In-Depth Analysis of Bitcoin’s Potential Downtrend
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Galaxy Digital’s Perspective on Bitcoin’s Market Trends
Galaxy Digital has issued a cautionary note regarding Bitcoin’s potential for further decline. The firm highlights that on-chain analytics, weakening technical indicators, and a lack of significant catalysts suggest that BTC could experience a deeper pullback, possibly reaching the high $50,000 range in the coming weeks or months.
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In an insightful client note dated February 1, 2026, Galaxy researcher Alex Thorn presented last week’s market downturn as more than just a temporary fluctuation. Throughout the week from January 28 to January 31, Bitcoin experienced a 15% drop, with the steepest decline of 10% occurring on Saturday. This dramatic fall triggered significant liquidations, erasing over $2 billion in long positions across futures markets.
Factors Contributing to Bitcoin’s Bearish Outlook
The selloff drove Bitcoin’s value to as low as $75,644 on Coinbase, briefly falling below several critical investor cost bases. Thorn noted that Bitcoin dipped approximately 10% under the average cost basis for US spot ETFs, estimated at around $84,000, before recovering slightly. Additionally, BTC breached Strategy’s average cost basis of $76,037 and nearly reached the one-year low of $74,420 set during the April 2025 “Tariff Tantrum.”
At the time of analysis, Thorn estimated Bitcoin to be about 38% below its all-time high of $126,296 recorded on October 6, 2025. Historically, Bitcoin has not typically stabilized at a 40% drop from its peak without extending to a 50% decline within three months. A 50% drop from the October high would suggest a potential target of approximately $63,000.
Thorn’s central strategy revolves around two long-term reference points that have historically acted as gravitational forces in previous market cycles after key supports failed. Bitcoin’s loss of its 50-week moving average in November 2025 is significant, as past bull markets have often preceded a deeper correction to the 200-week moving average, currently around $58,000.
On-Chain Metrics and Market Dynamics
Meanwhile, the realized price, an on-chain measure representing the average cost basis of Bitcoin based on its last movement, hovers around $56,000. These metrics tend to rise over time if BTC trades above them.
The note also emphasized the importance of ETF positioning as an additional stress factor. US spot Bitcoin ETFs, launched in January 2024, had accumulated $54 billion in net inflows by the week ending January 30, 2026, down from a peak of $62.2 billion in early October 2025. Thorn highlighted that the previous two weeks were among the worst for ETF flows, with combined outflows of $2.8 billion, despite ETF holders largely maintaining their positions amid the broader downturn.
On-chain distribution data suggested that the $82,000–$70,000 range might not be strongly defended, increasing the likelihood of further declines. Thorn identified a significant ownership “gap” in this range, arguing that prices often seek out areas with previously established demand, especially after sharp deleveraging events.
Challenges in Bitcoin’s Market Narrative
Thorn also pointed out the deteriorating narrative backdrop for Bitcoin. He noted that catalysts are scarce, and narratives are currently unfavorable for Bitcoin. Additionally, recent market behavior shows little evidence of significant accumulation, and BTC’s failure to align with gold and silver amid macroeconomic uncertainty has undermined its status as a “debasement hedge.”
Despite these challenges, the note stopped short of predicting an inevitable breach into the $50,000 range. Thorn emphasized that long-term holder profit-taking, which was exceptionally high in 2024 and 2025, has begun to ease—a condition that historically aligns with late-stage selloffs.
The Tactical Considerations for Traders
For traders, Galaxy’s analysis poses a tactical question: whether the current ETF cost basis near $84,000 will serve as a near-term support, or if the supply gap below will act as a vacuum, drawing BTC toward the $70,000 mark. Should this level fail to hold, the more significant test will be whether the realized price and the 200-week moving average in the high $50,000s can once again act as a cycle-defined floor, a zone that long-term investors have traditionally viewed as an entry point.
At the time of writing, Bitcoin was trading at $78,301.
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