Within just one week, the total cryptocurrency market capitalization collapsed by approximately $400 billion, falling from about $2.95 trillion to approximately $2.56 trillion by press time on February 2, 2026, as per data calculated by Finbold.
The erasure started late in January and is the worst digital assets experienced since the $500 billion two-day wipeout that followed Bitcoin’s (BTC) brief rise to an all-time high (ATH) close to $125,000.
BTC, for example, fell 11.53% in a week to its press time price of $77,704. Simultaneously, Bitcoin’s market cap dropped $210 billion from $1.76 trillion to $1.55 trillion.
XRP, another major and highly popular digital asset, fared even worse as it crashed 14.70% to $1.61. Still, even this XRP’s drop is dwarfed by the bloodbath affecting Ethereum (ETH), considering it sent the cryptocurrency 20.92% lower to $2,288.
Why the cryptocurrency market is crashing
The downturn appears to be driven by a relatively large variety of factors. Perhaps the most important of these has been the recent turmoil at the Federal Reserve.
President Donald Trump has been urging Chair Jerome Powell to begin lowering interest rates and, after the central banker refused, began employing increasingly hostile rhetoric while having the government initiate a criminal probe over a Fed building renovation.
Although such a move was enough to heighten instability – the relatively recent example of inflation affecting Türkiye in the wake of President Erdogan replacing his head of the central bank provides a stark warning – more recent developments have deepened uncertainty.
Indeed, reports from late January indicate Kevin Warsh is set to replace Powell in a move that has only muddied the waters further. Specifically, despite President Trump being vocal about wanting a more dovish Fed to help stimulate the economy. Warsh has previously been an adamant hawk and an opponent of the Reserve’s market-stimulating activities.
Contagion sends risk-on and risk-off assets lower
Another cause for the cryptocurrency market’s bloodbath is, simultaneously, one of its most disturbing features.
The crash has been visible across the financial markets and across multiple asset types. Notably, gold and silver managed to erase an estimated $8 trillion from their collective market cap in just three days.
Once the admittedly smaller struggles of the stock market are accounted for, it becomes evident that the ongoing bloodbath is a rare occurrence of risk-on and risk-off assets dropping simultaneously.
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