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Bitcoin’s price crash exposes painful truth – crypto market still dances to BTC’s tune

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Bitcoin’s price crash exposes painful truth – crypto market still dances to BTC’s tune

A decade ago, the crypto market was straightforward: When bitcoin BTC$76,540.50 surged, some 500 or more alternative cryptocurrencies followed suit; when it plunged, the entire market crashed. Portfolios spread across “diverse tokens” with unique use cases looked diversified on paper, but cratered during the bitcoin slides.

Fast forward to 2026, and very little has changed, even though the number of altcoins has increased to several thousand.

Despite institutions supposedly painting crypto as a multifaceted asset class akin to stocks, with each project boasting distinct investment appeal, the reality is grim. The market’s still a one-trick pony, following BTC up and down, offering no real diversification.

The year-to-date price action underlines that fact. Bitcoin’s price has tanked 14% to $75,000, the lowest since April last year, with almost all major and minor tokens bleeding by a similar amount, if not more.

CoinDesk has 16 indices tracking the performance of various coins with unique use cases and appeal, and nearly all are down 15% to 19% this year. Indexes tied to DeFi, smart contract and computing coins are down 20%-25%.

Here’s where it gets more alarming: Tokens tied to blockchain protocols generating real revenue have dropped alongside BTC.

According to DefiLlama, decentralized exchanges and lending and borrowing protocols like Hyperliquid, Pump, Aave, Jupiter, Aerodrome, Ligther, Base, and layer 1 blockchains like Tron are among the leading revenue generators over the past 30 days. This starkly contrasts with bitcoin, which has lately failed to hold up to its dual use case as digital gold and a payments infrastructure.

The native tokens of most of these protocols are in the red. For instance, leading Ethereum-based lending and borrowing protocol Aave’s AAVE token has dropped 26%. Hyperliquid’s HYPE stands alone, up 20% even after pulling back from $34.80 to $30, fueled by booming tokenized gold and silver trading.

The disappointing trend is the result of a popular narrative that labels large-cap tokens like bitcoin, ether and solana as safe havens (safe pockets during downturns) while calling revenue-generating projects volatile, according to some observers.

“The jokers that run this industry will keep telling you that BTC, ETH and SOL are the “safe haven majors” — meanwhile the only things that make any money in downturns are $HYPE, $PUMP, $AAVE, $AERO and some other DeFi protocols,” Jeff Dorman, chief investment officer at Arca, said on X.

He added that the crypto industry needs to borrow a page from traditional markets by building consensus around truly resilient sectors, such as DeFi platforms, and hammering their haven appeal home via exchanges, analysts, and funds.

Just as Wall Street brokers and research firms etched “consumer staples” or “investment-grade bonds” as downturn darlings, turning data into price outperformance during bear markets, crypto must anoint and promote its safe havens to make them real.

“Why do you think certain corporate bonds and stocks do better than others in downturns? Because the industry decided certain sectors were “defensive” — consumer staples, utilities, healthcare, etc,” Dorman explained.

Cash-equivalents play spoilsport

According to Markus Thielen, founder of 10x Research, part of the problem is stablecoins, digital tokens whose values are pegged to an external reference, such as the U.S. dollar. These are often seen as cash equivalents. And so, when the largest cryptocurrency slides, traders de-risk their portfolios by moving into stablecoins.

“Unlike equity markets—where capital is typically required to remain invested—the rise of stablecoins has fundamentally changed positioning in crypto. Stablecoins allow investors to shift quickly from bullish to neutral exposure, effectively serving as the defensive allocation within the crypto market,” Thielen told CoinDesk.

He added that bitcoin has always been the most dominant cryptocurrency, consistently accounting for over 50% of the total digital asset market value. This makes it harder to diversify.

“[Still] among major tokens, BNB and TRX have historically behaved more defensively, with TRX showing the strongest defensive characteristics,” he noted. TRX is down just 1% this year, outpacing BTC’s sharper drop.

Looking ahead

Institutional participation in the bitcoin market boomed after the debut of spot ETFs in the U.S. two years ago. This is evident from BTC’s share of the total crypto market, which has held above 50% since then.

