TLDR
- Bitcoin fell below $89,000 on Tuesday, wiping out all gains made in 2026 and dropping to its lowest level since December 31
- Over $1.8 billion in crypto positions were liquidated in 48 hours, with 93% being long positions
- The crypto market lost $225 billion in total market capitalization, marking the largest decline since mid-November
- Japanese government bond yields surged to multi-decade highs, triggering panic across global financial markets
- U.S. Treasury Secretary Scott Bessent attributed market declines to Japanese bond market movements rather than tariff concerns
Bitcoin experienced a sharp decline on Tuesday, falling 4.2% to trade at $88,746 as of 7:50 p.m. ET. The price drop pushed the cryptocurrency to its lowest point since the end of last year.
The decline erased all of Bitcoin’s January gains. The asset had reached nearly $98,000 earlier this month but has now fallen 10% from that year-to-date high.
Over the past 48 hours, more than $1.8 billion in positions were liquidated across crypto markets. Long positions accounted for approximately 93% of these liquidations, according to data from Coinglass.
The broader cryptocurrency market saw significant losses. Total market capitalization dropped by $225 billion, falling to $3.08 trillion. This marks the largest decline since mid-November.
Ethereum also fell during the sell-off. The second-largest cryptocurrency dropped 7.3% to $2,953 in the same 24-hour period.
Traditional markets mirrored the crypto downturn. The S&P 500 and Nasdaq Composite both closed more than 2% lower on Tuesday. The Dow Jones Industrial Average fell 1.76%, marking the worst session since October for all three major U.S. benchmarks.
Japanese Bond Market Turmoil
The sell-off coincided with turmoil in Japan’s bond market. Japanese 10-year government bond yields jumped nearly 19 basis points over two days. The 30-year yields posted their biggest daily increase since 2003.
Japanese government bond demand is crashing:
Japanese insurers sold -$5.2 billion of bonds with maturities of 10+ years in December, the largest monthly sale since data began in 2004.
This marks the 5th consecutive monthly sale, the longest streak on record.
Over this period,… pic.twitter.com/B87xlfW8vm
— The Kobeissi Letter (@KobeissiLetter) January 21, 2026
U.S. Treasury Secretary Scott Bessent directly linked the market decline to Japanese bonds. He stated that markets were falling because the Japanese 10-year bond market experienced a six-standard-deviation move over two days.
Bessent said the movements had “nothing to do with Greenland,” dismissing connections to other geopolitical concerns.
Investors appeared to be bracing for increased government spending and reduced liquidity in Japan. A snap election is scheduled for February 8, adding to fiscal uncertainty.
Global Market Impact
Vincent Liu, CIO of Kronos Research, said the decline was driven by a risk-off macro backdrop and leverage flush. This triggered cascading liquidations across the market.
Peter Chung, head of research at Presto Research, described the situation as a “Sell America” trade. He noted that equities, treasuries, the dollar, and Bitcoin all fell while gold rose.
Gold reached an all-time high of $4,835 per ounce on Tuesday during the market turmoil.
Crypto-related stocks also declined. Coinbase closed down 5.6%, while Circle fell 7.5%. Strategy, the largest corporate holder of bitcoin, dropped 7.8%.
Jeff Ko, chief analyst at CoinEx Research, said the Japanese bond surge was driven by fiscal uncertainty and market volatility ahead of the snap election. He warned this threatens to accelerate the carry trade unwind, further tightening global liquidity.
Ko added that fund flows are shifting away from U.S. assets as geopolitical tensions mount. Bitcoin is caught between its characteristics as a hard asset like gold and its sensitivity to liquidity conditions.
Andri Fauzan Adziima, research lead of Bitrue, said traders are watching Bitcoin’s key support level at $87,000 to $88,000. A break below this level could lead to further drops toward $85,000.
