Bitcoin Drops 4% Amid US EU Trade War Escalation

Bitcoin experienced a sudden drop of 4% as markets reacted to the latest developments in the US trade war with the European Union. The price of Bitcoin (BTC) plummeted to a low of $107,367 on Bitstamp before recovering, marking daily losses of up to 4%. This volatility was triggered by comments from US President Donald Trump, who announced a proposed 50% tariff on the European Union starting June 1, 2025, citing stalled negotiations.

Trump's announcement sent shockwaves through global markets, with US stocks immediately reacting at the open. The S&P 500 and Nasdaq Composite Index both saw declines of 1% and 1.2%, respectively. Crypto market participants were not surprised by the reaction, given the historical precedent for tariff-related volatility. Popular trader Skew summarized the situation, noting that the market saw a "flush of long leverage & de-risk selling from spot, all driven by headlines once again."

Data from monitoring resource CoinGlass indicated that 4-hour liquidations reached nearly $350 million, with the 24-hour tally exceeding $500 million. This liquidation event underscored the sensitivity of the market to geopolitical tensions and the potential impact on risk assets. Fellow trader Daan Crypto Trades commented on the market's reaction, stating, "There's the break from the compression with a push from Trump. Markets worldwide obviously not liking the news." He also noted the need to observe how Bitcoin performs relative to equities in the face of renewed trade uncertainty.

The macro outlook, as suggested by trading resource The Kobeissi Letter, highlighted the delicate balance the Trump administration faces. The letter pointed out that excessive tariff pressure could unwind the basis trade, while insufficient pressure could lead to rising inflation expectations. This situation leaves the administration in a challenging position, needing to maintain tariffs while suppressing treasury yields without relying on Federal Reserve cuts. The Federal Reserve's reluctance to hasten interest rate cuts, despite declining inflation, adds complexity to the risk-asset landscape.

As the market sought a rebound, traders focused on key Bitcoin price levels to preserve bullish momentum. Trader Crypto Caesar emphasized the importance of holding the "green zone," an area of interest immediately below $110,000. Another trader, Poseidon, noted the lack of resistance above the current spot price, suggesting potential for easy upside. Skew further highlighted the significance of the $110,000 level, stating that it is crucial for the market to auction above this point for continuation.

In summary, the recent drop in Bitcoin's price was a direct response to the escalating trade tensions between the US and the EU. The market's reaction underscored the interconnectedness of global financial markets and the sensitivity of risk assets to geopolitical developments. As traders and analysts monitor the situation, the focus remains on key price levels and the broader macroeconomic environment to gauge the potential for further volatility or recovery.