In brief

• Bitcoin has pulled back from a local high near $94,400 after a burst of selling triggered $440 million in liquidations, unwinding much of its early-2026 gains.
• The rally had been driven by easing year-end liquidity strains and growing expectations for Federal Reserve rate cuts, lifting the broader crypto market by about $250 billion.
• Analysts said low leverage left the move fragile, though MSCI’s decision not to exclude crypto treasury stocks reduced a potential source of institutional selling pressure.

Bitcoin’s run was cut short on Tuesday as a spike in selling pressure undid most of the new year's gains. Experts suggest the pullback is a short-term impediment to long-term recovery.

Since the start of 2026, the bellwether crypto has surged over 7%, reaching a local top at $94,420 on Tuesday, according to CoinGecko. The sustained push over the past week lifted altcoins, adding roughly $250 billion in total crypto market cap. 

The easing of 2025's year-end liquidity crunch and growing expectations for Federal Reserve rate cuts in 2026 have been the two key factors driving the rally. 

“The convergence of these two factors triggered a recovery in risk assets; Bitcoin benefited accordingly, and ETF flows shifted back to net inflows,” Tim Sun, senior researcher at HashKey Group, told Decrypt.

However, Sun noted the rally was structurally conservative, with leverage and volatility staying low, as Decrypt previously reported. 

“The market has not yet entered an 'offensive state' driven by the resonance of sentiment and high leverage,” he said. “This lack of further upward momentum is what caused Bitcoin to stall after touching $94,000.”

The whipsaw that followed, involving a sudden 3% drop from this local top to $91,544 and a subsequent recovery to $92,618, where Bitcoin is currently trading, has triggered $440 million in liquidations, with eager bulls bearing the brunt.

It follows MSCI’s announcement on Tuesday not to exclude MicroStrategy and other crypto treasury stocks from its indexes. 

The index provider noted that feedback from its consultation “confirmed institutional investor concern that some digital asset treasury companies exhibit characteristics similar to investment funds.” 

MSCI is now initiating a broader consultation on how to treat non-operating companies.

“MSCI’s decision effectively removed a significant source of potential selling pressure,” Sun noted, explaining that an exclusion would have forced passive funds to sell and created a negative narrative for institutional allocation.

What’s next?

“In the first half of the year… the short-term trend is likely to be volatile yet strengthening, driven by specific events rather than a unilateral upward move,” the HashKey analyst noted. 

Looking further ahead, he expects institutional allocations via spot ETFs to remain the primary driver, absorbing long-term capital and reducing price reliance on short-term sentiment. 

“The broader market will continue to filter out speculative projects… assets related to infrastructure, payment settlements, and real-world applications are the most likely to benefit,” Sun said.

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