The very best stage of margin utilization by US merchants in historical past has, sadly, led to historic underperformance in crypto costs as speculators re-learned timeless knowledge: leverage works each methods.
After spending 2025 by means of January 2026 constructing their largest leveraged positions in historical past, bets on digital belongings have unraveled with unnerving velocity.
In January 2026, US margin debt had surged to a file $1.28 trillion — its ninth consecutive month-to-month enhance and a 50% rise from April 2025. That monetary leverage added bids to crypto belongings which made new all-time highs in Could, July, August, and October 2025.
Then, regardless of buyers persevering with to pile on extra margin debt than ever, costs collapsed 47% and shed $2 trillion in mixed market capitalization as a sector rotation to AI and treasured metals ensued.
Crypto losses since October are staggering.
Chart of complete crypto market cap, April 2025 to current. Supply: TradingView
US margin debt elevated $53 billion from December to January alone. Worse, the ratio of margin to actual disposable private earnings exceeded 6.0% in January for the primary time on file.
That ratio measures extra monetary leverage in January 2026 relative to earnings than the dot-com mania.
Leverage-fueled demand flows into crypto devices like bitcoin (BTC) futures, spot and leveraged ETFs, name choices, and publicly traded crypto corporations. Though extra leverage can amplify beneficial properties, it additionally amplifies crashes.
Though conventional margin statistics are an incomplete measure of complete systemic threat on crypto, which has huge portions of opaque exchanges and commerce knowledge APIs managed by offshore entities with little to no regulatory oversight, it may well nonetheless inform some evaluation concerning the causes of crypto volatility.
A supernova of crypto leverage that worn out $2 trillion
Some crypto derivatives merchants spent mid-2025 constructing their largest leveraged positions in historical past, then watched all of their paper beneficial properties evaporate.
Mixture crypto futures open curiosity peaked above $220 billion on October 6, 2025. Inside per week, the trade started to crash and by no means seemed again.
October 10 produced greater than $19 billion in complete liquidations throughout exchanges, in keeping with CoinGlass knowledge — the one largest day of pressured closures in crypto historical past.
Many noticed Binance as a handy scapegoat.
Report-setting volatility continued amid record-setting margin ranges. On February 5, 2026, one other flash-crash drove BTC from $73,000 to $62,000 and worn out 10-figure place values inside a single day.
Worst day of realized losses from BTC liquidations
Glassnode estimated that February 5’s crash produced $3.2 billion in realized losses from liquidated BTC trades — the biggest single-day realized loss in Glassnode’s recorded historical past that surpassed even October 10, 2025, the FTX chapter in November 2022, or the Could 2022 collapse of Terra/Luna.
By late February, crypto’s margin buying and selling hangover had set in.
CoinGlass’ Crypto Worry & Greed Index fell to 5 out of 100 — a never-before-seen ranking that exceeded its Three Arrows Capital chapter low of six in June 2022, and its COVID-19 low of seven in March 2020.
As of writing, the index nonetheless stays close to historic lows at 9, or “extreme fear.”
Losses amid file margin ranges have additionally drawn out spot BTC from US ETFs. Particularly, spot BTC ETFs misplaced $4.5 billion in internet outflows by means of the primary eight weeks of 2026, in keeping with Investing.com.
The leveraged unwind of Technique
Including insult to harm, software program company-turned-leveraged BTC acquirer Technique turned the most-shorted massive cap inventory within the US final month, in keeping with knowledge from FactSet cited by a number of retailers.
The corporate held 717,722 BTC over this weekend, bought at a median value close to $76,020 per coin. With BTC buying and selling within the mid-$60,000s, the corporate faces unrealized losses within the billions.
Margined short-sales in opposition to Technique and its BTC, on this case, have really stood out as a uncommon success story amid crypto’s margin mania of January 2026.
Leverage all the time works each methods. Though US margin debt at $1.28 trillion is an unbelievable headline, the true story is that leverage has seeped into each layer of crypto valuations — from listed securities in brokerage accounts to perpetual swap venues in tax havens.
With losses liquidating collateral and forcing cascading gross sales, every layer’s losses have been feeding the following since October.
