On January 19, 2026, in the early morning of the UTC+8 time zone, the cryptocurrency market suddenly experienced severe fluctuations under the pressure of macroeconomic bearish sentiment. Major cryptocurrencies collectively plummeted in a short period, pushing leveraged long positions in perpetual contracts and futures to the brink of liquidation. On-chain and derivatives data pointed to a core picture: within just one hour, the total liquidation amount across the network reached approximately $551–$554 million, with the vast majority coming from previously bullish long positions. Meanwhile, the Fear and Greed Index, which represents market sentiment, sharply declined from a neutral range, falling back to around 44, as sentiment shifted from optimism and confidence to caution and even panic. The main storyline of this event gradually became clear: external tariff threats combined with internal accumulation of leveraged long positions, under the combination of high funding fees and high leverage, turned what might have been a normal price correction into a collective retreat with a sudden collapse of support.
The Fragility of Leverage: $500 Million Evaporated in One Hour
From a data perspective, the most direct impact of this flash crash was reflected in the scale of liquidations. According to statistics, within the hour of the event, the total liquidation amount across the network was approximately $551–$554 million, with long positions making up the absolute majority. By cryptocurrency, BTC liquidations amounted to about $144 million, and ETH liquidations were around $73.13 million, with these two major assets occupying the concentrated firepower zone of liquidations, exposing the previous high concentration of capital betting on the rise of mainstream assets.
Before the flash crash, the market atmosphere had long been optimistic, with narratives like "buy the dip" and "add to positions on declines" becoming mainstream. The proportion of long positions in the contracts continued to rise, and many funds chose to increase leverage on core assets like BTC and ETH to seek higher returns. This structure seemed safe during a one-sided or slowly oscillating phase, even being packaged as "efficient allocation in an institutional bull market." However, when prices suddenly reversed and volatility surged, positions heavily concentrated on the long side could be liquidated by the clearing engine in a very short time, with destructive power exponentially amplified.
Some market participants suggested that "the excessive concentration of leveraged long positions is one of the key reasons for this round of crash." From this perspective, the flash crash was not a random phenomenon that could be explained by a single sell order or news item, but rather a structural fragility that had accumulated over time being forced out all at once: when prices fell slightly below expectations, the long leverage chain began to break, and passive liquidations further pushed prices down, creating a typical "chain liquidation" scenario.
From Whales to Retail: The Bloody Lessons of Leverage
If the total liquidation figures seem somewhat abstract, the changes in individual accounts' profits and losses are much more impactful. An on-chain whale long position in DOGE, tracked by Onchain Lens and PANews, faced a nearly "textbook" disaster during this brief volatility: its DOGE long position was completely liquidated, resulting in a loss of about $2.2 million in a very short time, wiping out all previous unrealized gains and principal in one sharp decline. For holders accustomed to one-sided rises, such liquidations do not require extreme price drops; as long as the leverage ratio is high enough and the margin utilization is tight enough, even slightly unexpected volatility can trigger the "liquidation threshold."
More representative is the fact that this whale did not solely bet on Dogecoin. Data shows that it also held a 15x leveraged long position in ETH, which at one point showed an unrealized loss of about $475,000 during this round of market activity. A 15x leverage means that even a relatively limited reverse price movement can quickly compress the account's capacity to bear losses, significantly shortening the time window for stop-losses, margin calls, or even passive liquidations. Using high leverage on highly volatile assets is essentially a strategy that leaves almost no room for error.
The experience of this whale bears a striking similarity to countless ordinary retail investors who were "swept out" during this flash crash. Regardless of the scale of their positions, liquidated accounts often share several common characteristics: excessive confidence in the upward trend, linearly extrapolating past strong performance into the future; positions heavily concentrated on the long side, lacking hedging and diversification; and maintaining an optimistic judgment of "the market has its main line" even as macro events approach or uncertainty rises, ignoring the potential for sudden tail risks. When macroeconomic bearishness combines with the fragility of the leverage chain, the differences between whales and retail investors are greatly diminished in the face of the liquidation engine, with the only significant difference being the absolute scale of losses.
The Return of Insider Whales and the High Funding Fee Trap
In addition to accounts that were forced to liquidate, there is another, more insidious yet equally deadly way to incur losses: going from significant profits to "failing to recover." In this event, an account labeled as the "BTCOG insider whale" by the market serves as a typical example. On-chain and funding data tracking shows that within about 90 minutes before and after the flash crash, this account's unrealized gains, which had reached as high as $35 million, were rapidly eroded, ultimately shrinking to a net unrealized gain of only about $5.39 million. The scale of profits given back in such a short time is comparable to a medium-sized institutional-level loss.
Even more noteworthy is that this whale paid an astonishing funding fee of approximately $7.7 million during this period to maintain high leverage and large positions. In most participants' daily discussions, funding fees are often seen as "negligible small costs" in a bull market. However, when position sizes are large, holding periods are extended, and funding rates remain high, this cost can erode final profits at an astonishing rate. High-profit positions that seemed impressive before the volatility, when accounting for funding fees and losses, may yield actual net returns far below what appears on the surface, even approaching a "high-risk, low-cost performance" gamble.