This trend is unlikely to change, which means the prospects of wider crypto market decoupling from bitcoin look bleak.

“It will continue to concentrate into BTC, as the ongoing downturn helps kill off zombie projects and unprofitable businesses,” Jimmy Yang, co-founder of institutional liquidity provider Orbit Markets.

Who Struck Step Finance? Treasury Breach Nets $27 Million

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Who Struck Step Finance? Treasury Breach Nets $27 Million

Trusted Editorial content, reviewed by leading industry experts and seasoned editors. Ad Disclosure

Step Finance, a well-known Solana analytics hub, said its treasury was hit in a major breach that emptied 261,854 SOL from wallets tied to the platform.

The loss forced a sharp market reaction, and users and investors watched prices tumble as the team moved quickly to contain the damage.

Based on reports, roughly 261,854 SOL were unstaked and shifted off the platform on January 31, 2026, an amount worth around $27 million to $30 million at the time.

Breach Hits Step Finance Treasury

Investigators were called in right away. According to the platform’s public posts, security specialists and outside firms are helping to trace the funds. Some transfers were obvious on public ledgers; they could be followed from the compromised wallets to a set of addresses that began converting SOL.

Questions remain about how access was gained. It is not yet clear whether private keys were taken, a staking routine was exploited, or an internal process failed. The exact technical route is still being pieced together.

Image: CMIT Solutions

On-Chain Clues And Market Fallout

Markets reacted violently. The platform’s governance token fell hard, with prices dropping by more than 80% in minutes as panic spread. Traders sold quickly. Price books thinned.

Based on reports from on-chain trackers, multiple large unstake transactions and swaps were executed in a short time window.

Some of the moved SOL was routed to exchanges, while other amounts were split across several wallets, a pattern observers often tie to attempts at cashing out without drawing attention.

Community Anxiety And Operational Response

Step Finance announced emergency steps to shield remaining funds. Access to certain treasury functions was restricted and multisig controls were reviewed.

Accounts under direct protocol control were frozen where possible. The company said it was cooperating with authorities and sharing findings with the wider Solana community.

At the same time, public-facing channels were used to give updates as they became available, though many technical details were deliberately withheld to avoid tipping off the attacker.

SOLUSD is now trading at $105. Chart: TradingView

Recovery Steps And Unknowns

A handful of security firms are conducting forensic work on the transactions. On-chain evidence will be crucial to any effort to recover assets.

Reports note that tracing is a step; recovering funds is another. Legal and regulatory routes may be explored if identifiable intermediaries or exchanges are used to move the stolen value.

Whether user funds outside the treasury were touched has been a key concern, and the company is said to be clarifying that matter.

Featured image from Unsplash, chart from TradingView

Editorial Process for bitcoinist is centered on delivering thoroughly researched, accurate, and unbiased content. We uphold strict sourcing standards, and each page undergoes diligent review by our team of top technology experts and seasoned editors. This process ensures the integrity, relevance, and value of our content for our readers.

Nevada Court Grants Temporary Restraining Order Against Polymarket

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Nevada Court Grants Temporary Restraining Order Against Polymarket

In brief

  • A Nevada state court has issued a temporary restraining order blocking Polymarket from offering event contracts.
  • Judge Woodbury ruled the harm from evading Nevada’s “comprehensive regulatory structure” is “immediate, irreparable and not sufficiently remediable by compensatory damages.”
  • The decision adds to mounting regulatory pressure on prediction markets, following enforcement actions in Tennessee and bans in Portugal and Hungary.

A Nevada state court has issued a temporary restraining order blocking Blockratize, the entity behind Polymarket, from offering event-based contracts in the state for two weeks, finding that the platform’s activities likely violate Nevada gaming law and are not shielded by exclusive federal derivatives oversight.

In an order issued Saturday, Judge Jason Woodbury sided with the Nevada Gaming Control Board, ruling that the Commodity Exchange Act “does not vest exclusive jurisdiction over Polymarket’s contracts with the Commodity Futures Trading Commission.” 

