Crypto Market Tanks Amid Trump Tariff Announcement: $2 Billion in Liquidations and Bitcoin Sudden Plunge

The crypto market has faced major turbulence following President Donald Trump’s announcement of new tariffs, resulting in a $2 billion liquidation wave. Bitcoin, which was already struggling, dropped to its lowest point since early January, falling below $100,000 and continuing its decline to $92,000, according to Coinglass data.

Trump Tariff Announcement Triggers Market Volatility

On Saturday, President Trump revealed plans to impose 25% tariffs on imports from Canada and Mexico, as well as a 10% tariff on Chinese goods. The decision, set to take effect Tuesday, is framed by the President as a strategy to tackle border security and address fentanyl trafficking—especially from Mexico. However, economists warn that these measures could exacerbate inflation by increasing consumer prices, as businesses are likely to pass on the additional costs.

While the White House argues that the tariffs will bolster American manufacturing, critics believe these tariffs could trigger a trade conflict, escalating inflation and straining global supply chains. As the tariffs were announced, the crypto market reacted sharply, with traders fearing the mounting inflationary pressures.

Crypto Market Reacts to Tariff Fallout

The tariffs sparked significant volatility in the crypto space. According to Coinglass, $1.7 billion worth of long position liquidations occurred in just 24 hours. This was largely driven by sharp drops in major cryptocurrencies like Bitcoin and Ethereum. Bitcoin traders suffered $421 million in liquidations, while Ethereum traders faced losses amounting to $528 million.

As a result, the overall crypto market capitalization shrank by 8%, with many assets suffering from double-digit losses. XRP and Dogecoin (DOGE) plummeted by 30%, Cardano (ADA) saw a 35% dip, and Solana (SOL) and Binance Coin (BNB) each dropped 15% in value.

The fallout of Trump’s tariffs caused widespread sell-offs, leaving investors scrambling to manage risks, even as some analysts predict a different trajectory for Bitcoin in the long run.

Could Trump’s Tariffs Be the Catalyst for a Bitcoin Boom?

While the tariffs have sparked short-term volatility, some analysts believe they could set the stage for a Bitcoin boom. Jeff Park, head of alpha strategies at Bitwise Asset Management, suggests that these tariffs could unintentionally create a favorable environment for Bitcoin’s growth.

Park points to the Triffin Dilemma, where the U.S., as the world’s reserve currency issuer, needs to maintain trade deficits to supply global liquidity. The new tariffs could weaken the U.S. dollar, driving countries to look for alternatives. This scenario, Park speculates, may pave the way for the creation of a multilateral agreement akin to a “Plaza Accord 2.0”. This deal could reduce the dominance of the dollar in favor of more diversified global reserves, making Bitcoin an increasingly attractive asset.

As inflation rises in the U.S. and foreign nations face currency debasement, the demand for Bitcoin as a store of value could increase, pushing its price significantly higher. Park’s analysis suggests that the combination of a weakened dollar and lower U.S. interest rates could foster an environment where Bitcoin adoption accelerates, potentially leading to “violent” price surges as countries around the world turn to the cryptocurrency as a hedge against the ongoing instability.

A Volatile Road Ahead for Crypto Assets

While Bitcoin could be positioned to benefit from the economic fallout caused by Trump’s tariffs, the short-term market remains volatile. With XRP, Ethereum, and other altcoins experiencing major losses, traders are left to navigate through the choppy waters of a rapidly shifting market landscape.

The announcement of new tariffs has underscored the delicate balance between traditional fiat currencies and decentralized digital assets like Bitcoin. As investors weigh their options, it remains to be seen how these tariffs will shape the global economic landscape and the future of cryptocurrency adoption.