The market is actively searching for the cause of this recent crash, with Wintermute strategists believing that this crypto winter will thaw faster.

**February 7th** Bitcoin notched its steepest weekly drop in over three years—but for some crypto die-hards (including the biggest, most well-known bulls), the worst part is they’re not exactly sure what triggered the crash. Crypto merchant bank and trading firm Galaxy Digital’s chief, Michael Novogratz, noted multiple market theories for the selloff: investors shifting to prediction markets and other high-risk bets, broad profit-taking after a red-hot bull run, and no clear single catalyst. Here are the mainstream takes on the downturn: - **New trends diverting capital**: Prediction markets, gold, silver, AI, and meme stocks have lately competed for traders’ attention, siphoning focus from crypto. Bitcoin was once the go-to asymmetric bet; now there are AI, prediction markets, and other areas to speculate in. - **ETF/derivative impact**: Wall Street is rushing to cash in on crypto’s popularity with Bitcoin ETFs, tokenized products, and derivatives. Their surge doesn’t change Bitcoin/Ethereum’s absolute supply, but some investors argue they’ve diluted Bitcoin’s appeal as a scarce asset. Analysts say these tools let investors bet on Bitcoin’s price without buying or holding actual tokens. - **Regulatory hawkishness**: Some link the drop to Trump’s Fed chair pick, Kevin Warsh—viewed as more hawkish on rate hikes to curb inflation and more supportive of a strong dollar. Higher rates and a stronger dollar typically hurt alternative assets like gold and crypto, making them less attractive. - **CLARITY Act stall**: The proposed CLARITY Act aims to set a clear regulatory framework for crypto, but a rift between exchanges and traditional banks has slowed progress. Without it, many financial firms are hesitant to integrate digital assets. This dispute could rob crypto of a rally catalyst—unless a compromise emerges. - **Profit-taking**: Novogratz and others say the selloff was largely driven by investors locking in 2024 FOMO-era profits. That frenzy hit after Trump was elected and pledged to make the U.S. the world’s crypto capital, pushing Bitcoin, Ethereum, and other tokens higher. Some analysts think this crypto winter could thaw faster than past ones: no major company collapses or legal charges (events that sparked confidence crises in prior crashes). For believers, Friday’s rebound reinforced their faith crypto always bounces back—a key reason they stay invested. “The infrastructure is stronger, stablecoin adoption is growing, and institutional interest hasn’t disappeared—it’s just paused temporarily,” said Jasper De Maere, strategist at crypto trading firm Wintermute. “That interest can rebound quickly.”