48 hours liquidation of $1.8 billion! Bitcoin crashes below 88,000, wiping out the year's gains

Bitcoin fell below $88,000 to $87,790 on Tuesday, erasing all gains for 2026. Coinglass reports over $1.8 billion in liquidations in the past 48 hours, with 93% being longs. The total crypto market cap evaporated by $225 billion to $3.08 trillion. Trump’s tariff threats and the Japanese bond market collapse triggered a “sell US” trade, with the 10-year Japanese government bond yield soaring 19 basis points in two days.

$1.8 billion in liquidations in 48 hours, 93% longs wiped out

(Source: Trading View)

Affected by US President Trump’s tariff threats and turmoil in the Japanese bond market, Bitcoin dropped another 4% on Tuesday, with over $1.8 billion worth of Bitcoin liquidated in the past 48 hours. Later Tuesday evening, Bitcoin on Coinbase fell to $87,790, the lowest since December 31. Coinglass reports that over $1.8 billion was liquidated in the past 48 hours, approximately 93% of which were long positions.

This scale of liquidation is rare in 2026, indicating that market leverage was at relatively high levels earlier this year. The 93% long liquidation ratio further reveals that investors held predominantly bullish positions, which became casualties of chain liquidations when prices unexpectedly declined. The liquidation mechanism triggers stop-losses and forced liquidations, which in turn push prices lower, creating a vicious cycle.

The asset has now wiped out all gains this year, falling 10% from the high near $98,000 earlier this year. It also broke below the 50-day exponential moving average (EMA), which had provided support during recent rebounds. The total crypto market cap has evaporated $225 billion, the largest decline since mid-November, now standing at $3.08 trillion.

This full-year retracement has a profound psychological impact. Many investors who bought early in the year are now at a loss, and the experience of “making profits only to lose them back” is often more frustrating than pure losses, potentially prompting more investors to exit. Breaking below the 50-day EMA is a clear technical signal of weakening momentum, as this moving average has been a key support line for the bulls over the past months.

Six sigma chaos in Japanese bonds triggers global liquidity crisis

Reuters reports that Trump’s renewed tariff threats have led to another wave of “sell US” trade, a pattern that emerged after tariffs were announced last April. While many attribute market volatility to Trump’s escalation of the trade war, other factors may also be at play.

Dan Tapiero, founder and CEO of 50T Funds, states that this “crash” was caused by “the complete collapse of the Japanese bond market spreading to all markets.” Tapiero predicts gold prices will continue to rise, with gold reaching a record high of $4,835 per ounce on Tuesday, closely followed by Bitcoin.

US Treasury Secretary Scott Bessent also expressed the same view on Tuesday: “I believe the market decline is due to six standard deviations of volatility in the Japanese (10-year) government bond market over the past two days.” He added that this “has nothing to do with Greenland.” Reuters reports that, amid expectations of increased government spending and reduced liquidity, the yield on the 10-year Japanese government bond soared nearly 19 basis points in two days, with the 30-year yield experiencing its largest single-day increase since 2003.

A six-standard-deviation move is an extremely rare event in financial markets. Statistically, such an event has a probability of about one in a billion, indicating that Japan’s bond market is experiencing historic turbulence. This intense volatility quickly spread globally, as Japan is the world’s third-largest economy, and its bond market stability is crucial to the global financial system.

Arbitrage unwinding tightens global liquidity

Jeff Ko, chief analyst at CoinEx Research, told Cointelegraph that the surge in Japanese bond prices is driven by pre-election financial uncertainty and market volatility. “This could accelerate the unwinding of arbitrage trades, further tightening a key source of global liquidity,” he said. “Besides the trade war, a capital war seems to be brewing.”

JPY arbitrage trading is a vital source of liquidity in global financial markets. Investors borrow yen at low interest rates and exchange it for USD or other currencies to invest in higher-yield assets. When Japanese bond yields rise, the cost of borrowing yen increases, squeezing or eliminating arbitrage profit margins. This forces traders to unwind arbitrage positions, selling risk assets and buying back yen to repay loans. This wave of unwinding drains liquidity from global markets, causing risk asset prices to fall.

“As geopolitical tensions escalate, capital flows are shifting from US assets. Bitcoin finds itself caught in a tug-of-war — although it shares some characteristics with hard assets like gold, due to its high sensitivity to liquidity conditions, it is currently being sold off,” Ko’s analysis reveals Bitcoin’s awkward position in the current environment: it is neither a pure safe-haven asset (like gold, which rises during crises) nor a typical risk asset (like tech stocks, which benefit from ample liquidity), but rather in a gray area between the two.

This tightening of liquidity impacts Bitcoin liquidation on multiple levels. First, liquidity scarcity thins market depth, causing larger price impacts from the same sell volume. Second, leveraged traders face higher financing costs, reducing their incentive to open new positions. Third, as global liquidity tightens, institutional investors may be forced to sell more liquid assets, including Bitcoin, to meet margin requirements elsewhere.

Gold hits new high while Bitcoin crashes — the divergence logic

Gold hit a record high of $4,835 per ounce on Tuesday, contrasting sharply with Bitcoin’s collapse. This divergence reveals differing market perceptions of the two assets. Under the dual pressures of geopolitical crises and liquidity tightening, investors are favoring gold over Bitcoin as a safe haven, challenging the narrative of “Bitcoin as digital gold.”

Tapiero predicts gold will continue to rise, with Bitcoin following closely behind. This forecast is based on the long-term positive correlation between Bitcoin and gold, with historical data showing they tend to move together over extended periods. However, the short-term divergence indicates Bitcoin needs to digest liquidity shocks and liquidation pressures before reasserting its safe-haven role.

Bessent’s statement that “it has nothing to do with Greenland” attempts to shift market focus from Trump’s tariffs to the Japanese debt crisis. While this official stance has some merit, it overlooks the fact that Trump’s tariff threats are a significant trigger for risk-off sentiment. The market’s actual reaction is a combination of multiple factors: Trump’s tariffs provide a reason to sell, while the Japanese bond turmoil provides the motive, together causing the $1.8 billion in liquidations over 48 hours.