Saturday, January 31, 2026 – The cryptocurrency market is facing its most severe stress test of the new year. Bitcoin has plummeted to $81,000 in early trading, marking the steepest Bitcoin price crash 2026 has witnessed so far. A perfect storm of macroeconomic anxiety and leverage flushing has wiped out approximately $1.75 billion in long positions across major exchanges within the last 24 hours. The sell-off is being driven by two primary catalysts: a rapidly strengthening U.S. Dollar Index (DXY) and intensifying fears over a federal government shutdown set to commence at midnight tonight.
$1.75 Billion Liquidation Storm Decimates Longs
The sudden volatility caught bullish traders off guard, triggering a massive cascade of crypto liquidations today. According to on-chain data, over 180,000 traders were liquidated as Bitcoin broke below the critical $85,000 and $83,000 support zones. The sheer scale of the wipeout—$1.75 billion—surpasses the liquidation figures seen during the correction in late 2025.
Analysts describe the event as a classic "liquidation cascade," where automatic stop-loss orders and forced margin calls create a feedback loop of selling pressure. "The market was over-leveraged on the long side, expecting a breakout to $90k," noted a senior analyst in recent Cryptovot market news. "Instead, we got a liquidity shock that flushed out weak hands instantly."
US Government Shutdown Markets Anxiety
Looming over the charts is the political deadlock in Washington. With the deadline for a spending bill passing at midnight this Saturday, January 31, the odds of a partial government shutdown have hit 80%. US government shutdown markets historically react with volatility, and crypto is proving to be the canary in the coal mine.
Investors are fleeing risk assets in anticipation of the shutdown, which would halt non-essential federal operations, including data releases from the Bureau of Labor Statistics and regulatory oversight by the SEC. This uncertainty has created a "risk-off" environment where liquidity is drying up. The lack of clarity regarding the shutdown's duration—whether it will be a weekend hiccup or a prolonged standoff—is driving capital into cash and Treasury bonds, leaving digital assets exposed.
The Dollar's Revenge
Compounding the pressure on crypto prices is the resurgence of the U.S. Dollar. The Dollar Index (DXY) surged to 97.14 on Friday, putting significant pressure on risk assets. As the dollar strengthens, dollar-denominated assets like Bitcoin become more expensive to hold, typically leading to inverse price action. This macro headwind is currently overpowering any bullish on-chain metrics, forcing Bitcoin to retest levels not seen since the start of the year.
Technical Analysis: BTC Support Level 80k is Critical
Technically, Bitcoin is now sitting at a precipice. The BTC support level 80k is widely considered the "line in the sand" by chartists. A clean break below $80,000 could open the door to a much deeper correction, with the next major support zone sitting at the Fibonacci retracement level of $71,000.
"We are seeing a defense of the $80k level right now," says technical analyst Sarah Jenkins. "However, the momentum indicators are flashing bearish. If the US government shutdown markets panic intensifies over the weekend, we could see a wick down to $78,000 before any meaningful recovery." Conversely, bulls need to reclaim the $84,000 level quickly to invalidate the current bearish structure.
Ethereum and Altcoins Bleed Heavily
As is typical during Bitcoin corrections, the broader market has suffered even steeper losses. The Ethereum price drop today has exceeded 6%, with ETH trading near vital support levels. Altcoins with lower liquidity have seen double-digit percentage drops, exacerbating the portfolio pain for diversified investors. The correlation between Bitcoin and Ethereum remains high, meaning ETH is unlikely to decouple and rally until Bitcoin finds a stable floor above $81,000.
Institutional Flows: Will They Buy the Dip?
Despite the carnage, there is a silver lining. Institutional investors, who have been waiting on the sidelines, may view this correction as a prime accumulation opportunity. The narrative of a bitcoin institutional buy dip is gaining traction, with reports of large OTC (Over-The-Counter) buy orders filling in the low $80,000s. Unlike retail traders who often panic sell, institutions tend to use liquidity events to enter positions at a discount.
As the clock ticks toward the midnight shutdown deadline, volatility is expected to remain extreme. Traders are advised to exercise caution, lower leverage, and closely monitor the news coming out of Capitol Hill. For now, all eyes are on the $80,000 fortress—will it hold, or is the crypto winter chill returning for a brief visit in 2026?
