One of the most dramatic stories of early February 2026 has been the "cascading liquidation event" that saw over $2.2 billion in long positions wiped out in 24 hours. This massive deleveraging occurred as Bitcoin broke below the key 78.6% Fibonacci retracement level. When prices hit these "air pockets," automated sell orders trigger a chain reaction, forcing prices down much faster than fundamental data would suggest. This "leverage washout" is a brutal but necessary part of the crypto market cycle. It removes the excess "froth" and prepares the ground for a more sustainable move upward. Today’s 9% bounce across major coins is a sign that the market has cleared the majority of these forced sellers. However, traders are cautioned that volatility will likely remain elevated as the market searches for a new support level amidst the ongoing macro-economic jitters.
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