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U.S. President Donald Trump’s threat to impose a 100% tariff on Chinese imports generated significant turmoil in global markets, as mentioned earlier. The announcement made via Truth Social led to a rapid decrease in risk appetite, causing liquidations worth billions of dollars in the crypto market during the Asian session. According to CoinGlass data, $19.1 billion worth of positions were liquidated within just 24 hours, with $16.7 billion coming from long positions.
Uncertainty in U.S. Data Deepens the Crisis
Bitcoin $112,269 briefly dropped to $102,000 before recovering to $113,294 by midday. Ether rose to $3,844, yet the CoinDesk 20 Index dropped by 12.1%. The total cryptocurrency market capitalization fell to $3.87 trillion. This sharp sell-off marked a liquidation ten times larger in dollar terms than those during the 2022 FTX collapse or the pandemic-induced sell-offs.
Trade war concerns, reignited by Trump’s statements, compounded with the impact of the U.S. government shutdown. The lack of economic data releases due to the shutdown made it difficult for investors to navigate the markets. Despite the volatility, Ethena’s team reported that issuance and redemption of the USDe stablecoin continued smoothly, with collateral ratios maintained through gains from short positions.
Additionally, the delayed reporting of liquidation data by major exchanges like Binance fueled suspicions that the total liquidation amount might be higher than reported. This situation triggered panic selling among investors, leading to a chain reaction of declines.
Ripple Effects on European and Asian Markets
Trump’s trade move impacted not just the crypto market but also shook Asian and European stock markets. The Hong Kong Hang Seng Index dropped by 3% and Japan’s Nikkei 225 by 2.8%. On the same day, Nasdaq futures also turned red, indicating a global investor shift towards risk aversion.
On the crypto front, analysts suggest that this decline might not signal a long-term trend change. Some market commentators recall that crypto markets have experienced rapid recoveries following similar political statements in the past, arguing that the current correction might be a short-term “cooling” phase.
In conclusion, Trump’s statements highlighted once again how sensitive crypto markets are to global political risks. However, this situation also indicates that the market is in the process of maturing. The continued interest from institutional investors and the stability in the stablecoin market suggest that the potential for recovery is strong. Despite uncertainty, the crypto market continues to demonstrate resilience.
