Bitcoin’s plunge in late January caused $2 billion in liquidations, broke crucial support points and left nearly half of its supply underwater, Galaxy found.
Bitcoin (BTC) attempted to recover above $78,000 after devastating losses over the weekend, but the bears took the upper hand and pushed the price back down. Alex Thorn, head of research at Galaxy Digital, said recent on-chain data and market structure indicate continued downside risk for BTC.
The researcher cited weak momentum, macroeconomic uncertainty and missing catalysts, which indicated further pain rather than relief.
Declining companies rise
In the latest research note, Thorn be until the sharp sell-off late last month, which saw Bitcoin fall 15% between January 28 and 31, with the decline accelerating over the weekend. On Saturday alone, a drop of around 10% led to one of the largest liquidation events ever. More than $2 billion in long positions were liquidated on various futures trading platforms.
During this move, BTC on Coinbase fell to $75,644, falling as much as 10% below the average cost basis of US spot Bitcoin ETFs, estimated at around $84,000. At one point, the crypto asset also briefly traded below Strategy’s reported average cost basis of $76,037 and came close to a one-year low of $74,420 set during the April 2025 “Tariff Tantrum.”
Thorn stated that 46% of Bitcoin’s circulating supply is now underwater, meaning those coins last moved up the chain at higher prices, and that Bitcoin’s January close marked four consecutive red monthly candles for the first time since 2018. According to the note, with the exception of 2017, the asset has not previously suffered a decline of around 40% from an all-time high without extending to a decline of 50% or more within three months. This would imply that prices based on the current cycle are closer to $63,000.
The Galaxy researcher also noted a significant gap in the chain’s ownership between about $82,000 and $70,000, indicating limited demand in that range and increasing the likelihood of further testing.
The analysis shows that Bitcoin’s realized price is around $56,000 and its 200-week moving average is around $58,000, levels that will gradually rise as long as spot prices remain above that.
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The note says there is little evidence of significant accumulation by whales or long-term holders, although profit-taking by long-term holders has begun to decline. Thorn outlined that potential catalysts remain difficult to identify, while narratives have also worked against Bitcoin as it has failed to trade in line with precious metals such as gold and silver during a period of increased macro and geopolitical uncertainty.
While the passage of US crypto market structure legislation known as the CLARITY Act could act as an external catalyst, Galaxy said the likelihood of passage has diminished in recent weeks and any positive impact could benefit altcoins more than Bitcoin.
These factors together increase the likelihood of Bitcoin drifting toward the lower end of the $70,000 range and potentially challenging its realized price and 200-week moving average in the $50,000 area in the coming weeks or months. Interestingly, these levels historically represent cycle bottoms and strong long-term entry points.
BTC bottom could be deeper
Crypto analyst Doctor Profit recently lowered his expectations for BTC’s cycle bottom following the price drop. He said the sell-off and the loss of key technical support levels have changed the market outlook.
As a result, he revised his expected bottom to a lower range between $54,000 and $44,000, down from his previous estimate of $50,000 to $60,000.
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