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|7 min ReadCrypto Chases Stability As Markets Reel From October Shock
Carter Hayes
Senior Analyst
Published
Jan 16, 2026
Crypto traders spent the week trying to regain their footing after the violent deleveraging on October 10. The move still hangs over the market, shaping every rally, every liquidation, and every risk decision. Almost no sector escaped the turbulence. AI jitters in U.S. equities added even more pressure as ETF outflows and tech losses rippled across digital assets. Even CEOs warned investors to brace for potential drawdowns. At the same time, DeFi-specific panic around Stream DeFi’s frozen withdrawals and Balancer’s major exploit deepened the selloff. A separate controversy involving a digital asset treasury firm selling crypto for “strategic reallocation” only hardened the risk-off mood.
Macro Pressure Meets Legal Uncertainty
The wider macro picture did not offer any relief. The U.S. Supreme Court began hearing arguments about President Trump’s use of tariffs under the International Emergency Economic Powers Act. Markets reacted only modestly. A ruling will take weeks and even a block on the emergency tariffs would not tie the administration’s hands. Sections 122 and 301 of the Trade Act of 1974 still give the White House and the U.S. Trade Representative broad authority to impose new tariffs or target foreign trade practices.
Many investors hoped the October correction would burn out quickly. That has not happened. Instead, markets are grinding through a long digestion phase, and the legal backdrop adds another layer of uncertainty. With Washington weighing new trade tools and global risk appetite fading, crypto remains vulnerable to every macro headline.
DeFi Suffers A Painful Week
DeFi was hit hard. Stream Finance disclosed that during the October 10 deleveraging event, an external fund manager lost roughly $93 million after levering up user deposits in an attempt to recover personal losses. The platform suspended deposits and withdrawals after its xUSD stablecoin and other tokens were dragged into cascading liquidations across multiple lending venues. Trust evaporated fast and raised serious questions about Stream’s internal controls, risk oversight, and its access policies for external contributors.
Another blow came from the Balancer v2 exploit, which drained 40 million of the stolen funds from being moved.
Our view is straightforward. AI agents will make it easier to find vulnerabilities in smart contracts, even ones long considered safe. But the same technology may eventually strengthen defenses by verifying code and detecting anomalies faster than any human auditor. Until then, the DeFi sector is likely to accelerate its shift toward stronger risk frameworks and rapid-response playbooks.
Bitcoin Tests Support As Traders Hunt For A Bottom
Bitcoin slipped below $100,000 for the first time since June, hitting a round-number level loaded with psychological and structural significance. Price is also trading under two major bull-market support bands: the 200-day simple moving average and the short-term holder cost basis. When spot sits under STH cost, newer market entrants are underwater. Historically, this makes them less eager to buy dips and more likely to sell into rallies.
BTC now floats near the 75 percent profit cost-basis percentile. Roughly 25 percent of coins sit at a loss, a zone that acted as support during the 2024 drawdown.
The cost basis distribution reinforces the stakes. A thick cluster of supply sits between 100,000. The longer price hovers below that zone, the more likely “weak hands” may trim exposure or capitulate. If the range breaks cleanly to the downside, the lighter acquisition density beneath it suggests fatter left-tail risks for dip buyers.
Options data shows the same caution. The short-dated Bull-Bear Index leans bearish, mid-term is flat, and long-dated skews slightly bullish. Investors are protecting against downside first, chasing upside later. Nobody is showing aggressive conviction.
ETF flows have not helped. The trailing seven-day sum for U.S. spot ETFs is negative. Several days of outflows hit late October into early November. A single day of inflows near $100,000 was not enough to shift the trend. As long as BTC trades below key support levels, spot ETF demand is likely to stay uneven.
DAT activity is soft as well. Outside of MicroStrategy adding small tranches in October, digital asset treasuries have not been active buyers. Some miners have even sold into the pressure. Marathon reportedly routed roughly 2,300 BTC to brokers and exchanges this week.
The path of least resistance now depends on re-acceptance. Bitcoin needs to reclaim and hold above the STH cost basis and the 200-day SMA. Spot ETFs need consistent inflows. Short-dated options positioning needs to drift toward neutral or positive. If those align while BTC trades inside the 105,000 supply band, support could rebuild. Until then, every rally will be tested.
Flows Tell A Story Of Hesitation
Coinbase CES Insights
Crypto has been cautious since the October selloff even while the S&P pushed higher. This week’s equity drop on valuation concerns pulled crypto even lower. Bitcoin’s brief slip under $100,000 echoed across funding markets. Majors still show positive funding rates in the mid single digits, but some altcoins are turning sharply negative. Volatility remains elevated and uneven.
Notable Developments Across The Industry
Institutional funding stayed active. Canaan raised 3.9 billion wave of crypto fundraising.
Regulators were busy. Trump’s crypto advisor said the Clarity Act is moving forward despite the government shutdown. Canada proposed stablecoin rules in its new budget. The European Commission floated the idea of an SEC-style supervisor overseeing both crypto and stock exchanges.
In broader news, Monad revealed its mainnet and token launch date. Stream Finance halted withdrawals after disclosing a 3 billion crypto theft network. Aave DAO approved $50 million in annual token buybacks.
Coinbase published new reports on AI documentation workflows, settled monitoring issues with the Central Bank of Ireland, and issued warnings about new scams hitting Discord and Telegram communities.
The Week Ahead
Macro data takes center stage with U.S. CPI, PPI, and retail numbers. Bitfarms reports earnings. APT has an 11.31 million token unlock scheduled. Markets will be watching how Bitcoin behaves around $100,000 and whether ETF flows begin to stabilize.
Disclaimer: This document is intended for informational and entertainment purposes only. The views expressed in this document are not, and should not be taken as, investment advice or recommendations. Recipients should do their own due diligence, taking into account their specific financial circumstances, investment objectives and risk tolerance, which are not considered here, before investing. This document is not an offer, or the solicitation of an offer, to buy or sell any of the assets mentioned.