February 2026 in Crypto: From Noise to Signal

As noted in the previous Monthly Update, 2026 began with heightened geopolitical sensitivity, with the first few weeks of the year characterized by policy uncertainty and cross-asset volatility. February represented a continuation of this pattern, with digital asset markets responding to a combination of narrative developments, trade policy signaling, and structural technology transition discussion. It began with the release of the Epstein files and the revelation that he took an early interest in cryptocurrencies – something not many crypto players had on their 2026 Bingo card.

Epstein’s Links To Bitcoin

Emails released by the Department of Justice showed that in June 2011, a time when Bitcoin was very much a plaything of the tech community and basically unknown to the rest of the world, correspondence referenced Epstein’s interest in contacting the “Bit coin [sic] guys.” – see image.

Bitcoin In The Epstein Files

Source: US Department of Justice

His interest shifted from intellectual to financial when Blockstream, a prominent Bitcoin infrastructure company co-founded by Austin Hill and Adam Back, was raising its seed round. Emails show Austin Hill corresponding with Epstein and Joi Ito (then director of the MIT Media Lab) about Blockstream’s investor allocations. Despite being 10X oversubscribed, Epstein’s allocation in the round was increased from $50,000 to $500,000 through the fund Ito managed – see image.Separately, Epstein invested several million dollars—via an intermediary entity—into Coinbase.

Epstein’s Blockstream Investment

Source: US Department of Justice

Then, around 2016, Epstein authored emails claiming that he had spoken with “some of the founders of bitcoin” and discussed possible applications of Bitcoin-related technology, including hypothetical alternative digital currencies. Even though there was no indication that he had any influence on protocol development that did not stop the FUDers from claiming that Epstein and his associates had “hijacked Bitcoin”, had put back doors in the Bitcoin code base, or even speculation that Epstein was Satoshi Nakamoto – see image.

Real Fake News

Source: X

Despite the obvious flaws in such thinking – Bitcoin is open source code whose consensus rules are enforced by thousands of nodes and miners who choose to voluntarily (meaning they cannot be forced to adopt code changes) run the software – the FUD certainly did not help.

Subsequent reporting of the Epstein files triggered widespread narrative discussion and speculative social media commentary. While this narrative activity did not introduce evidence of protocol security vulnerability (or centralized operational control), it likely contributed to heightened uncertainty within an already risk-sensitive market environment and probably amplified downward price pressure alongside broader macro and positioning dynamics. Indeed, in the days following the DoJ release, the price of Bitcoin dropped below $80,000.

Unfortunately for digital asset owners, the sharp price drop was not a capitulation event that signaled “the bottom was in”, rather it turned out to be a harbinger of further weakness throughout the remainder of the month.

Tariff Turmoil 2.0

On February 20, the Supreme Court ruled by a 6-3 majority that last year’s “Liberation Day” tariffs, unilaterally introduced by President Trump using emergency powers to circumvent the need for congressional approval, exceeded executive authority.

Digital asset prices initially reacted positively to expectations that reduced trade tension could support global risk sentiment, but this bullish move proved fleeting once it became clear that Trump was refusing to give in without a fight. Indeed, soon after the ruling, he announced on his social media platform Truth Social, that, effective immediately, his administration would impose a worldwide tariff of 10% (the day after he increased it further to 15%) – see image.

Trump Tariff Tantrum

Source: Truth Social

The introduction of a 15% global tariff level contributed to uncertainty across international policy coordination channels. In response, the ratification process of a US–EU trade framework was temporarily paused by the European Parliament pending reassessment of the legal and institutional basis of the agreement.

Ongoing uncertainty surrounding US trade policy implementation likely contributed to higher global risk premia by increasing uncertainty over future growth coordination and international capital flow conditions. In such an environment, positioning across risk assets tends to gravitate toward instruments perceived to offer structural or policy-resistant value characteristics. The modest weakening of narratives framing cryptocurrencies as direct digital analogues of precious metals (gold rallied on the tariff announcement while cryptocurrencies sold off) is therefore more consistent with broader portfolio rotation behaviour than with any fundamental reassessment of long-term technological or monetary utility.

Sentiment Slump

Unsurprisingly, amid all this turmoil, sentiment among digital asset investors deteriorated to extreme pessimism, with the widely followed Fear and Greed Index hitting a new record low of 5, meaning it was even worse than in the immediate aftermath of the FTX bankruptcy in 2022.

Fear And Greed Index Hits Record Low

Source: alternative.me

Given such extreme sentiment readings, it is tempting to conclude that all the bad news is now, finally, “priced in”, especially when history shows that in the 17 years that Bitcoin has been operating the longest run of consecutive down months is six, matching the current duration of the sell-off – see image.

Record Bitcoin Losing Streak

Source: X (via @SatoshiFlipper)

Last time around, this sustained period of selling was followed by four successive up months, which would certainly be a welcome development for the crypto bulls. Unfortunately, as the caveat added to every financial product offering states, “past performance is not indicative of future results”, especially given this extreme pessimism is probably better viewed as an indicator of positioning stress rather than a signal of imminent price stabilization/reversal.

Policy Uncertainty

One factor that could influence digital asset performance over the next several months is the unresolved trajectory of US trade policy developments.

The new 15% tariff is being introduced under Section 122 of the Trade Act of 1974, which authorizes the president to address “large and serious” balance-of-payments deficits. However, this law, which has never been used before, only gives Trump the ability to impose tariffs for a maximum of 150 days. Beyond this, congressional approval is required, and given the upcoming mid-term elections it is highly unlikely that they would agree to any extension.

