Crypto Market Drops 2% Amid Political Uncertainty and Leveraged Liquidations

The crypto market experienced a downturn on July 1, 2025, with a dip of nearly 2% in total market cap, which now stands at $3.26 trillion. This decline was marked by a 7% jump in 24-hour trading volume to $103.76 billion, indicating significant market activity driven by panic selling, liquidations, or aggressive dip-buying.

Bitcoin, the leading cryptocurrency, is a significant contributor to this decline, currently trading at $106,025, down 1.58% in the last 24 hours. The primary cause of this drop is the liquidation of leveraged traders, with Bitcoin long liquidations amounting to $5.08 million, while short liquidations were relatively minor at $128K. This liquidation map highlights the over-leveraged positions of bulls, which were auto-liquidated when the price dropped suddenly, fueling a cascading sell-off.

Political uncertainty is another major factor contributing to the market's decline. The U.S. Senate is preparing to vote on a controversial $4.5 trillion bill proposed by Donald Trump, which includes massive tax cuts and military funding but would increase national debt by over $3 trillion. Tech mogul Elon Musk has criticized the bill, warning that every Congressman who supports it will be unseated. This high-voltage political feud has created market-wide uncertainty, making investors risk-averse and contributing to the crypto market's downturn.

Additionally, concerns about the management of new tokenization projects have shaken investor confidence. Backed Finance, the team behind the tokenized stock platform xStocks, has a history linked to DAOstack, a Web3 project that raised $30 million but collapsed in 2022. This past association has sparked fears of mismanagement, particularly in the Real World Assets (RWA) and DeFi sectors, further adding to the market's decline.

Despite the market's downturn, the Fear & Greed Index remains at 64, indicating a sentiment of greed. Many traders view this as a typical buy-the-dip opportunity rather than a sign of further trouble. The climbing trading volume and greedy sentiment index suggest that the situation may reverse soon. Long-term investors should continue to monitor major market movements and potential entry points in the industry.