If you started 2026 feeling optimistic about your portfolio, you’re not alone. January offered a reason for cautious optimism: Stocks ticked higher, bitcoin was climbing back from a rough end to 2025, and the economy appeared to be holding up.
But in the span of a few brutal trading days, some risk assets unraveled. Bitcoin plunged to a 15-month low, and the Nasdaq posted its worst three-day rout since April. Gold is also trading below its all-time highs.
Three numbers tell the story of this market shake-up and what might be driving it.
| Decline from all-time highs | |
|---|---|
| Bitcoin | –$57,000 |
| Nasdaq Composite | –3.72% |
| Gold | -6.05% |
Table of Contents
–$57K: Bitcoin’s “digital gold” thesis falls apart
Bitcoin started the year trading around $88,700 per coin. As of Wednesday’s close, it was trading at $69,485.19, down more than $57,000 (almost 46%) from its October 7, 2025, all-time high, shedding nearly half its value in about four months.
Several forces drove the sell-off:
- Forced liquidations: More than $2 billion in leveraged crypto positions were unwound in a single week as margin calls amplified the decline.
- Institutional outflows: Digital asset investment products recorded two consecutive weeks of outflows totaling $1.7 billion, according to CoinShares.
- No federal lifeline: Treasury Secretary Scott Bessent confirmed that the government does not have the authority or the intent to buy bitcoin.
- A stronger dollar: The nomination of Kevin Warsh as the next Federal Reserve chair strengthened the dollar, weakening bitcoin’s appeal as an alternative currency.
Perhaps the most notable takeaway: Bitcoin’s crash happened while gold was surging. For years, crypto advocates have pitched bitcoin as “digital gold.” That narrative has not held up in early 2026.
–3.72%: Nasdaq’s volatile pullback
At first glance, the tech-heavy Nasdaq Composite looks uneventful so far this year. As of Wednesday’s close, the index sits at 23,066, virtually unchanged from its end-of-2025 level. But that near-flat number is deceptive.
But after a solid January, the Nasdaq plummeted more than 700 points over three consecutive sessions and bottomed out on February 5, a decline just below 4% from its all-time high.
Artificial intelligence was big factor in the decline:
- AI spending sticker shock: During earnings season, Amazon, Alphabet, Microsoft, and Meta collectively unveiled plans to spend more than $650 billion on capital expenditures in 2026, mostly on AI infrastructure. Amazon’s $200 billion capital expenditure (capex) guidance alone sent its shares tumbling as much as 10%.
- AI disruption fears: Software stocks were hit the hardest. After Anthropic launched new AI plugins that raised concerns about the viability of its software-as-a-service business model, the iShares Expanded Tech-Software Sector ETF fell for eight straight sessions. Stocks tracked by the fund lost almost $1 trillion in market value in a single week.
The market’s message: Spending billions on AI is no longer enough to justify premium multiples. Investors want to see results.
-6.05%: Gold pulls back from record highs
While crypto and tech stumbled, gold’s rally has cooled. After ending 2025 at $4,350 per ounce following a 65% annual gain, the metal climbed to a 2026 high of $5,549.
As of Wednesday, gold is trading at about $5,107 per ounce, down 6.05% from its all-time high.
The drivers behind the earlier surge remain familiar: Geopolitical tensions, including friction between the U.S. and Iran and President Donald Trump’s push to acquire Greenland, along with continued central bank buying. China extended its gold purchases for a 15th consecutive month in January, and expectations for Fed rate cuts have supported non-yielding assets.
Bumps along the way
Gold’s rally has not been linear. The January 30 announcement of Kevin Warsh as President Trump’s Fed pick triggered a 9% drop. While prices have rebounded from that sell-off, they remain more than 6% below the record peak of $5,549.
The wild card: A new Fed chair
One factor connecting these storylines is the nomination of Kevin Warsh to succeed Jerome Powell as Fed chair. President Trump announced the pick on January 30, and, if confirmed, Warsh would take over when Jerome Powell’s term expires in May.
Warsh served as a Fed Governor from 2006 to 2011 and is known for hawkish views on inflation and criticism of the Fed’s balance sheet expansion. His nomination has added uncertainty to an already jittery market, with investors weighing whether the so-called “Fed put,” the assumption that the central bank will step in during downturns, may be fading or even dead.
Warsh has signaled support for rate cuts this year, arguing that AI-fueled productivity gains could support growth without stoking inflation. But his confirmation is not yet guaranteed, adding to market uncertainty.
What to watch next
Nvidia’s earnings on February 25 will test whether the AI spending boom is translating into revenue. Warsh’s confirmation hearings will also shape expectations for the Fed’s direction. And whether bitcoin can hold above $60,000 to $65,000 could signal whether the sell-off is a correction or something deeper.
For everyday investors, the early weeks of 2026 have been a reminder that volatility is the cost of admission for long-term returns, and that diversification remains one of the most reliable ways to weather it.
Article sources
At LendEDU, our writers and editors rely on primary sources, such as government data and websites, industry reports and whitepapers, and interviews with experts and company representatives. We also reference reputable company websites and research from established publishers. This approach allows us to produce content that is accurate, unbiased, and supported by reliable evidence. Read more about our editorial standards.
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- Politico, Why Trump’s Federal Reserve Pick May Surprise Him
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About our contributors
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Written by Ben LuthiBen Luthi is a Salt Lake City-based freelance writer who specializes in a variety of personal finance and travel topics. He worked in banking, auto financing, insurance, and financial planning before becoming a full-time writer.
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Edited by Kristen Barrett, MATKristen Barrett is a managing editor at LendEDU. She lives in Cincinnati, Ohio, with her wife and their three senior rescue dogs. She has edited and written personal finance content since 2015.