Public signalling from President Trump indicates strong intent to maintain tariff pressure; however, alternative legal or political constraints may ultimately shape realized policy outcomes. Legal challenges could constrain the executive branch’s ability to impose or sustain broad-based tariffs without congressional authorization. Moreover, Congress retains the potential to reassert oversight authority if trade measures are perceived as economically disruptive or represent policy overreach. In this regard, international responses are highly relevant. Sustained cross-border pushback or retaliatory trade measures could increase the economic cost to the US of maintaining elevated tariff levels, particularly if such measures dampen global growth momentum and/or contribute to increased financial market instability.

Fiscal Pressures

Having raised well over $150bn last year¹, tariff revenues have become a meaningful, albeit not dominant, component of US federal receipts and were expected to raise substantial additional sums over the longer-term. In the absence of replacement revenues or offsetting fiscal adjustments—such as spending reductions, which are seemingly verboten in US political circles these days —this could materially worsen the medium- to long-term US debt trajectory, negatively influencing long-run perceptions of fiscal sustainability.

As we have noted on numerous prior occasions, in a fiat money system the value of the currency is backed by the perceived creditworthiness of the issuer, in this case the US government. Consequently, persistent structural fiscal pressures in the US could lead to greater diversification toward non-sovereign or scarcity-oriented monetary assets (like finite supply cryptocurrencies), putting the US dollar’s dominant reserve currency status into jeopardy.

An additional potential catalyst is monetary policy flexibility. Should tariff levels decline, US imported inflationary pressure stand to ease, potentially expanding the policy manoeuvring space available to the Fed, which historically has been bullish for cryptocurrencies and other risk assets.

Taken together, the balance of risks remains skewed rather than symmetric. While persistent trade friction represents a headwind to global growth stability, legal, political, or international constraints on tariff escalation leave open the possibility of positive macro surprises, particularly if risk premia associated with prolonged trade uncertainty begin to normalize, providing the fuel for a bounce back in digital asset prices.

AI Transition Fears

In addition to the tariff drama, digital asset prices were also undermined by a fresh wave of AI doom mongering². The pessimism was triggered by the release of AI agents such as Anthropic’s Claude Cowork or the open-sourced ClawdBot (quickly renamed Moltbot following a complaint from Anthropic), which are are capable of executing complex, multi-step tasks.

While historical technological transitions have generally been associated with net productivity expansion over long horizons, the broad applicability and rapid advancement of AI technologies has generated concern regarding potential labour market displacement and income distribution effects. Such concerns are particularly relevant for consumption-driven economies where household spending represents a substantial share of aggregate GDP growth.

Your Soon-to-be New Boss

Source: 2001 Space Odyssey

As pessimism regarding the economic impact of AI became more widespread, equity valuations across certain technology segments experienced downward pressure. Given the historically strong correlation between cryptocurrency markets and high-beta technology equities, this weakness transmitted into digital asset pricing dynamics – see image.

Hi-tech Stocks vs. Bitcoin Price

Source: TradingView

Irrational Exuberance Pessimism

As outlined in a prior report, AI is widely expected to exert substantial economic influence over the coming years, making it reasonable for investors to incorporate AI-related considerations into portfolio allocation decisions.

The recent seemingly indiscriminate selling of tech-related investments may reflect uncertainty regarding long-term AI monetization pathways and capital intensity requirements across the technology value chain. Equally, though, it could simply reflect irrational investor behaviour. After all, if AI is set to be truly disruptive as we increasingly think, demand for computing power and semiconductors should remain robust. Yet chipmaker stock prices have fallen alongside SaaS companies. This is logically inconsistent.

The negative spillover into digital assets makes even less sense. AI systems cannot independently maintain traditional bank accounts due to legal personhood requirements. The most obvious workaround is for them to transact via crypto wallets. Recent hiring activity by xAI for expertise in blockchain analytics, tokenomics modelling, and on-chain behavioural inference is directionally consistent with exploratory research into machine-readable financial ecosystems. It provides a strong signal that the increasing integration of AI agents into economic/financial system will significantly boost demand for blockchain services, stablecoins, and decentralized infrastructure, which is very much at odds with recent bearish price action.

STOP PRESS: On the last day of the month, digital asset markets were again rattled by US military action after, alongside Israel, they launched Operation Epic Fury targeting the Iranian regime. Crypto prices initially fell nearly 4% amid a surge in risk aversion, but quickly rebounded, demonstrating notable resilience despite the escalation in geopolitical tensions — perhaps a reflection of already depressed investor sentiment in recent weeks. That recovery, however, was tested by a sharp spike in crude oil prices, which rose more than 6% despite OPEC’s pledge to increase production by over 200,000 barrels per day as tradfi investors reacted to the effective shutting of the Strait of Hormuz — a critical chokepoint through which roughly 20% of global crude supply passes. The key concern is that if elevated oil prices persist, they could reignite inflationary pressures. This would reduce the likelihood of the Fed delivering the rate cuts currently anticipated later this year, potentially tightening global liquidity conditions and creating a less supportive backdrop for risk assets. This is a topic we will expand upon in next month’s Crypto Update.

1 As the Supreme Court did not answer whether or how refunds will be issued, US companies wishing to get refunds will almost certainly have to go through the US courts – a process that will be messy and drawn out as indicated by Treasury Secretary Bessent – see: https://fortune.com/2026/02/23/scott-bessent-tariff-supreme-court-ruling-refunds/

2 On February 22, a post on X by Citrini research included a link to a hypothetical post dated June 2028, written from a future perspective detailing the progression and fallout of the Global Intelligence Crisis. In less than 24 hours the post had over 8.6 million views – see: https://x.com/Citrini7/status/2025668400396349476