$2.5 Billion Liquidated: Crypto Market Cursed with 'Following Drops, Not Rallies'

Original | Odaily (@OdailyChina)

Author | Ding Dang (@XiaMiPP)

A flash crash has happened once again.

On the night of January 31st, Bitcoin briefly fell below $78,000, touching a low of $75,700, with a 24-hour drop of 7.6%. This decline was not only extremely rapid but, more critically, it directly broke through the price range where BTC had been consolidating for nearly three months, retracing to levels not seen since April 2025.

The situation for ETH is even more concerning. Its price fell below the $2,400 mark, with a 24-hour plunge of 12.28%, nearly erasing all gains made since July 2025. Solana also couldn't escape the downturn, dropping below $100 with a single-day loss of 13.74%, returning to levels last seen in February 2025.

The collective decline of major assets seems to be approaching a new critical point.

In the derivatives market, total liquidations over the past 24 hours reached $2.522 billion, with long positions accounting for $2.411 billion and short positions $115 million. The largest single liquidation order occurred on Hyperliquid - ETH-USD, valued at approximately $222 million. Notably, liquidations in just the past hour alone amounted to a staggering $1.14 billion.

The Starting Point of the Decline Was Not Just Within the Crypto Market

The first domino in this market movement was not on-chain.

Looking at the timeline, market tension began to noticeably escalate from January 29th. A sudden intensification of geopolitical risk was one of the earliest triggers captured by the market. The US aircraft carrier USS Abraham Lincoln and its strike group entered a "lights-out" status with communications severed, while statements from Iran also clearly shifted towards a posture of preparedness. Odaily had previously provided a detailed analysis in the article "From Geopolitical Tensions to Liquidity Tightening, BTC Dragged into Uncontrolled Market Conditions".

Even so, the speed of this crypto market decline far exceeded expectations. What truly caused the risk to spill over rapidly was the simultaneous crash in the precious metals market.

After Gold and Silver Fell, Crypto's Uncontrolled Decline Accelerated

On January 29th, after briefly breaking above $5,600, gold quickly reversed course, falling to a low of around $4,740, a maximum drop of 15.7%. The adjustment in silver was even more severe. After breaking above $120, it plummeted sharply, touching a low of $76.6, a maximum decline of 37%.

Dirk Malak, Managing Director at SLC Management, pointed out that the plunge in gold and silver began with the market's reaction to reports that Trump would nominate Kevin Warsh as Fed Chair. Warsh's resume carries distinct hawkish undertones, which somewhat weakened the expectation of a "long-term, broad-based depreciation of the US dollar." The market is re-anchoring to a more orderly path for monetary policy. Related reading: "'Estée Lauder Son-in-Law' Kevin Warsh to Lead the Fed: Is This Hawkish Veteran a Crypto Ally?"

Seth R. Freeman, Senior Managing Director at GlassRatner Advisory & Capital Group, also believes that the "good news" of this nomination is that the market might no longer have to repeatedly deal with the uncertainty and emotional disturbance caused by Trump's continuous pressure on the Fed. The sharp decline in gold and silver already reflects the market's repricing for a stronger dollar environment. In his view, it wouldn't be too surprising if metal prices fail to show a significant rebound in this context. On the contrary, traders heavily positioned in precious metals without effective hedging might face sustained pressure, especially silver bulls. By next Monday, some trading accounts could suffer severe losses.

Furthermore, analysts mentioned that month-end concentrated profit-taking trading behavior, as well as hedging operations by banks to guard against sudden declines, may have amplified the selling pressure in a short period.

Adrian Ash, Head of Research at BullionVault, stated that in his 20 years participating in the precious metals market, he has never seen a similar market move. However, he downplayed the narrative of "retail investors collectively fleeing," pointing out that abnormal volatility also occurred in base metal markets like copper—for instance, copper futures fell 4.5% on Friday. If it were only gold and silver, it could be attributed to retail sentiment, but the base metals market has almost no retail participation.

Bitcoin Relative to Gold Has Fallen to Historical Lows

Data from Bitwise Europe shows that the price ratio of Bitcoin relative to gold has fallen to historical lows. This indicator has appeared multiple times in the past near Bitcoin's cyclical bottoms.

This implies two coexisting realities: on one hand, Bitcoin is currently in a significantly weak position relative to gold; on the other hand, this extreme weakness leads some analysts to view the current environment as a potential accumulation zone similar to the period before the 2015–2017 bull market launch.

The market widely observes that long-term holders are gradually absorbing the recent selling pressure. As capital rotates between safe-haven assets and risk assets, some traders anticipate that starting in February, there might be a phase of capital rotation from gold back to Bitcoin.

However, more cautious views point out that such capital rotation is not inevitable and requires continuous observation of changes in macro policies, the US dollar's trajectory, and overall risk appetite.

Risk Transmission and Chip Redistribution

The crash in gold and silver ultimately transmitted to the crypto market. It must be said that the crypto market is currently at the bottom of the food chain: when US stocks rise, crypto may not rise; when US stocks fall, crypto often falls deeper; and now, with precious metals falling, crypto has also failed to escape the downturn. The crypto market seems to be caught in a "curse" of following declines but not gains.

In this situation, the "believers" long on crypto assets also seem to be losing their chips in this torrent.

Garrett Bullish (@GarrettBullish), the lucky one who made the biggest profit during the 10/11 flash crash, couldn't escape this disaster. His position on Hyperliquid was fully liquidated, with a single liquidation exceeding $700 million, leaving his account balance at just $53.68. This was also the largest single liquidation in this event. Data shows his cumulative losses on Hyperliquid over the past two weeks were approximately $270 million.

On-chain records also show that since starting to trade with this account in early October 2025, Garrett Bullish's historical cumulative PnL has incurred losses exceeding $128 million.

Behind the liquidation lies protocol revenue. After Garrett Bullish's liquidation was completed, the Hyperliquid ecosystem treasury HLP gained approximately $15 million in revenue. This single event brought HLP depositors a return of about 5.8%, translating to an annualized yield of around 110%. Data shows that HLP currently still holds an ETH long position valued at approximately $230 million.

The high-profile whale heavily long on ETH also seems to be struggling. According to on-chain data monitoring, the secondary fund Trend Research, under Yi Lihua, currently has a total collateral of 175,800 WETH (worth about $445 million) on Aave V3, borrowing approximately 274 million USDT. The liquidation price for the ETH position is $1,558, with a loan health factor of 1.34. During the market decline, Trend Research continued to add margin. Yesterday, it withdrew about 109 million USDT from Binance and deposited it into Aave to reduce the liquidation risk of its Ethereum position.

As of January 29th, Trend Research held approximately 651,300 ETH with an average entry price of around $3,180. At the current price of $2,400, the unrealized loss is close to $500 million.

Conclusion

From the escalation of geopolitical risks to the collapse of precious metals, crypto assets have become the first to be abandoned in this process. Does this indicate that they are not safe-haven assets and have not yet truly gained consensus support as a "value anchor," only passively bearing pressure amidst the fluctuations of macro sentiment?

This market cycle is forcing the market to re-examine a question: in a deleveraging cycle, what exactly justifies holding crypto assets long-term?