In recent months, a strong dollar has caused a significant sell-off across multiple financial markets, including crypto. On February 5, 2026, Bitcoin’s price dipped just under USD 70,000, continuing the severe value destruction seen during the first week of February, which has erased hundreds of billions of dollars from the total crypto market cap.
Why a Strong Dollar is Crushing Risk Assets
As the U.S. Dollar Index continues to rise, it is almost back to 98. The U.S. dollar surged to a two-week high, its highest level in several months, driven by a combination of the Federal Reserve’s signals, beating risk assets like tech stocks and metals, particularly. This strong dollar makes dollar-denominated assets like Bitcoin (BTC) and gold more expensive for international buyers, reducing global demand.
In addition, the U.S. FED’s ability to maintain low interest rates has diminished because, following Kevin Warsh’s nomination as the next Fed Chairman, dampened hopes for aggressive rate cuts, increasing the opportunity cost of holding non-yielding assets. This environment drains liquidity from speculative markets, hitting tech stocks, precious metals, and crypto assets simultaneously.
Bitcoin’s Failed “Safe Investment” Test
This correlated decline is a severe test of Bitcoin’s “digital gold” narrative. As Bitcoin plunges and equities follow the trend, each undergone correlated price declines, and Bitcoin has continued to act like a higher beta risk asset as opposed to a non-correlated safer investment. Analysts believe that the current pressures in these markets are being driven by broader cross-asset stress and are not solely related to crypto.
On the other hand, investor sentiment has fallen to a level of “extreme fear,” and the recent choppy inflows into U.S. spot Bitcoin ETFs are not providing sustained support to BTC’s price. The failure to hold the USD 72,000 support level now opens the door to further potential declines in the coming days.
