Original | Odaily Planet Daily (@OdailyChina)
Author | Fu Ruhe (@vincent 31515173)
Recently, the crypto market has continued to decline. After Trump announced the tariff policy, BTC dropped from $105,000 to below $92,000, exacerbating the market's panic sentiment. In addition, several whales transferred ETH from their wallets to CEX for selling, and multiple whales started to short Ethereum, making Ethereum the main "victim" of this round of market downturn.
OKX real-time data shows that as of the time of writing, BTC has fallen below $92,000, currently trading at $94,100, a 24-hour drop of 5.45%;
In addition to BTC, Altcoins led by ETH are also facing a significant decline, with ETH dropping to as low as $2,100, a maximum 4-hour drop of over 30%, and currently trading at $2,540; SOL has also fallen below $190, currently trading at $195.57, a 24-hour drop of 7.4%;
Affected by the overall market downturn, the total crypto market cap has also plummeted rapidly. CoinGecko data shows that the current total crypto market cap has fallen to $3.1 trillion, a 24-hour drop of 12%. The trading enthusiasm of crypto users has also declined, with the Alternative Fear and Greed Index today reporting 44, shifting from Greed to Fear.
In terms of derivatives trading, Coinglass data shows that $2.234 billion in positions were liquidated across the network in the past 24 hours, of which $1.877 billion were long positions and $357 million were short positions. In terms of cryptocurrencies, $408 million in BTC positions and $609 million in ETH positions were liquidated.
Below, Odaily Planet Daily analyzes the reasons for the recent market downturn.
Reason: Why did the crypto market crash at the beginning of the new year?
Trump's tariff policy triggers a global sell-off in risk assets
Recently, the crypto currency market has experienced a significant decline, mainly due to the impact of the new round of tariff policies announced by the Trump administration. On February 1 and February 2, US President Trump signed executive orders to impose tariffs on goods from multiple countries, which directly affected market sentiment, especially in the crypto currency market.
First, Trump announced a 10% tariff on goods from China, and then on February 2, he signed an order to impose an additional 25% tariff on imports from Canada and Mexico. Particularly for energy resources from Canada, an additional 10% tariff will be levied. The implementation of this series of tariff policies has triggered a risk-averse sentiment in the market, leading to a significant drop in crypto currency prices.
Industry analysts believe that Trump's tariff policy has exacerbated market uncertainty, causing investors to flee from risk assets and turn to more conservative investment strategies. BTC Markets CEO Caroline Bowler pointed out that Trump's tariff policy has not only affected the traditional market, but also triggered a panic sell-off in the crypto currency market.
Daniel Yan, co-founder of Matrixport, believes that the current market sell-off is more due to lack of liquidity and follow-up trading by Commodity Trading Advisors (CTAs). He pointed out that although the new tariff policy has limited impact on US productivity and inflation, the over-reaction of market sentiment has led to a short-term decline, but the market is expected to recover quickly.
Robert Kiyosaki, author of "Rich Dad Poor Dad", posted on the X platform that while Trump's new tariff policy may lead to a collapse in the short-term prices of assets such as gold, silver, and BTC, it also provides more buying opportunities for investors.
El Salvador revokes Bitcoin's legal tender status
On January 30, the Salvadoran Congress passed legislation to amend the Bitcoin law to comply with IMF requirements. Ruling party legislator Elisa Rosales stated that this amendment aims to ensure that Bitcoin continues to exist as legal tender, while promoting its "actual application".
However, on February 2, the Salvadoran Congress quietly passed another amendment to the "Bitcoin Law", deciding to revoke Bitcoin's status as legal tender, and change it to be used entirely voluntarily. This amendment was made under pressure from the IMF, which had set the approval of a $1.4 billion loan to El Salvador as a prerequisite, requiring the government to "reduce the risks of Bitcoin".
As the first country in the world to adopt Bitcoin as legal tender, El Salvador has now abandoned Bitcoin's legal tender status, but this move has limited impact on the market, and the country's policy of buying Bitcoin still exists, this is just to meet the IMF's requirements.
Ethereum's performance in this cycle is poor, feared to be abandoned by whales
Reviewing the current cycle, Ethereum's market performance appears to be relatively weak. While it has risen along with the broader market, its gains have lagged far behind the overall market; and each time the market declines, Ethereum's drop is more pronounced, causing concern.
Since the beginning of the year, there has been constant criticism from the community towards the Ethereum Foundation. To respond to these doubts, Vitalik Buterin stepped forward to reassure the community, announcing that a "toll" will be charged on Ethereum's Layer 2 (L2) protocols and that the Ethereum Foundation will be restructured. However, this move does not seem to have had a significant impact on Ethereum's market performance. In the market performance of some well-known Altcoins, Ethereum's decline is still among the top.
Even more disappointing to the community is that whenever the market crashes, the Ethereum Foundation has never been able to step up in a timely manner to boost market confidence, but instead often sees small-scale "selling" from its addresses when the market is rising. This behavior may have displeased the whales, further prompting them to dump their ETH holdings before the crash. Even a whale who was shorting ETH with 50x leverage did not take profits even when ETH approached $2,100, which undoubtedly exacerbated the market's panic sentiment.
According to a post by BitMEX co-founder Arthur Hayes on the X platform, he heard that the ETH position of a trading institution had been liquidated, but no relevant institution has confirmed this yet. If true, the reason for Ethereum's such a sharp decline this round may become clear.
However, industry insiders have different views on the current market. Andrew Kang, a partner at Mechanism Capital, believes that Ethereum may have been oversold at the moment, and the current price may be a buying opportunity, with the price expected to rebound to $2,700.
Summary
The main reason for this round of market decline is the impact of Trump's tariff policy, which directly triggered a risk-averse sentiment in the market, leading to a massive sell-off in the crypto currency market. Although the market's short-term reaction may be excessive, the lack of liquidity and follow-up trading have also played a role in exacerbating the situation, but in the long run, this series of policies may have a complex impact on the crypto asset market.
According to the analysis of Fudan Development Research Institute on Trump's tariff policy, the deadline of April 1 for the trade investigation report will be a key node for whether the tariff policy will be further aggravated.
Odaily Planet Daily reminds users to pay attention to investment risks.