The order blocks Polymarket from offering sports and events contracts to Nevada residents ahead of a February 11 hearing on a preliminary injunction.

If upheld, platforms like Polymarket and competitor Kalshi may be forced to obtain state-by-state gambling licenses or abandon sports-related markets entirely, a business segment representing over 80% of some platforms’ trading volumes.

The Nevada Gaming Control Board filed its civil enforcement action seeking “a declaration and injunction to stop Polymarket from offering unlicensed wagering” through its mobile app, which it considers sports wagering activity under state statutes.

“The resulting harm in evasion of Nevada’s ‘comprehensive regulatory structure’ and ‘strict licensing standards’ is immediate, irreparable, and not sufficiently remediable by compensatory damages,” the judge wrote.

The order declared that “an unlicensed participant beyond the Board’s control, such as Polymarket, obstructs the Board’s ability to fulfill its statutory functions,” including preventing wagers from individuals who could influence sporting event outcomes, blocking underage participants, and keeping unsuitable individuals from involvement.

“The balance of hardships and public interest in maintaining meaningful control over Nevada’s gaming industry for the purpose of ensuring its integrity strongly supports issuance of the temporary restraining order,” Judge Woodbury added.

“It appears that Polymarket has already ceased offering event contracts in Nevada,” Daniel Wallach, founder and principal of Wallach Legal LLC, a law firm specializing in sports wagering and gaming law, posted on X.

State-level enforcement may increase “compliance costs and legal uncertainties, potentially deterring investment and slowing the development of new features or products in the prediction market sector,” Even Alex Chandra, a partner at IGNOS Law Alliance, told Decrypt.

Chandra said the government needs to provide “clearer guidelines, potentially standardizing the industry and fostering long-term growth.”

The Nevada action follows similar enforcement moves across multiple jurisdictions. 

Both the Hungarian Supervisory Authority for Regulated Activities and the Portuguese Gaming Regulatory Authority issued bans against Polymarket this month, accusing it of illegal gambling activity. 

Earlier this month, Tennessee’s Sports Wagering Council sent cease-and-desist letters to Polymarket, Kalshi, and Crypto.com, ordering the companies to immediately pull sports-related markets accessible to Tennessee customers and refund pending wagers. 

Rep. Ritchie Torres (D-NY) and 30 House colleagues, including former House Speaker Nancy Pelosi (D-CA), recently introduced the Public Integrity in Financial Prediction Markets Act of 2026.

The bill would stop federal elected officials, political appointees, and employees of Congress and executive agencies from participating in prediction markets when they possess “material non-public information” about a market or the ability to influence its outcome.

Decrypt has reached out to Polyarket for comment.

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Vitalik Buterin Proposes Fix to Content Creator Coin Model

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Vitalik Buterin Proposes Fix to Content Creator Coin Model

Ethereum co-founder Vitalik Buterin has proposed a new creator token model that combines decentralized autonomous organizations (DAOs) with prediction market mechanics to incentivize higher-quality content creation.

Creator tokens, or content coins, are blockchain-based assets that can grant fans a slice of ownership, access rights, or even royalties for the content creator’s work, which could be in the form of posts, photos, music, or videos. 

However, in a post on X on Sunday, Buterin said existing creator token platforms notably prioritize mass content creation over quality, and that this is now being exacerbated by AI-generated content.

To combat this, Buterin said one idea would be for content creators to launch tokens and apply to curated creator DAOs, where members decide which content to accept, while speculators profit by predicting which creators or content will be admitted.

Accepted content creators could then see their coins rise in value when the DAO burns their tokens, reducing supply and increasing scarcity.

Source: Vitalik Buterin

He noted that many of the top creator coins on existing platforms like BitClout and Zora are led by celebrities or people of “very high social status,” making it challenging for creators to succeed purely on merit.

Another example, not mentioned by Buterin, is Friend.tech — a SocialFi app on Ethereum layer-2 Base that allowed creators to share content in private chatrooms accessed via tradable keys.

However, some criticized the platform because the price of the keys was driven mainly by speculation.

Friend.tech shuttered in September 2024 after activity had significantly dropped and its native token had fallen 95% from its high.