Bitcoin Faces Correction Amid Kevin Warsh's Fed Nomination and Waning On-Chain Momentum

On February 2, 2026, the cryptocurrency market exhibited signs of a significant correction as Bitcoin's price dropped below several critical on-chain benchmarks. This downward movement has led market analysts to issue warnings regarding a potential shift into a structural bearish phase. The price decline, which saw the leading digital asset fall below the psychological $80,000 threshold, occurred simultaneously with major political developments in Washington. President Trump officially nominated Kevin Warsh to serve as the next Chair of the Federal Reserve, positioning him to succeed Jerome Powell, whose term is set to conclude in May.

Technical experts at CryptoQuant, including the analyst known as Crazzyblockk, have observed that Bitcoin's current position below the realized price of the 12-to-18-month holder cohort is a concerning signal. Historically, such a trend indicates a transition from a standard market pullback to a more enduring bear cycle. At the time of reporting, the asset was valued at approximately $77,534, representing a 1.8% decrease over a 24-hour period. Current technical analysis suggests that the market is testing vital support zones between $74,000 and $74,500. According to QCP Capital, the $74,500 level is particularly significant as it aligns with the price floors established during 2025.

The market's reaction to the nomination of Kevin Warsh has been intense, as many investors interpret his selection as a precursor to more aggressive monetary tightening. Warsh, who previously served as a member of the Federal Reserve Board of Governors from 2006 to 2011, is widely viewed as a figure who might move to shrink the central bank's balance sheet more rapidly. This nomination has disrupted the prevailing market consensus, which was previously rooted in expectations of a more dovish Fed and consistent interest rate cuts. This sudden shift in expectations led to a rapid repricing of assets and triggered over $2.5 billion in liquidations of leveraged positions.

On-chain data further highlights a broader decline in market liquidity and investor interest. CryptoQuant analyst Darkfost pointed to a structural deficit in liquidity that has emerged recently. While the total market capitalization of stablecoins had grown by an impressive $140 billion since 2023, this upward trajectory shifted toward outflows in December. Furthermore, the rate of Bitcoin accumulation has slowed markedly over the last 30 days. In sharp contrast to October, when net stablecoin inflows topped $9.7 billion, the market has seen net outflows since November, including the withdrawal of more than $4 billion from trading exchanges.

Alex Thorn, an analyst at Galaxy Digital, previously noted that roughly 46% of the total Bitcoin supply is currently in a state of unrealized loss. This high percentage could exert further downward pressure on the market, especially as the narrative of Bitcoin as a protection against inflation begins to weaken. Looking back at historical data, a break below the realized price for 12-18 month holders in 2022 was the precursor to a much larger market crash. Most analysts now agree that until the spot price can reclaim its realized price levels and accumulation momentum is restored, investors should anticipate further consolidation and a heightened risk of continued depreciation.