The cryptocurrency market encountered a major decline on February 3, 2025, due to new U.S. tariffs, leading to over $2.2 billion in leveraged position liquidations.
Market Impact of U.S. Tariffs
Under Donald Trump's leadership, the U.S. introduced tariffs of 25% on Canadian and Mexican imports and 10% on Chinese goods. These measures aimed at resolving trade imbalances and national security issues triggered retaliatory actions from the affected countries. The Mexican and Canadian governments started trade barrier initiatives against U.S. products, while China prepared to take the matter to the WTO.
Cryptocurrency Market Response
These developments led to significant declines across the cryptocurrency market. Bitcoin experienced a 6.5% decline, reaching $91,200 before slightly recovering to $93,600. Ethereum suffered a severe 20% drop, falling to $2,500. CoinGlass reported $1.87 billion worth of long positions were liquidated and $345 million in short positions were sold.
Broader Market Effects
Beyond major cryptocurrencies, top-100 altcoins lost between 15% and 30%. The leveraging across the market exacerbated the downward price movements, intensified by successive liquidations.
Analysts caution against impulsive trading during periods of increased volatility. Current events mirror the Terra (LUNA) collapse and FTX downfall, marking this as the most intense market fall since the COVID-19 pandemic. The upcoming period will be critical to see if this drop is temporary or leads to a prolonged market downturn.
