Crypto Suffers Its Biggest Liquidation on Record | ForkLog
On February 3, the cryptocurrency market faced a significant downturn following statements about aggressive tariffs on imports into the United States. This announcement led to a sharp decline in total crypto market capitalization, which fell by 11.7% to $3.16 trillion.
The American authorities are implementing additional 25% levies on imports from Canada and Mexico, along with a 10% tariff on goods from China. Further measures are anticipated concerning trade with the European Union.
Bitcoin’s price experienced a substantial decrease, hitting a low of $91,281. It currently trades near $94,500, with a market capitalization of $1.87 trillion.
Ethereum also faced a downturn, falling below a three-month low of $2,400. After a slight recovery, it now trades around $2,600.
XRP, a cryptocurrency from Ripple, dropped below $2, losing more than 20% of its market value within hours. At present, the price has recovered slightly above $2.5.
Several large altcoins experienced heavy drawdowns. ADA fell by about 30%, AVAX by 25%, DOGE by 24%, and LINK by 23%, each losing over 20% of their market capitalizations.
The overall market decline resulted in a significant loss for the Trump-linked project World Liberty Financial (WLFI), whose crypto portfolio fell by $51.7 million, or 21%.
Bitcoin’s dominance increased, topping 64%, though it has since settled to 61.7%.
This sharp sell-off resulted in the largest liquidation event in crypto history, amounting to approximately $2.27 billion. Over the past 24 hours, positions worth $615.72 million in ETH pairs, $417.77 million in BTC, and $123.3 million in XRP were forcibly closed.
“The worst day of liquidations in the history of cryptocurrencies and altcoins,” commented Michaël van de Poppe, an analyst and founder of MN Trading. “Much worse than the FTX or Luna collapses.”
Economist Alex Krüger notes that the tariffs announced were considerably more severe than markets had expected. This development is likely to impact the stock market and the broader US economy. He identifies bitcoin among the “risk assets” that could be adversely affected.
Krüger suggests that despite the negative news, there is hope for crypto markets. The market has likely sold off heavily in anticipation of the tariff news, which might limit the depth of further declines. This is particularly relevant for altcoins, which suffered significant losses.
In the days to come, market movements will largely depend on news headlines, and trends could shift in either direction. Krüger is uncertain about whether the market has reached a local bottom or if bitcoin will test the lower range at $90,000 once more. He remains optimistic that trading partners’ retaliatory measures won’t be extreme and that tariffs might be reduced swiftly through negotiations.
Krüger also predicts that the aggressive policy stance will bolster the dollar’s dominance initially. However, he warns that this might eventually lead to a weaker currency as the economic impact becomes apparent.
In response to the tariffs, Prime Minister Justin Trudeau has planned to impose matching 25% tariffs on approximately $105 billion of American imports. Mexico is also preparing countermeasures, although details have yet to be revealed.
The US president plans to engage in discussions with the leaders of Canada and Mexico to address the situation. The new tariffs are set to be enforced by February 4.
Earlier in February, indications of a possible market peak and a shift in market dynamics were highlighted by industry analysts, marking a cautionary stance for investors. The unfolding developments in international trade policies continue to exert substantial influence over the volatile cryptocurrency markets.
