The major reasons for the significant drop in Bitcoin in February 2025 are as follows:

- Regulatory factors: The U.S. SEC delayed the approval of multiple spot ETFs, negatively impacting market expectations and causing investor concerns about market prospects, undermining confidence. The third phase of compliance checks for the EU's MiCA regulations has begun, subjecting the cryptocurrency industry to stricter regulatory scrutiny, leading investors to sell Bitcoin to avoid risks.

- Market operation factors: Quantitative funds utilized cross-market arbitrage strategies, selling Bitcoin in the spot market while establishing short positions in the options market, amplifying market volatility through Delta hedging. A certain market maker's address transferred $1.2 billion worth of BTC to a derivatives exchange within 72 hours before the crash, coupled with an unusual spike in the Cboe Volatility Index, exacerbating market panic and sell-off.

- Market structure factors: Order book data shows that Bitfinex has continuously displayed iceberg orders of 500 BTC at key support levels, creating liquidity traps that induce retail investors to stop-loss, triggering panic selling in the market. Futures contracts exhibited a rare backwardation structure, with the annualized basis rate of quarterly contracts dropping to -15%, indicating extreme pessimism among institutional investors regarding forward prices, affecting market sentiment and leading to price declines.

- Capital flow factors: The net inflow to exchanges surged by 300%, and the holdings of whale addresses dropped to a three-year low, indicating a significant outflow of capital from the Bitcoin market, with substantial selling pressure resulting in price declines.