On January 31, 2026, the cryptocurrency market endured its most severe single-day clearing event since the "1011 Crash." According to data from Coinglass and major global exchanges, total liquidations across the network surged to $2.5615 billion within a 24-hour window. This figure not only sets a three-month high but also highlights the fragile nature of the market under high-leverage conditions and shifting macroeconomic policies.
For crypto users, this day has been dubbed "Bloody Saturday." Against a backdrop of long-term high funding rates and overheated market sentiment, sudden price volatility triggered a massive wave of long-position liquidations, causing market liquidity to evaporate almost instantly.
Key Takeaways
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Massive Liquidation Scale: Total liquidations hit $2.5615 billion, with long positions accounting for over 95%, reflecting an over-leveraged bullish bias.
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Macro Policy Turbulence: Nominations for the Federal Reserve Chair and expectations of tighter monetary policy are cited as the primary external triggers for the downturn.
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Increased Correlation: The synchronicity between Bitcoin and traditional assets (such as gold and US equities) has strengthened, making independent "decoupled" rallies more difficult.
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Exchange Infrastructure Stress: Asset transfer subsystems on major exchanges experienced performance degradation during the extreme volatility, hindering risk-hedging operations for some users.
Deep Dive into the January 31 Crypto Market Crash
Beginning on the afternoon of January 31, digital assets led by Bitcoin (BTC) entered a steep cliff-like decline. Bitcoin prices briefly plunged below the $77,000 threshold, marking a drop of over 8%. Concurrently, major altcoins like Ethereum (ETH) were not spared, with daily losses generally exceeding 10%.
The "Liquidation Cascade" of Long Positions
The distribution of liquidations during this event was extremely lopsided. Data shows that long liquidations reached $2.468 billion, while short liquidations totaled only about $154 million. This asymmetry indicates that after a period of sustained growth, a vast number of traders had built long positions using significant leverage, betting on a continued upward breakout.
However, when prices hit key psychological levels (such as $80,000), automated liquidation mechanisms on exchanges were activated. Because market buy orders could not absorb such a massive volume of forced sell orders in a short time, prices dropped further, triggering even more stop-losses—a classic liquidation cascade.
Why is this the Strongest Shock since the "1011 Crash"?
Looking back at the crash of October 11, 2025, that event was driven by extreme trade policy expectations and a total freeze in liquidity. In contrast, the January 31 event highlights the sensitivity of the crypto market to liquidity tightening. As 2026 begins, with the Fed potentially pivoting toward a more aggressive hawkish stance, the low-cost capital that previously flowed into crypto has started to retreat.
For the average user, understanding the impact of liquidity exhaustion in the cryptocurrency market is vital. In such environments, even relatively small sell orders can cause violent price swings (known as "pins" or "wicking"). On January 31, this volatility was magnified infinitely by billions of dollars in leveraged capital.
Macro Context: Fed Nominations and Policy Shifts
This market tremor did not occur in a vacuum. Many analysts point toward recent nomination movements for key positions within the U.S. Federal Reserve.
The Warsh Nomination and Tightening Expectations
Market expectations for a hawkish new Fed Chair have strengthened significantly. With candidates who have long advocated for shrinking the balance sheet and maintaining high real interest rates, this "policy headwind" has damaged the valuation logic for high-risk assets. While crypto has been viewed as a hedge against currency debasement, this narrative faces reconstruction as the global monetary environment moves toward "institutional tightening."
Rising DXY and Capital Outflow
During the same period as the liquidations, the US Dollar Index (DXY) recorded its largest single-day gain since July 2025. As an indicator traditionally inversely correlated with risk assets, a strong dollar rebound usually signals that global capital is exiting volatile assets in search of the certainty offered by fiat or bonds.
Exchange Performance and User Challenges
Under extreme market conditions, the stability of trading platforms has once again become a focal point. During the January 31 movements, several users reported delays when attempting to top up margins or execute hedging trades.
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Asset Transfer Obstructions: During the peak of the sell-off, internal transfer systems on certain platforms lagged, preventing users from moving funds from spot to futures accounts in time.
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Widening Spreads: The disappearance of liquidity caused order books to thin out, meaning users' forced liquidations were often executed at prices far worse than the mid-market rate.
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Sentiment Indicator Failure: The Fear & Greed Index plummeted from "Greed" to "Neutral" or "Fear" almost instantly. This rapid shift rendered many technical-indicator-based strategies ineffective.
Conclusion: Finding Balance Amid Uncertainty
The January 31 liquidation event served as a profound "wash-out" for the 2026 crypto market. While the surge in liquidations cleared out excessive speculation and brought benchmark prices back to more rational levels, it also reminded users of the high-risk, high-volatility nature of this asset class.
For traders, managing leverage risk in the cryptocurrency market is no longer an elective—it is a necessity. In today’s world, where macro environments are complex and the correlation between stocks and crypto is tightening, relying on a single bullish narrative or over-leveraging can lead to extreme vulnerability during systemic shocks like those seen on January 31.
FAQs: About the January 31 Liquidation Event
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Why were the liquidations on January 31 mostly long positions?
This was primarily due to the prevailing bullish sentiment prior to the crash, which led many to use high leverage to bet on higher prices. When prices dipped slightly due to macro news, high-leverage accounts hit their liquidation prices first, creating a domino effect of selling.
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What was the "1011 Crash," and how does it compare?
The "1011 Crash" occurred on October 11, 2025, driven by global risk-off sentiment due to policy uncertainty. While the January 31 event had a slightly smaller total liquidation volume, the depth of the blow dealt by shifting monetary policy expectations is considered equally significant.
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How does a "liquidation cascade" affect non-leveraged holders?
Even if you do not use leverage, a liquidation cascade impacts you by causing a rapid decline in the net value of your holdings. During liquidity exhaustion, prices can fall irrationally far below their actual value.
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Why do Federal Reserve personnel changes affect cryptocurrency?
Cryptocurrency thrives in environments with ample liquidity. The appointment of officials who favor tightening means higher interest rates for the dollar and a potential reduction in the total money supply, reducing the appetite for high-risk assets like crypto.
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Are exchange system glitches common during such volatility?
When massive trading volume and risk-control checks happen simultaneously, the technical architecture of any platform faces immense pressure. While core trading engines usually stay online, delays in front-end displays or internal asset transfers are not uncommon in history.