- Over $1.8B in long positions liquidated as traders misjudged the market bottom.
- Tariff wars and rising inflation fears push investors away from risk assets.
- U.S. tax policies on crypto holdings add further selling pressure.
The crypto market is in freefall, with close to a $200 billion drop in total market value in the last day. Bitcoin and major altcoins tumbled as traders reconsidered their positions.
Experts point to two main things for the sharp downturn: growing global trade tensions and a wave of leveraged liquidations.
Tariff Wars, Fuel Inflation Concerns, Strengthening the Dollar
The U.S. government under the Trump administration is putting in place new tariffs on several countries, including China, Canada, Mexico, and even the European Union and BRICS nations.
This move is raising fears of higher inflation, which makes the U.S. dollar stronger and forces the Federal Reserve to keep a tighter monetary policy. Historically, a strong dollar hurts risk assets like cryptocurrencies, leading many investors to sell off their holdings before things get worse.
Leverage Liquidations Crush Crypto Long Positions
In the last 24 hours, a significant $1.8 billion in long positions were liquidated as retail traders rushed to buy the dip using high leverage. The snowballing liquidations made the downward slide even faster, causing more sell-offs and deepening the market drop.
Analysts have warned for a long time about too much leverage, as it often causes big losses, especially in unstable situations like these.
New Crypto Tax Rules Spark Corporate Asset Dump
Adding to the market chaos, new U.S. tax rules on crypto holdings are pushing companies to unload their digital assets. Some firms, worried about potential 35% tax rates on peak valuations, are actively selling Bitcoin and Ethereum to avoid large tax bills.
Related: Bitcoin Price Jumps 8% as US Strategic Crypto Reserve Plan Offsets China Stock Concerns
Also, fewer institutional ETF inflows are reducing liquidity, making the downward trend worse.
Crypto Market’s Next Move: Uncertainty Prevails
While some traders believe this is just a short-term shakeout before the next price surge, others caution that ongoing geopolitical and economic factors could cause even bigger drops.
Related: European Crypto Markets Face Disruption as Binance to Delist Tether USDT, DAI, and Other Stablecoins
Market participants are carefully watching Federal Reserve policies, ETF inflows, and any possible regulatory changes to figure out the crypto market’s next move.
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