A Trump Tariff Tremor Shakes Crypto, Flushing Out $309M in Long Traders

The crypto market faced a significant liquidity crisis in early 2025, as a wave of forced liquidations totaling $309 million in value underscored the heightened volatility and risk exposure within leveraged trading positions. The event primarily targeted long positions, with over $1.8 billion in leveraged long trades being liquidated in a single day on February 3, according to data from crypto analytics firm CoinGlass. This was attributed to a combination of factors, including heightened macroeconomic uncertainty, regulatory developments, and geopolitical tensions that triggered a broader risk-off sentiment in global markets.

The liquidation wave was closely tied to a policy shift announced by U.S. President Donald Trump, which included the imposition of new trade tariffs. This led to a cascade of panic selling in the crypto market, particularly in high-leverage positions. Bybit reported $666 million in positions being liquidated on February 25, with 90% of those losses attributed to long traders. The volatility was especially pronounced across altcoin markets, with tokens like Solana experiencing a 50% decline by the end of February, which in turn led to over $150 million in liquidations.

The broader impact of these liquidations extended beyond individual traders. Market liquidity, already under pressure due to reduced trading volumes and high leverage usage, deteriorated further during this period. Exchange data showed Bitcoin’s spot trading volume dropping from $44 billion in early February to $10 billion by the end of Q1, while altcoins saw an even steeper decline to $23 billion from $122 billion. This reduction in liquidity raised concerns about the market’s ability to absorb large-scale selling pressure, highlighting the fragility of the system during periods of rapid price swings.

However, the market began to show signs of stabilization by April, as overleveraged long positions were flushed out, reducing the risk of further forced liquidations. CoinGlass noted that this deleveraging process historically creates the conditions for a market bottom to form and facilitates a recovery phase. On April 23, the largest short liquidation of the year occurred, with over $600 million in short positions being cleared—88% of total liquidations for the day. This marked a potential shift in market sentiment, though long liquidations remained significantly larger overall, indicating that bullish sentiment had not yet fully regained dominance.

Analysts have pointed to institutional activity as a key factor in the potential recovery of the crypto market. Despite the turbulence, high-net-worth and institutional investors have continued to accumulate Bitcoin, signaling confidence in its long-term utility and value. The broader institutional adoption, along with the growth of stablecoin balances and improved regulatory clarity, has contributed to a more structured and resilient market environment. These developments suggest that the market is gradually adapting to macroeconomic headwinds and structural changes, setting the stage for a more sustainable growth trajectory.