Trump's New Tariffs Trigger Massive $2 Billion Crypto Liquidation
By: Eliza Bennet
The cryptocurrency market faced a significant downturn after the imposition of aggressive trade tariffs by President Donald Trump. Bitcoin, the world's largest cryptocurrency, saw its value plummet to a one-month low of $92,000 during Asian trading hours. This drop triggered one of the largest liquidation events seen in the past year, effectively wiping out substantial gains accrued post Trump's electoral victory in December 2024.
On January 31, Bitcoin's depreciation began when it slipped from $105,000 to $102,000 in mere hours. This decline sustained momentum over the weekend, causing further devaluation below the $100,000 threshold, setting a grim tone for the broader cryptocurrency market.
The downturn affected various altcoins, with Ethereum, the second-largest cryptocurrency, losing nearly 20% of its value and settling slightly above the $2,500 level. Solana saw a reduction of 10%, landing at $195. Other notable cryptocurrencies such as XRP, Dogecoin, and Cardano experienced declines of 17% to 20%, compounding the market's distress.
This market response is attributed to Trump's newly imposed tariffs on key trading partners, namely Mexico, Canada, and China. As articulated by analysts from the Singapore-based trading firm QCP, these tariffs instigated a broad market sell-off, impacting equities across different regions. Gold prices dipped, while oil experienced a price hike, underlining the volatility across various asset classes.
The liquidation frenzy wiped more than $2 billion from the crypto market, affecting approximately 742,000 traders, as reported by CoinGlass. Long position traders bore the brunt, suffering a combined loss of around $1.88 billion, compared to the $379 million lost by those holding short positions.
Ethereum traders experienced the highest level of liquidations, with losses reaching $611 million. Bitcoin traders followed closely, enduring a liquidation total of $411 million. One of the most severe single liquidation episodes occurred on the Binance platform, where a $25 million Ethereum trade was completely nullified.
Arthur Hayes, co-founder of BitMEX, cautioned that further losses might follow. He speculated that relief would only arrive if a significant financial institution faced a crisis, which could prompt the Federal Reserve to inject liquidity into the market.
