The cryptocurrency market experienced a sharp, synchronized downturn on January 31, 2026, with over $70 billion in total market value erased in less than 45 minutes. The sell-off was driven by a cascade of forced liquidations amid thin order books and heightened leverage, rather than a shift in fundamental market conditions.
Data indicates the total crypto market cap was hovering around $2.83 trillion prior to the event, with 24-hour trading volume down 23.13% to $137.89 billion. The Crypto Fear & Greed Index sat at 26, indicating "Fear" among traders. The rapid decline saw Bitcoin (BTC) slip about 2.35% to trade near $81,176, while Ethereum (ETH) fell roughly 6.81% to around $2,539. Solana (SOL) dropped around 5.51% to near $109.02, and XRP declined 6.41% to $1.63.
Derivatives data confirmed the move was driven by liquidation hunting. Over a 4-hour period, total liquidations reached approximately $422.79 million, with an overwhelming skew toward long positions. Long liquidations accounted for ~$408.95 million, compared to only ~$13.84 million in short liquidations. Ethereum bore the brunt with roughly $163.49 million in liquidations, followed by Bitcoin at $107.09 million and Solana at $37.43 million.
Analysts pointed to institutional caution and reduced risk appetite late in the week, which weakened bids just as market liquidity thinned. This created an ideal setup for liquidation cascades. The event underscores the market's fragility during periods of high leverage and low liquidity. Despite the pullback, broader market structure is seen as remaining intact, pointing to a reset in positioning rather than a trend breakdown.
In other market developments, the DeFi sector recorded a 1.87% slump to $115.57 billion in TVL, while NFT sales volume plunged 23.90% to just over $7 million. Separately, BitGo debuted with a valuation of $2.59 billion amid a crypto IPO sector reopening, and the Flow Foundation destroyed 87.4 billion counterfeit FLOW tokens to remediate a security incident.
