The cryptocurrency market experienced a significant downturn on February 1, 2026, with over $2.5 billion in liquidations across various exchanges. A notable incident involved a trader losing over $220 million on a leveraged Ethereum (ETH) position, as the price of ETH fell by up to 10%. This forced liquidation on the Hyperliquid exchange was one of the largest in recent history.
The liquidation coincided with a sharp 17% decline in ETH’s price, impacting other major cryptocurrencies like Bitcoin and Solana. This massive sell-off highlights the inherent risks associated with leveraged trading in volatile market conditions, where minor price fluctuations can result in substantial losses.
The Role of Liquidations in Market Dynamics
Liquidations occur when the value of a trader’s position falls below a certain threshold, prompting the exchange to automatically close the position. Particularly in leveraged trading scenarios, such liquidation processes can lead to significant losses, as traders are essentially borrowing funds to amplify their positions. If market prices move against them, the exchanges sell off their holdings to cover the borrowed amount.
In the 24 hours preceding February 1, liquidations were widespread across multiple exchanges. A total of 434,945 traders were affected, with the majority of the losses stemming from long positions. Specifically, over $2.42 billion of the $2.58 billion total came from traders who had bet on rising prices. This heavy concentration of long positions during liquidation events often indicates market panic, usually followed by price reversals.
Ether’s Leading Role in the Sell-Off
Ether, which experienced the largest price drop among major cryptocurrencies, saw over $1.15 billion worth of positions liquidated. ETH’s decline was particularly significant, as it led the broader market downturn, which also adversely affected Bitcoin and Solana.
In total, more than $788 million worth of Bitcoin positions were liquidated, followed by nearly $200 million in Solana positions. The Ethereum market’s extensive liquidation events occurred amid low liquidity, making it more susceptible to abrupt price changes. A lack of liquidity can provoke sharper price movements, which in turn can trigger a cascade of forced liquidations.
Hyperliquid Exchange Bears the Brunt of the Losses
The Hyperliquid exchange, renowned for its decentralized derivatives trading, was particularly hard-hit by this wave of liquidations, recording over $1.09 billion in total liquidations. Nearly all of this amount stemmed from long positions, accounting for more than 40% of total losses across exchanges in the 24-hour period.
Following Hyperliquid, Bybit and Binance also reported significant liquidations, with Bybit seeing $574.8 million and Binance around $258 million. The severity of these liquidations underscores the escalating role of leverage in the crypto market and its ramifications for volatility amid sudden price shifts.
Impact of Market Liquidity on Forced Liquidations
The current wave of liquidations accentuates the influence of market liquidity on price stability. In scenarios where liquidity is scarce, even minor price movements can lead to significant cascades of forceful liquidations. This risk is magnified by leveraging, which heightens the potential for considerable losses when market dynamics shift rapidly.
As demonstrated in the wake of ETH’s 17% drop, the resulting sequence of liquidations can sometimes signal the cessation of a price downtrend, potentially paving the way for market reversals. Traders and investors monitor liquidation data to assess market sentiment and predict potential turning points in price movements.
