The cryptocurrency market experienced a sharp correction on January 26, 2026, with Bitcoin erasing its entire monthly progress. After peaking at $97,000 on January 14, BTC slid approximately 10.9% to briefly dip below the $87,000 mark, pushing its January return to -0.5%. The broader market slump reflected a significant "risk-off" sentiment across digital assets.
The primary catalyst for the sell-off was rising uncertainty surrounding a potential U.S. government shutdown. Rick Maeda, research associate at Presto Research, stated, "The move in crypto to start the week was driven by a broad macro risk-off impulse rather than crypto-specific news." He identified the U.S. government shutdown risk, fueled by funding uncertainty and political deadlock, as the key factor pressuring risk assets. Vincent Liu, CIO of Kronos Research, noted that the probability of a shutdown had climbed to 75% on prediction market Polymarket.
Institutional demand showed signs of caution. U.S. spot Bitcoin ETFs posted their worst week since February 2025, recording roughly $1.33 billion in net outflows for the week ended January 23. While ARK Invest disclosed purchases of crypto-linked equities like Coinbase, analysts suggested this selective buying did not reflect wider institutional sentiment, with ETF flows pointing to "softer institutional demand at the margin."
Ethereum followed the downturn, slipping 3.17% to $2,847. The GameFi sector was hit particularly hard, dropping nearly 5%, led by double-digit losses in Axie Infinity (AXS). Despite the broad decline, some assets showed resilience, with River (RIVER) surging 30% and Beam (BEAM) rising 19% on specific project catalysts.
Looking ahead, analysts indicated that macro developments remain the primary market driver. Traders are closely watching the upcoming Federal Reserve interest rate decision and U.S. producer price index data for policy and inflation clues. Near-term signals for crypto include ETF flow stabilization and Bitcoin's ability to hold recent support levels.
