Crypto Markets Face Turmoil as Liquidity Concerns Trigger Massive Sell-Off

The cryptocurrency market endured a brutal sell-off this week as investor anxiety mounted over stagnating US liquidity following President Donald Trump’s nomination of Kevin Warsh to lead the Federal Reserve. The move sent shockwaves through digital asset markets, with Bitcoin exchange-traded funds (ETFs) recording three consecutive days of outflows totaling $431 million on Thursday alone, according to Farside Investors data.

Bitcoin’s price briefly plummeted to $60,074 on Friday before staging a partial recovery to trade above $64,930 as of 7:49 a.m. UTC. The volatility comes as markets grapple with expectations that Warsh—who served as a Fed governor from 2006 to 2011—will continue the interest rate cut trajectory while potentially signaling that broader market liquidity is expected to “stabilize rather than meaningfully expand,” according to Thomas Perfumo, economist at crypto exchange Kraken.

The industry witnessed its 10th-largest liquidation event on January 31, as more than $2.56 billion in leveraged positions were wiped out, data from derivatives platform CoinGlass reveals. This massive cascade of liquidations underscores the fragility of the current market structure and the heightened sensitivity to macroeconomic signals.

TRM Labs Achieves Unicorn Status with $70M Funding Round

Blockchain intelligence platform TRM Labs completed a landmark $70 million Series C funding round, valuing the company at $1 billion and cementing its status as the latest crypto unicorn. The investment round was led by seed investor Blockchain Capital, with participation from Goldman Sachs, Bessemer Venture Partners, Brevan Howard Digital, Thoma Bravo, Citi Ventures, and Galaxy Ventures.

TRM Labs is positioning itself at the forefront of combating cryptocurrency-related cybercrime by equipping public and private institutions with AI-powered solutions. The company’s technology specifically targets illicit activities that increasingly rely on automation, from money laundering to ransomware operations.

“At TRM, we’re building AI for problems that have real consequences for public safety, financial integrity, and national security,” said Esteban Castaño, co-founder and CEO of TRM Labs. “This funding allows our world-class team to innovate alongside institutions on the front lines of the most consequential threats.”

The substantial investment round signals growing institutional confidence in blockchain analytics platforms, with traditional financial giants like Goldman Sachs and Citi Ventures joining the funding, demonstrating the sector’s maturation and mainstream acceptance.

Avalanche RWA Tokenization Surges 950% as BlackRock’s BUIDL Expands

Avalanche blockchain network experienced explosive growth in institutional adoption during Q4 2025, with real-world asset (RWA) tokenization driving the total value locked to new heights. The network saw a 68.6% quarter-over-quarter increase and nearly 950% year-over-year growth, pushing the value of tokenized RWAs above $1.3 billion.

The catalyst for this remarkable growth was BlackRock’s $500 million USD Institutional Digital Liquidity Fund (BUIDL), which launched on Avalanche in November. This institutional-grade money market fund has become a cornerstone of the network’s RWA ecosystem, demonstrating traditional finance’s increasing comfort with blockchain-based asset management.

Fortune 500 fintech giant FIS further bolstered Avalanche’s position by partnering with Avalanche-based marketplace Intain to launch tokenized loans. This partnership enables 2,000 US banks to securitize over $6 billion worth of loans on the Avalanche blockchain, creating unprecedented liquidity in traditionally illiquid markets.

The S&P Dow Jones also entered the fray by partnering with Dinari, an Avalanche-powered blockchain, to launch the S&P Digital Markets 50 Index. This innovative product tracks 35 crypto-linked stocks and 15 crypto tokens on Avalanche, bridging traditional market indices with digital assets.

“Traditional finance firms are increasingly confident about experimenting with tokenization, as the Securities and Exchange Commission has become more open to crypto products over the past year,” noted industry analysts.

Jupiter Secures $35M Investment from ParaFi Capital

Jupiter, the Solana-based onchain trading and liquidity aggregation protocol, secured a $35 million strategic investment from ParaFi Capital, marking its first outside capital injection after years of bootstrapped growth. The transaction involved token purchases at market prices with no discount and an extended lockup period, settled entirely in Jupiter’s JupUSD stablecoin.

