Bitcoin Drops 4% After Trump Tariff Threat Triggers Risk-Off Move

Bitcoin (BTC) is currently experiencing a consolidation phase after reaching an all-time high of $111,880 last week. This consolidation is driven by significant profit-taking movements and concerns over potential tariff risks, which have cooled the price momentum.

According to a report, strong spot demand and steady exchange-traded fund (ETF) inflows lifted BTC more than 50% from early-April lows. However, President Donald Trump’s tariff threat on European Union imports triggered a risk-off move across global markets, causing a macro shock. This shock, combined with elevated leverage in perpetual futures, led to cascading liquidations, pushing the price below the $107,000 threshold within 36 hours.

This price correction was seen as a necessary cooling movement. Futures funding flipped negative during the pullback, indicating that traders quickly reduced their directional exposure. Open interest also fell as forced sellers exited their positions, which helped to stabilize the market.

Two main groups of sellers drove the flow: dip buyers locking in substantial gains and previously underwater addresses exiting at breakeven. Their combined activity created an "overhead supply glut" that may stall price expansion without a corresponding uptick in inflows. Exchange data shows reduced incremental buying, while perpetual basis rates remain subdued after last week’s shakeout.

The analysis suggests that a period of sideways trading or mild retracement would reinforce market structure by flushing excess leverage and allowing spot demand to re-establish control. Such consolidation has historically preceded fresh advances. However, the report cautioned that the depth of any pullback depends on macro events, including further clarity on the proposed tariffs and whether ETF allocations resume at a recent clip.

Amid the macro uncertainty and profit-taking risks, the report expects Bitcoin to oscillate between last week’s $106,000 intraday low and the $111,000 area until fresh spot demand absorbs overhead supply or a deeper reset draws buyers lower. Seven weekly green candles illustrate persistent upward momentum, the longest streak since October 2023. However, the report noted that such moves often cool as leverage normalizes.

On-chain data corroborate the slowdown. The cost basis for short-term holders (STH Realized Price) climbed to $95,164, and selling accelerated once the market reclaimed that level. Short-term holders booked $11.4 billion of profit over the past 30 days, compared with just $1.2 billion in the prior month. Realized profit peaked at $747 million a day, a level exceeded on only about 8% of trading sessions in Bitcoin’s history.

The report then warned that the STH Realized Profit/Loss Ratio surged to territory typically associated with late-stage rallies. In this stage, heavy distribution could cap the upside if new capital does not arrive to absorb it. This highlights the importance of continued inflows and spot demand to sustain the current price levels and prevent a deeper correction.