout, with crypto competing on a broader stage for global institutional capital.

Historical Crash Comparisons: What Past Drawdowns Tell Us

Bitcoin has endured six drawdowns exceeding 50% in its history. Each followed a distinct pattern, but together they offer a statistical framework for estimating recovery timelines.

The 2018 Crypto Winter

After the ICO-fueled mania of 2017, Bitcoin fell 84% from $19,783 to $3,200 over 12 months. The recovery took 36 months — from December 2017's peak to December 2020, when Bitcoin finally reclaimed $20,000. This was a structurally different market: no institutional custody, no regulated derivatives, and a regulatory environment that was openly hostile.

The March 2020 COVID Crash

Bitcoin plunged 52% in four days during the pandemic liquidity crisis, falling from $8,900 to $4,800. But the recovery was the fastest in crypto history: within 8 months, Bitcoin had not only recovered but surged past $19,000 to set new all-time highs. The catalyst was unprecedented fiscal and monetary stimulus, which flooded the financial system with liquidity and drove investors toward scarce assets.

The 2022 Bear Market

Bitcoin fell 77.6% from November 2021's $68,000 peak to $17,500 in November 2022, driven by Federal Reserve rate hikes, the Terra/Luna collapse, and contagion through CeFi lenders. Recovery took approximately 24 months, with Bitcoin not sustainably clearing $70,000 until early 2024.

What the Pattern Suggests for 2026

The current 50% drawdown fits the profile of a "moderate" correction rather than a full bear market wipeout. Past 40-50% corrections have recovered in 9 to 14 months, significantly faster than the 24-36 months required after 77-84% crashes. With realized price support estimated near $55,000 and no systemic CeFi collapse comparable to 2022, historical precedent suggests a 12 to 24 month recovery window — placing a potential return to $126,000 somewhere between late 2026 and early 2027.

On prediction market Polymarket, the odds of Bitcoin hitting $75,000 by the end of February have climbed to 54%, reflecting cautious optimism that the worst of the selling pressure has passed.

The Fed Factor: Rate Cuts, Recession Risks, and the Path Forward

Hovering over every Bitcoin forecast is the question of Federal Reserve policy. The central bank held rates steady at its January 2026 meeting, maintaining the federal funds rate in the 3.50%-3.75% range after a series of cuts from the 5.25%-5.50% peak in 2024.

Goldman Sachs expects the Fed to deliver two additional cuts in 2026, pushing rates toward 3.00%-3.25%. J.P. Morgan Research sees the Fed remaining on hold until a new Fed Chair is seated, after which one to two cuts are likely. Both banks acknowledge significant uncertainty around the timing and magnitude of any easing.

The key risk variable is the labor market. If unemployment continues to rise — consumer credit delinquencies are already at 2011 levels — the Fed may be forced into aggressive cuts regardless of lingering inflation concerns. This is precisely the scenario Arthur Hayes models: a labor market shock driven by AI displacement forces the Fed's hand, and the resulting liquidity injection fuels a new Bitcoin rally.

Conversely, if the economy achieves a soft landing and the Fed holds rates steady, Bitcoin may face an extended consolidation without the monetary fuel needed to power a V-shaped recovery. In this scenario, Galaxy's Kurz vision of gradual, infrastructure-driven appreciation becomes the most likely outcome.

Frequently Asked Questions

Why did Bitcoin crash 50% from its October 2025 all-time high?

Bitcoin's 50% decline from $126,000 was driven by a combination of macroeconomic shocks — including tariff threats and a weakening labor market — approximately $6 billion in Bitcoin ETF outflows, a $14 billion stablecoin exodus, and widespread hedge fund deleveraging as the once-profitable basis trade became uneconomical at sub-5% returns.

What is Mike McGlone's current Bitcoin price prediction?

Bloomberg Intelligence analyst Mike McGlone revised his downside target from $10,000 to $28,000 after significant backlash. His revised forecast is based on Bitcoin's historical price distribution, where the most frequently occurring price (the mode) since 2023 sits near $28,000, even though the average price over the current cycle is around $66,000. McGlone argues that in severe risk-off environments, prices revert to the mode rather than the mean.

Will the Federal Reserve's response push Bitcoin to new all-time highs?

Arthur Hayes argues that when the Fed intervenes with emergency liquidity measures in response to an AI-driven credit crisis — similar to its March 2023 Bank Term Funding Program — Bitcoin will rally decisively and eventually reach new record highs. However, he warns Bitcoin may fall further (potentially below $60,000) before political dynamics allow the Fed to act. The timing remains deeply uncertain.

How long does it typically take Bitcoin to recover from a 50% crash?

Historical data from Bitcoin's past 40-50% corrections shows recovery periods of 9 to 14 months. The 2020 COVID crash recovered in approximately 8 months, while the 2022 bear market (a 77% drawdown) took about 24 months. With realized price support near $55,000 and no systemic collapse, analysts estimate a 12 to 24 month recovery window for the current drawdown, potentially reaching October highs by late 2026 or early 2027.

What does Bank of America's record bearish dollar positioning mean for Bitcoin?

Bank of America's February 2026 Fund Manager Survey shows the most bearish dollar positioning since 2012. Traditionally, a weaker dollar lifts Bitcoin. However, since early 2025, Bitcoin has developed an unusual positive correlation with the dollar (0.60 on a 90-day basis), meaning a further dollar slide could actually hurt Bitcoin rather than help it. The extreme bearish positioning also creates conditions for a sharp dollar short squeeze, which could introduce additional volatility across crypto markets.

Disclaimer: This article is for informational purposes only and does not constitute financial, investment, or trading advice. Cryptocurrency markets are highly volatile and carry significant risk. Always conduct your own research and consult a qualified financial advisor before making any investment decisions. Spoted Crypto is not responsible for any financial losses resulting from the use of information presented in this article.