Quick Takes
- $2 billion worth of positions in Bitcoin (BTC), Ethereum (ETH), and other leading cryptocurrencies were liquidated within a day as Trump announced a 25% tariff on all imported goods and services from Mexico and Canada, with a 10% tariff for China.
- BTC dropped to its lowest level of the year, while ETH saw its price crash by more than 20%. Major altcoins such as XRP, SOL, and DOGE also faced heavy losses in the aftermath of the White House’s policy decision.
- Coinglass data suggests that over 450,000 traders liquidated nearly $2 billion worth of crypto investments, with $1.79 billion in long liquidations and $219 million in short positions. ETH and BTC led the chart, with $528 million, and $421 million suffered in long position liquidations.
- Experts anticipate the tariffs to create more inflationary pressure and the dollar to weaken as America’s trading partners look to enact countermeasures, inflicting downward pressure on crypto prices. However, it could be advantageous to Bitcoin as traditional investors and nation-states could turn towards the digital asset as an alternative store of value.
The global cryptocurrency market is in the red today, with major coins experiencing significant price declines as U.S. President Donald Trump announced a 25% tariff on imports from Canada and Mexico and a 10% tariff on Chinese goods. This resulted in a broad sell-off in risk assets like cryptocurrencies as investors reacted to fears of mounting inflationary pressures.
Bitcoin And Major Altcoins Drop To Yearly Lows As U.S. Imposes Tariffs On Canada, Mexico, And China
Bitcoin (BTC) dropped to its lowest level of the year, currently trading at $92,863 – down nearly 7% over the past 24 hours. Ethereum (ETH) suffered the biggest loss, with its value dropping over 20% to $2,572 at press time. Solana (SOL) is changing hands at $191.83, showing an 8.63% loss in price. Ripple (XRP) also faced steep lows, trading at $2.17 – down nearly 20% over the past day.
According to Coinglass data, over 450,000 traders liquidated nearly $2 billion in cryptocurrency positions, with long liquidations accounting for $1.79 billion, while short liquidations totaled approximately $219 million. While Bitcoin traders faced $421 million in liquidations, it was Ethereum traders who suffered the biggest losses, with $528 million in short and long positions exiting the market. Other cryptocurrencies such as XRP, DOGE, and SOL also saw considerable liquidations.
The overall crypto market capitalization has dropped to $3.12 trillion, shrinking by approximately 13.7% in less than a day as most digital assets recorded double-digit losses. The GMCI 30 Index, which measures the price performance of the top 30 crypto assets, fell 24.3% in the last 24 hours.
Speaking to crypto news outlet The Block, Min Jung, a research analyst at Presto Research, attributed that the market-wide sell-off was triggered by the White House’s decision to impose tariffs on energy and goods imported from China, Mexico, and Canada, which is set to go into effect on Tuesday, February 4. Jung also stated that this situation has reignited concerns over inflation as it could further pressure prices, weighing on risk assets such as crypto.
Kronos Research CEO Hank Huang noted that inflation caused by the tariff policy would force the U.S. Federal Reserve to maintain a higher interest rate environment for longer than previously anticipated.
Crypto Market Sentiment Starts To Vain As Trump’s Declares “Trade War”
Economists warn that Trump’s new tariffs could increase consumer costs as businesses could pass on additional expenses. While the White House maintains that the measures will strengthen American manufacturing, experts argue that they could worsen inflation and potentially trigger a trade conflict with the nations involved, causing job losses and supply chain disruptions.
Analysts also said the positive sentiment surrounding the crypto market, hyped up by Trump’s re-election and his unwavering support for the industry, has started to waver due to the macroeconomic fears and the lack of crypto-specific policy decisions since the 47th President took office on January 21.
Rachael Lucas, an analyst at BTC Markets, stated that the continued lack of stimulus from the Federal Reserve and high interest rates have “disproportionately” impacted altcoins, resulting in their underperformance. She also added that further market volatility could be expected as Trump’s trade policies evolve and any further escalation on the tariffs or changes to the Fed’s policy could impact investor sentiment.
Both Canada and Mexico announced a 25% counter-tariff that will take effect on the same day, while China is also expected to respond similarly. This has many dubbing the current situation as a “trade war”.
Analysts also believe that Trump’s new tariffs could lead to increased demand for assets such as Bitcoin as a hedge against inflation. Yet, many warn that the ongoing market volatility may continue to assert downward pressure on prices in the short term.
Jeff Park, head of strategies at Bitwise Asset Management, stated that Trump’s tariff policies could set the stage for a Bitcoin boom. He suggested that these measures could weaken the dollar, creating conditions that will be favorable for Bitcoin’s growth. The situation comes amid the U.S. grappling with the Triffin Dilemma, where the dollar’s global reserve status requires maintaining trade deficits with other countries to provide worldwide liquidity.
Park views the tariffs as a strategic move to temporarily weaken the dollar, which could potentially encourage countries to reduce their dependence on the dollar and diversify their reserves beyond U.S. Treasuries. He indicated that the combination of a weakened dollar and lower rates could ultimately create the right conditions for Bitcoin adoption. As the tariffs push inflation higher, affecting both domestic consumers and the U.S.’s international trade partners, foreign nations could be faced with currency debasement, forcing their citizens to turn towards Bitcoin as an alternative store of value.
South Korean Kimchi Premium For Bitcoin Hit Highest Level Since April 2024, Hinting At Growing Interest For The Asset
Amidst the chaos, South Korea’s Bitcoin kimchi premium hit a 10-month high as the price of BTC on domestic exchanges remained relatively steady. Kimchi premium refers to the price percentage gap when cryptocurrencies are trading higher in South Korean exchanges than elsewhere.
As per data from CryptoQuant, the BTC kimchi premium hit 9.7% early on Monday, marking the highest figure since April 2024 when the premium rose above 13%. The premium typically rises during a bull market when Korean investors make higher bids, but it can also spike during periods of panic selling, especially when the selling pressure is low on domestic exchanges compared to global markets.
The premium stems from Korean authorities shutting its markets to foreign investors while local investors who buy large amounts of crypto from foreign exchanges for arbitrage may be punished.
South Korea is home to one of the most active crypto markets in the world, which is heavily focused on altcoin trading. According to data shared by The Block, the country’s Upbit exchange was the fourth-largest centralized exchange by monthly trading volume in January, processing over $187 billion worth of transactions.
Despite the massive downtrend, Bitcoin continues to assert its dominance in the crypto market, making up 59.89% of its valuation. This is followed by Ethereum, which dominated 10.65% of all trades and transactions.
