Trump's Tariffs Trigger $500M Crypto Liquidations, Bitcoin Drops 5.6%

President Donald Trump's announcement of sweeping tariffs on US trading partners sent shockwaves through global markets, including the crypto space. The tariffs, which impose a minimum 10% levy on all exporters to the United States, with higher rates targeting major trading partners, triggered significant market volatility and liquidations.

Bitcoin, the leading cryptocurrency, initially showed signs of optimism, reaching $88,500 as investors hoped for manageable long-term effects. However, the euphoria was short-lived as the full scope of the tariffs became known. Bitcoin quickly retreated to around $83,500, effectively erasing all gains from earlier in the week. Ethereum followed a similar pattern, dropping from $1,934 to $1,797 following the announcements.

The sudden price movements triggered substantial liquidations across crypto futures. Data shows approximately $450-500 million in combined liquidations of both long and short positions within a 24-hour period. Bitcoin-tracked futures registered over $172 million in liquidations alone. Ethereum futures saw $120 million wiped out, with smaller altcoins accounting for an additional $50 million. Nearly 160,000 traders were affected by the market turbulence. The largest single liquidation was an $11.97 million ETHUSDT position on Binance. Interestingly, the liquidations hit both bullish and bearish positions almost equally. Long positions accounted for $257 million in liquidations, while short positions saw $232 million wiped out.

The effects of Trump’s tariff announcement extended well beyond the crypto space. Asian markets tumbled early Thursday in reaction to the news. U.S. 10-year Treasury yields slumped to their lowest level in more than five months. Meanwhile, gold prices set yet another record high as investors sought safe-haven assets. The total crypto market capitalization decreased by approximately $200 billion from its peak. The Crypto Fear & Greed Index plunged to a score of 25, indicating “extreme fear” among market participants.

Despite the immediate market reaction, some analysts suggest the tariff clarity could benefit markets in the long term. David Hernandez, a crypto investment specialist, noted that markets experienced volatility during Trump’s speech but added that clarity could be positive going forward. “Although the tariff rates were slightly higher than expectations, the announcement provided much-needed certainty on the scope and scale of the policy,” Hernandez said. “Markets thrive on certainty, and with speculation now largely removed, institutional investors may see an opportunity to take advantage of compressed valuations.”

US Treasury Secretary Scott Bessent urged US trading partners against taking retaliatory measures. He argued that the announced tariffs represent “the high end of the number” if countries don’t add more levies in response. Rachael Lucas, a crypto analyst, described the brief price surge before the decline as “uncertainty relief,” followed by a sell-off as the full tariff details emerged. “On BTC Markets, trading volume surged 46% as local traders scrambled to reposition. Big players took profit on the spike, while smaller investors hesitated,” Lucas noted in a statement. She warned that if China or the European Union “hit back hard,” another round of panic selling could follow. Global responses will be key for market direction in the coming days.

Despite the short-term challenges, some analysts maintain optimism about Bitcoin’s long-term prospects. Certain forecasts suggest Bitcoin could reach $200,000 by the end of 2025, with some projections as high as $500,000 if the U.S. establishes a strategic Bitcoin reserve. For now, the crypto market continues to digest the implications of Trump’s tariff policies as traders adjust their positions and await potential responses from affected trading partners.