The week: record market liquidations and Ethereum’s inflation returns

The crypto market saw the largest liquidation on record, Ethereum’s supply returned to pre-Merge levels, the US sketched out the contours of future regulation, and more from the week.

The market suffered the largest liquidation on record

On 3 February, after Donald Trump floated aggressive tariffs on imports to the United States, crypto’s market capitalisation fell 11.7% to $3.16 trillion.

On Binance, bitcoin fell to as low as $91,281.

Altcoins reacted more sharply—many leading cryptocurrencies lost over 20%.

The sell-off triggered the largest liquidation in crypto’s history—about $2.27bn in 24 hours, according to CoinGlass. Bybit CEO Ben Zhou argued the service significantly understated the figure because of limitations in exchanges’ API, putting the real total at $8–10bn.

Overnight on 4 February, bitcoin rebounded to $100,000. The catalyst was reporting that Washington had paused for 30 days the imposition of 25% tariffs on goods from Mexico and Canada after talks between the countries’ leaders and US President Donald Trump.

The bounce proved fleeting amid uncertainty over potential trade wars. On-chain activity on the network of digital gold sank to a yearly low, and CryptoQuant concluded that the asset’s fair value lies between $48,000 and $95,000.

At the time of writing, bitcoin is range-bound around $96,000.

Over the past seven days, the bellwether slipped nearly 3%. Several large altcoins fell more. Cardano (ADA) dropped 21%, while Ethereum (ETH) and XRP declined 14.4%.

The total crypto market cap stands at $3.28 trillion; bitcoin’s dominance exceeds 58%, and Ethereum’s is 9.7%.

David Sacks sets priorities for the White House crypto group; Hester Peirce outlines the SEC’s counterpart

One early task for the working group on digital-asset markets is to assess creating a national bitcoin reserve. This was confirmed by Donald Trump’s special adviser on AI and crypto—and the head of the body—David Sacks.

Building a strategic reserve of the first cryptocurrency was among the president’s campaign pledges.

Sacks called the asset “an excellent store of value”.

“It is the strongest digital currency. […] No one has broken its security,” he explained.

Stablecoin legislation will also be in focus. Within six months, the body is to draw up proposals for the regulation of digital assets more broadly.

The SEC’s cryptocurrency task force led by Hester Peirce intends first to:

• determine which assets are not securities;
• create a clear process for registering new tokens.

Specialists will also review lawsuits against crypto firms launched under former SEC chair Gary Gensler.

Against this backdrop, the regulator is shrinking the division that handled industry enforcement. It had more than 50 staff; some will be reassigned elsewhere in the agency.

Ethereum’s supply returns to pre-Merge levels

Ethereum’s supply has risen to levels last seen in September 2022, before The Merge.

The metric has surpassed its pre-Merge readings.

Experts noted that inflation in the second-largest cryptocurrency began to pick up a month after the Dencun hard fork, which took place in April 2024.

Scheduled for March, the Pectra upgrade could further accelerate Ethereum’s supply growth, analysts forecast. They pointed to users and liquidity migrating to Solana amid the proliferation of L2 networks and hype around meme coins.

On 4 February, most Ethereum validators backed raising the gas limit—the maximum that can be used for transactions in a single block—to improve the network’s scalability.

Community bristles at TON’s growing “monopoly” inside Telegram

Telegram’s developers have required all third-party crypto wallets to use only the TON Connect protocol to connect to The Open Network.

The new requirement is part of an exclusive agreement under which all mini-apps in the messenger’s ecosystem may use only the TON blockchain.

Third-party developers must implement the changes by 21 February, including contract migrations and asset bridging. After that, all protocols except TON Connect will no longer be supported.

Some third-party developers objected to both the exclusivity and the implementation timeline.

What to talk about with friends?

• Experts flagged three risks that could see bitcoin lose the $90,000 level.
• A Coinbase executive suggested Kraken might reveal Satoshi Nakamoto’s identity.
• Arthur Hayes predicted bitcoin could drop to $75,000 amid disappointment with Trump.
• In Ukraine, a crypto project “with an annual yield of 1045%” was added to a list of unreliable ventures.

Russia’s tax service adds a section for bitcoin miners

The Federal Tax Service (FTS) of Russia has added a section for miners to users’ personal accounts, enabling them to report the receipt of digital currency.

Under FTS rules, reports must be filed in the month following receipt of the cryptocurrency, but no later than the 20th.

Mining and the disposal of assets are exempt from VAT. Services of an authorised organisation that facilitates transactions with digital currency within an experimental legal regime are also exempt.

Deribit to halt service for Russian clients to comply with sanctions

The crypto options platform Deribit announced it will stop serving Russian citizens and residents, with limited exceptions.

The platform will block access for:

• individuals living in or resident in Russia who do not hold a passport from the European Economic Area (EEA) or Switzerland;
• all legal entities registered in Russia, without exception.

From 17 February, accounts in these categories will be set to reduce-only, allowing users to close existing positions only.

Also on ForkLog:

• MicroStrategy rebranded and posted a net loss of $670.8m.
• Analysts see further downside for crypto amid political uncertainty.
• Anthony Scaramucci: Trump’s promises may be a mirage.
• Media: the Durov case will not reach court before 2026.

What else to read?

The first issue of ForkLog’s revamped monthly digest—FLMonthly—has been published.

The new piece examines the risks and opportunities of the business of providing liquidity in DeFi.

Our regular digest rounds up the week’s main events in cybersecurity.