Red clay is prone to cracking in desiccating environments, with criss-cross cracks compromising soil structures and inducing slope instability. Under natural hygrothermal conditions, a desiccation test of red clay slurry was performed with a self-made device and digital image correlation (DIC) technology to study the crack evolution and quantitatively analyse the relationships between moisture content, displacement, strain and cracks. The results showed that cracks were usually initiated by subdividing and intersecting with other cracks at right angles. The main cracks were initiated first and had the longest duration; the stabilised main cracks were longer and wider than secondary cracks. DIC technology was used to monitor crack evolution dynamically. Based on the areas of strain concentration, the locations of early-initiated cracks and propagation trends could be preliminarily predicted. The failure strain in cracking was related to the moisture content, while crack evolution was related to the Atterberg limits of the red clay. The soil shrinkage exhibited anisotropic behaviour, with greater vertical shrinkage at the soil clod centre compared with the edges. In contrast, the horizontal displacement and maximum principal strain at the soil clod centre were smaller than those at the edges. These findings contribute to providing guidance for formulating engineering geological hazard control measures.