Crypto markets trimmed losses on Monday as both Ethereum and Bitcoin climbed back after a fall. BTC fell below $75k shortly and then climbed back up to $76,075, trimming today’s loss to 1.05%. ETH plunged 7% initially and then climbed back to $2,208, trimming the loss to $2.42%.
The losses are triggered by mass liquidation from automated sales of the coins as the prices fall below the stop-loss of long positions. A chain reaction triggered mass selling that is estimated to have wiped $1 billion off the crypto market.
What Led to the Crash?
Although the chain reaction from mass liquidation amplified the price drop of both coins, the looming geopolitical and legislative issues are at the core of safe investor confidence in crypto. Volatility is not news to cryptocurrencies, yet institutional investors, administrative benevolence, and legal legitimacy hopes have imparted an undeniable security and confidence in crypto.
But the ongoing legal and political deadlock in crypto has significantly eroded investor confidence. While the tensions between the U.S. and Iran led to huge inflows into traditional havens like gold and silver, Bitcoin didn’t experience the expected attention. Many investors saw this as an indicator of how Bitcoin is not holding up as the “digital gold”.
U.S. President Donald Trump is holding a summit to negotiate terms between traditional bankers and cryptocurrency-associated entities. The core of disagreement between the banking world and the crypto world is about stablecoin rewards. Bank wants a complete ban on interest-like rewards on stablecoin, while crypto exchanges term this as “limiting innovation” that reduces the revenue scope of their business model.
The CLARITY Act (Digital Asset Market Clarity Act), which brings legal clarity in the trade of cryptocurrencies and other digital assets, is still stuck in the Senate despite being passed by the House months ago. The Senate Banking Committee is still deliberating the Act as the terms currently do not align with the interests ofthe banking sector.
This legal uncertainty in the U.S. and markets’ reaction to Global chaos made Bitcoin and other tokens less attractive for investors. Cryptocurrency ETFs also experienced investors pulling out amid the ongoing chaos. These undercurrents likely caused BTC and ETH to fall beyond the Stop-loss of most investors, leading to liquidation and a chain reaction, which amplified the loss.
How Will The Legal Uncertainty Play Out?
Lawmaking around cryptocurrencies is undoubtedly seen as a beacon of crypto legitimacy and its acceptance as a mainstream asset. Endorsement by giants through massive investments and ETF products also has a similar effect. For example, BlackRock’s IBIT (Bitcoin ETF) recorded a massive inflow of $4.6B and shot up the BTC price.
The GENIUS Act of 2025 had a legitimizing effect on stablecoins. Similarly, a federal law (CLARITY) that lifts the fog of ambiguity from the crypto landscape will lead to tokens truly accepted as a mainstream asset, decreasing their volatility and increasing their appreciation. Yet, the roadblocks ahead for these legislations to come through remain daunting, which is a major undercurrent in all recent drops.
Watchlist
The White House will meet today (Feb 2, 2026) with bank executives and representatives from the crypto industry to discuss and negotiate terms in the CLARITY Act. The Trump administration has increasingly shown interest in passing the Act as a part of enabling technological innovation and U.S. domination in digital assets. The outcome of the meeting and new legal and administrative moves can significantly influence crypto prices.
