Key points:
- President Donald Trump caused panic in the cryptocurrency market after announcing the advancement of the U.S. military towards Iran.
- The total market capitalization of cryptocurrencies decreased by more than 6% to 2.78 trillion dollars.
- Liquidations exceeding 1.7 billion dollars were recorded in the last 24 hours, mostly from long positions.
- The fear and greed index in the crypto market dropped to 16 points, its lowest level this year, indicating "extreme fear."
- The market has returned to levels of last November, re-testing a key support area for 6 months.
The collapse of the crypto market due to escalating geopolitical tensions
The market was expected to see a slight recovery in the second half of the week after neutral or slightly positive economic data, but geopolitical events changed the course completely. President Trump announced that the U.S. military is advancing toward Iran, prompting Russia and China to take counter-moves on the geopolitical chessboard, increasing the risk of war.
As a result, the market experienced a strong wave of liquidations, with the total market capitalization dropping from above $3 trillion to $2.78 trillion. The collapse resulting from Trump's announcement pushed prices to levels not seen since November, re-testing an important support area that lasted 6 months.
The fear and greed index reaches its lowest level
The fear and greed index in the crypto market dropped to 16 points over the last 24 hours, its lowest level this year, reflecting the market entering an "extreme fear" zone. This comes as expected since cryptocurrencies sit at the far end of the risk spectrum, prompting investors to rush to protect their capital amid rising geopolitical uncertainty.
This behavior is similar to what happened in early 2022 with the rising tensions between Russia and Ukraine. But this time, gold did not benefit as a safe haven; instead, gold fell by over 5% from its peak on Thursday, while the U.S. dollar index rose from a low of 95.5 to above 96.5, indicating a preference for cash as a safe haven.
Massive liquidations confirm the strong impact
The geopolitical escalation occurred at a time when the market was expecting a recovery, but was surprised by a strong wave of FUD (fear, uncertainty, and doubt). According to CoinGlass data, long liquidations exceeded $1.8 billion in the last 24 hours, with Bitcoin alone contributing about $800 million.
These liquidations confirmed the previous bullish bias, but raised the question: Will the market recover quickly, or will it remain suppressed? In 2022, the impact of geopolitical tensions lasted for weeks or months. Although macro conditions have changed now (greater institutional participation and a different regulatory environment), whale activity suggests short-term recovery expectations, while institutional activity reflects a deterioration in sentiment.
The general context
The collapse comes amid multiple reports of Bitcoin dropping to levels around $81,000-$84,000 on January 30-31, 2026, with losses reaching 6-7% in certain sessions, and total liquidations exceeding $1.7-1.8 billion. This coincides with other factors such as a potential government shutdown, winter storms, and changes in Fed policy, increasing pressure on high-risk assets like crypto.