Bitcoin slid toward $60,000 in the latest selloff, and on-chain data cited in the report showed $3.2 billion in realized losses on February 5 alone. The article said that total exceeded investor losses seen during the Terra-Luna collapse and the FTX bankruptcy, making it the largest single-day capitulation event ever recorded for Bitcoin.
Against that backdrop, Jacob King, founder of SwanDesk, laid out a 16-step worst-case scenario describing how Bitcoin could spiral into what he called a “totally catastrophic domino effect of cascading failures.” His thesis centers on one point: if liquidity keeps thinning, panic selling can feed on itself.
ETF outflows, weak liquidity, and frozen withdrawals
In King’s framework, the chain starts with exchange liquidity breaking down under sustained ETF outflows. As market depth fades, retail traders rush to exit and trading venues come under strain. Some platforms could freeze up or go offline, while exchanges short on reserves might halt withdrawals entirely.
He then extends the scenario into stablecoin and mining stress. If Tether were to face federal pressure and stop issuing new supply, a liquidity source that has often been linked to market rebounds would shrink. At the same time, miners dealing with lower rewards and higher energy costs could sell BTC reserves into a market with little buying interest left.
Corporate leverage and network risk enter the picture
King also points to leveraged corporate holders. He specifically mentions firms such as MicroStrategy, arguing that margin calls could trigger “massive involuntary liquidations” involving hundreds of thousands of coins. In that setting, if demand disappears, a Tether depeg and a steep drop in hashrate could become more serious concerns, with even a 51% attack moving back into discussion.
King wrote that Bitcoin’s story mirrors the Titanic, saying it was once described as unsinkable even though that was never true. That line quickly became the most cited part of the bearish scenario.
Market depth is more than 30% below October
The full path to zero remains disputed, but the report highlights several market signals that traders are watching. One is market depth. According to the article, the amount of capital available to absorb large sell orders is now more than 30% below where it stood in October. In a thinner market, even moderate selling can push prices sharply lower.
Past drawdowns offer a separate reference point. Bitcoin’s bear markets have produced smaller declines over time: about 93% in 2011 and roughly 77% in 2022. If that pattern continues, and if the cycle starts from the $126,000 peak cited in the report, a possible floor would sit near $38,000. The article also says many traders are watching a downside support zone between $38,000 and $60,000 if selling pressure continues.
The source itself notes that a fall to zero is “extremely unlikely.” Even so, sharp drawdowns remain possible when liquidity weakens and leverage stress hits at the same time.