The logic revealed by this extreme case is very clear: even whales, regarded as "smart money," are equally fragile in an environment of high volatility combined with high leverage. On one hand, the sheer "size" of large positions in the market reduces their liquidity and ability to withdraw quickly; on the other hand, holding leveraged long positions in a high funding fee environment means paying an expensive ticket every day to continue betting on the rise. When sentiment and prices suddenly reverse, these costs can quickly amplify the perception of losses, making it difficult for large funds that were originally in an absolute advantageous position to exit unscathed.
The Shadow of Tariffs: The Resonance Impact of Macro and Leverage
Shifting the perspective from individual accounts back to the macro background, this flash crash occurred within a time window widely defined as a sensitive period for EU and US tariff policies. Concerns about the escalation of global trade frictions and pressure on cross-border liquidity have been rising, with a tug-of-war between risk aversion and risk appetite intertwining traditional markets and crypto assets. Participants in the crypto market gradually realized that the price movements in this cycle could no longer be completely detached from macro policies and the global liquidity environment; the weight of external variables was rapidly increasing.
In this context, several market participants mentioned that "the tariff threat from Trump may be one of the triggering factors." This statement is not an official conclusion but rather a result of multi-source market interpretations and public discourse, reflecting the psychological process of traders and institutions as they reconstruct risk expectations. As discussions about tariff threats intensified, some funds began to adjust their risk exposures in advance, and under the polarization of sentiment and the amplification effect of information, any news regarding policy uncertainty could become the last straw that breaks the high-leverage structure.
The key point is that macroeconomic uncertainty does not appear in isolation. It combines with a market structure that is already biased towards long positions and high leverage, amplifying what might have been merely a "routine technical correction." When the long side is filled with funds chasing upward movements, while short and hedging positions are clearly insufficient, once an external bearish signal appears, the downward space for prices can be simultaneously extended by sentiment and the forced liquidation chain, creating a chain feedback loop from news to price and from price to liquidation.
The Fear Index Turns: From Over-Optimism to Passive De-Leveraging
Changes in sentiment can be concretely represented through the trajectory of the Fear and Greed Index. Before this flash crash, the index was in a near-neutral range, reflecting a moderately optimistic atmosphere of "neither extreme greed nor obvious panic." However, after a short wave of liquidations, the index quickly fell back to around 44, approaching the panic side again. This change indicates that after experiencing the reality of liquidations and unrealized losses, the collective risk appetite of the market has significantly contracted, with traders shifting from "willing to leverage and chase prices" to "more willing to observe and reduce positions defensively."
Combining the structural characteristic of a high proportion of ETH/BTC long positions in this round of liquidations, it can be seen that this volatility was more like a concentrated correction of the previous excessive optimistic pricing rather than an unexpected black swan. The widespread liquidation of long positions was essentially a collective punishment for previously underestimating macro risks, funding fee costs, and tail risks of volatility. When optimistic sentiment combines with high valuations and high leverage, the upward space is excessively consumed in advance, and the fragility during downturns will naturally be amplified.
The impact of the liquidation wave on subsequent market behavior cannot be ignored either. In the short term, a large number of high-leverage longs were passively forced out, leverage ratios were forcibly reduced, and the holding structure of perpetual and futures contracts was reset; some whales and institutions, after encountering unrealized losses and giving back profits, were forced to reduce positions or shorten holding periods to lower risk exposure. Although this process is accompanied by pain, it has, to some extent, created new gaming space for spot and mid-to-low leverage funds. After the leverage chain was compressed, subsequent market fluctuations may be driven more by the inflow and outflow of spot and neutral strategies rather than a single-direction high-leverage bet.
Before the Next Black Swan, What Kind of Loss Can You Endure?
Breaking down the entire event reveals that its origins are not from a single dimension but rather the result of a double whammy: on the external level, macroeconomic bearish factors like tariff threats were concentrated and released during a policy-sensitive period, undermining optimistic expectations for global liquidity and risk appetite; on the internal level, the highly concentrated leveraged long positions and the long-term high funding rates formed a system that is extremely sensitive to price declines. The combination of both led the crypto market to exhibit a far more severe reaction than expected when faced with what is not an uncommon bearish signal, with support levels being breached in a short time and the liquidation chain rapidly expanding.
For every trader, the insights brought by this flash crash are not abstract. In a macro-sensitive period, blindly increasing leverage ratios, ignoring the continuous consumption of funding fees, and concentrating positions on a single direction and narrative essentially amplify one's exposure to tail risks. The truly controllable variables are not when policy details will be finalized or which news will become the "final blow," but whether you have left enough safety margins and exit strategies for your positions at any given moment.
Future similar macro shocks can almost be viewed as "inevitable to occur again, but the timing is unknown." Attempting to precisely predict the rhythm of every policy change and market reaction often leads to getting stuck in the quagmire of information noise and emotional fluctuations. In contrast, those participants who are more cautious and disciplined in position management, leverage control, and risk planning are more likely to turn these sudden events into manageable costs that still seem rational in hindsight. Before the next black swan, everyone needs to answer one question: in the worst 24 hours, what kind of loss can you truly endure?
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