- Bitcoin drops 31% from its peak.
- Short-term correction impacts other cryptocurrencies.
- Federal Reserve influences market stability.
Bitcoin’s price has plummeted approximately 31% from a peak of $126,000 in October 2025 to around $87,000-$90,000 by January 21, 2026, amidst $1.5 billion liquidations.
As a result of these market conditions, investors show increased caution, with stabilization potential hinging on critical support levels holding firm into the first half of 2026.
Bitcoin has entered a short-term correction phase, dropping approximately 31% from its October 2025 peak of $126,000 to around $87,000-$90,000. This decline is marked by significant liquidation events and aggressive spot selling.
The Federal Reserve’s restrictive liquidity environment is impacting Bitcoin’s stability. Although no major crypto leaders have commented recently, sentiments from the Fed suggest potential stabilization by Q1-Q2 2026 if key supports hold.
This correction has had immediate effects on Bitcoin and related digital assets. The market experienced a $1.5 billion liquidation, primarily from long positions, causing widespread pressure on trading positions.
Affected assets include Bitcoin and potential spillovers to Ethereum and altcoins if key support breaks. Institutional demand remains cautious due to the Federal Reserve’s decision to pause rate adjustments while reducing its balance sheet gradually.
Historically, mid-cycle corrections in bullish conditions have seen drops whose patterns align with current trends. Present market behavior is consistent with past phases, potentially extending into a 3 to 6-month period before stabilization. Presto Research’s insights provide perspective on these trends.
On-chain data shows significant pressure from whale profit-taking and aggressive selling activities. These market dynamics contribute to the potential financial and regulatory impacts, highlighting the importance of monitoring market conditions and Federal Reserve policies closely.