The investment comes as Jupiter has processed more than $1 trillion in trading volume over the past year and expanded beyond swap routing into perpetuals, lending, and stablecoins. The deal also included warrants allowing ParaFi Capital to acquire additional tokens at higher prices, a structure designed to reflect long-term alignment between the parties.

Jupiter’s recent product expansion includes the October launch of a beta version of its onchain prediction market developed with Kalshi, followed in January by the introduction of JupUSD, a Solana-native, dollar-pegged stablecoin built in partnership with Ethena Labs.

The native JUP token responded positively to the news, climbing approximately 9% over the past 24 hours, according to CoinGecko data.

Aave Simplifies Strategy, Winds Down Avara Brand

Aave Labs announced it is sunsetting its “umbrella brand” Avara as part of a strategic refocus on decentralized finance and simplified branding. Aave founder and CEO Stani Kulechov explained that Avara, which encompassed projects including the Family crypto wallet and previously the social media platform Lens, “is no longer required as we go all in on bringing Aave to the masses.”

The Apple iOS-based Family crypto wallet is also being wound down as the team has “learned that onboarding millions of users requires purpose-built experiences, such as savings, rather than generic, open-ended wallet experiences.”

This move marks Aave’s latest effort to refocus on products such as its flagship lending protocol. Last month, Aave handed stewardship of Lens to the Mask Network, with Kulechov stating that Aave’s participation in the protocol would be reduced to an advisory role so it can focus on DeFi.

“We are now united as one team of world-class designers, engineers, and smart contract experts, aligned around a single mission: bringing DeFi to everyone,” Kulechov stated.

Step Finance Suffers $27M Breach as STEP Token Crashes 90%

Step Finance, a decentralized finance portfolio tracker on Solana, disclosed a severe security breach that led to the compromise of several treasury wallets, triggering a catastrophic sell-off in its native token. The platform revealed that “several of our treasury wallets were compromised by a sophisticated actor during APAC hours. This was an attack facilitated through a well-known attack vector.”

Onchain data reviewed by blockchain security firm CertiK shows that roughly 261,854 Solana (worth around $27.2 million) was unstaked and transferred from Step Finance-controlled wallets. The team has not yet confirmed the total scale of the losses or disclosed how the attacker gained access.

The STEP token experienced a devastating crash, plummeting approximately 90% following the announcement. The incident highlights the ongoing security challenges facing DeFi protocols and the devastating impact that treasury compromises can have on token valuations.

It remains unclear whether any user funds were affected beyond protocol-owned assets, though the breach has significantly damaged confidence in the platform.

DeFi Market Overview

According to data from Cointelegraph Markets Pro and TradingView, most of the 100 largest cryptocurrencies by market capitalization ended the week in negative territory. Privacy-preserving Zcash (ZEC) token fell 35% to record the week’s biggest decline in the top 100, followed by the Story (IP) token, down 34% during the past week.

The total value locked in DeFi protocols remained under pressure as the market correction rippled through the sector, with investors reassessing risk exposure across multiple platforms and assets.

Tags: cryptocurrency sell-off, Bitcoin ETF outflows, Federal Reserve liquidity, TRM Labs unicorn, Avalanche RWA tokenization, BlackRock BUIDL, Jupiter Solana investment, Aave DeFi refocus, Step Finance hack, crypto security breach, DeFi market crash, institutional crypto adoption, blockchain analytics funding, Solana ecosystem, DeFi portfolio tracker breach, STEP token crash, cryptocurrency liquidation event, Kevin Warsh Fed nomination

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• “Crypto markets bleed as Fed nomination triggers $2.56 billion liquidation tsunami”
• “TRM Labs becomes blockchain’s newest unicorn with Goldman Sachs backing”
• “Avalanche RWA tokenization explodes 950% as BlackRock enters the arena”
• “Jupiter processes $1 trillion in volume, secures $35M from ParaFi Capital”
• “Aave kills Avara brand to focus laser-sharp on DeFi domination”
• “Step Finance loses $27M in Solana hack as STEP token crashes 90%”
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• “Bitcoin ETF outflows hit $431M as institutional confidence wavers”
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