Bitcoin fell below $76,000 on February 1st, marking the first time in nearly two and a half years that it dipped below MicroStrategy’s cost basis. In 24 hours, nearly $2.2 billion worth of crypto contracts were liquidated across the entire network, affecting over 335,000 investors, reaching a new high since the October 11th flash crash. New SEC regulatory guidelines, escalating geopolitical risks, and massive whale liquidations have collectively triggered panic.
$2.2 Billion Liquidation Wave Wipes Out 330,000 Investors
Bitcoin’s sharp decline has sparked an epic liquidation wave in the crypto market. According to CoinAnk data, within 24 hours, total crypto contract liquidations reached nearly $2.2 billion, forcing over 335,000 investors to be liquidated— the highest single-day liquidation since the October 11th flash crash in 2025. The shock of this figure not only signifies capital evaporation but also indicates that hundreds of thousands of families may face financial hardship.
Major Coin Liquidation Distribution
Ethereum: approximately $961 million
Bitcoin: $679 million
SOL: $168 million
Other Altcoins: about $392 million
Ethereum’s liquidation amount even exceeded Bitcoin’s, reflecting investors’ aggressive leveraged long positions on Ethereum. When the market drops sharply, Ethereum— the second most liquid mainstream coin after Bitcoin— often becomes a major victim of liquidations. SOL’s $168 million liquidation also shows that even the so-called “next-generation public chains” cannot escape systemic risks.
This scale of liquidation has self-reinforcing characteristics. When prices hit liquidation levels, exchange systems automatically close positions, creating additional selling pressure, further lowering prices, and triggering more liquidations. This “liquidation spiral” causes the decline to accelerate far beyond normal market adjustments. Bitcoin dropped from $82,000 to $76,000 within hours, a decline of over 7%, exemplifying this mechanism.
Weekend low liquidity further amplifies volatility. When large-scale sell-offs occur on weekends, reduced activity from institutional traders and market makers causes market depth to plummet, making similar sell-offs cause even greater price shocks. Abraxas Capital’s Heka fund transferred 2,038 BTC to Kraken last night. Such large transfers might cause minor fluctuations in liquid markets, but during weekends, they could be the final straw that breaks the camel’s back.
Notorious Whales Suffer Heavy Losses
Several high-profile crypto whales also fell victim to this carnage. “Brother Ma Jie” Huang Licheng’s position was fully liquidated on the evening of January 31st. This well-known KOL, who previously showcased his holdings on social media, suffered heavy losses during this crash. Huang’s liquidation is symbolic, representing a group of high-profile, aggressive crypto investors, and their failures serve as a stark warning of market risks.
The address starting with “0x9ee,” dubbed “CZ’s Opponent,” was liquidated for over $60 million, with profits fully wiped out and turning into a loss of over $10 million. This address is called “opponent” because it has repeatedly taken contrarian positions during CZ’s market fluctuations and profited. However, this time it clearly took the wrong side, with $60 million in liquidation turning its profit into a massive loss.
The so-called “insider whale” who opened a short position after the October 11th flash crash was also liquidated for over $12 million. Ironically, this address successfully shorted and profited after the October crash, leading market speculation that it might have insider information. Yet, it continued to short, not expecting Bitcoin to rebound from lower levels, and was ultimately liquidated during the rebound rally. This story reminds us that even “smart money” with perceived informational advantages can make fatal errors amid extreme market volatility.
Sun Yuchen’s Trend Research Ethereum holdings also faced immense pressure. When Ethereum briefly dropped to $2,240, the unrealized loss on his 651,300 ETH was nearly $1.2 billion. Trend Research currently collateralizes 175,800 WETH on Aave, borrowing about 274 million USDT, with a health factor of 1.29 and a liquidation price of $1,558. Although there is roughly a 30% buffer before liquidation, continued market downturns could push prices to $1,500. This case illustrates the risks of DeFi lending during extreme market volatility.
Geopolitical Risks and Government Stalemates Compound
Escalating geopolitical tensions have become a key trigger for Bitcoin’s plunge. According to Xinhua News Agency, on the evening of January 31st, an explosion occurred in a residential building in Bandar Abbas, Iran. Bandar Abbas is a critical oil hub in the Strait of Hormuz, responsible for about 20% of global maritime oil shipments. Instability in this region, coupled with US-Iran conflicts, has heightened concerns over Middle East tensions.
Risk aversion related to international affairs may be just an inducement; more direct impact stems from US political developments. Punchbowl News founder tweeted around 4 a.m. today that Democratic House members have informed Republican leadership that they will not assist in passing funding bills under the current government shutdown. This suggests that the government shutdown, initially expected to last only a few days, could extend into a second prolonged shutdown lasting months.
A US government shutdown impacts financial markets in multiple ways. First, it increases policy uncertainty, causing investors to doubt economic prospects. Second, many economic data releases are delayed or halted, depriving markets of key indicators. Third, prolonged shutdowns may affect government employees and contractors’ incomes, dampening consumption and economic growth.
Recent market volatility has been intense across asset classes. For example, gold and silver spot prices fell over 10% and 26%, respectively, in the last trading day of the week— unprecedented declines in decades. Microsoft’s Azure growth declined 1% quarter-over-quarter, erasing over $350 billion in market value. These staggering figures show that capital is highly concentrated in a few assets, and nerves are stretched tight— even a tiny crack can trigger a stampede of exits.
SEC’s New Regulations Shake Market Confidence
Since October 11th, the crypto market has underperformed compared to stocks, precious metals, and commodities. Besides reduced liquidity, one of the main culprits may be the new crypto market structure bill that treats crypto assets similarly to securities, dampening expectations of lighter regulation.
On January 29th, Beijing time, the SEC issued new guidelines clarifying that tokenized stocks are subject to the same regulations as ordinary stocks, effectively ending hopes for a “light-touch” regulatory environment for tokenized assets. The impact is profound, as it signals that the regulatory arbitrage previously enjoyed by the crypto industry is rapidly shrinking.
The boom of cryptocurrencies was largely due to a lenient regulatory environment. Developments in stablecoins and RWA tokenization are gradually mainstreaming, but “crypto-native” projects are unexpectedly facing pressure. The gap between ideals and reality is turning optimism into backlash. Investors initially expected a more friendly crypto regulatory environment under the Trump administration, but the reality shows that even with a change in government, regulators remain strict on crypto assets.
Bitcoin Attributes Questioned as ETF Outflows Continue
Recent divergence from risk assets and safe-haven assets has cast doubt on Bitcoin’s fundamental properties. For a long time, Bitcoin’s price movements followed tech stocks or gold, but since October, it has neither kept pace with AI-driven rallies in US stocks and silver nor with the frenzy driven by geopolitical risks in gold.
Clearly, whether bullish on AI or seeking safety, the market now has better options than Bitcoin. This “two-front” dilemma has eroded Bitcoin’s clear investment logic. Consecutive two-week net outflows totaling nearly $3 billion in spot ETFs further confirm this trend. Last weekend, US stocks and gold/silver experienced sharp declines, yet capital did not flow into crypto markets, indicating waning interest.
2026 will be a critical test of the crypto market’s resilience. While we hope for no further setbacks, most agree that a major shakeout is not necessarily a bad thing for the current industry.
