The global crypto market is currently facing a downturn, with top assets like Bitcoin, Ethereum, and XRP posting significant losses. Amid heightened geopolitical tensions and the Federal Reserve’s policy uncertainty, the market is struggling to regain momentum.
One of the main catalysts behind the broader negative trend is the Trump tariffs against the European countries. Rising tensions between these global economic powers are creating risk aversion in markets, with crypto particularly sensitive to shifts in capital flows and liquidity.
What are the Factors Affecting the Crypto Market Fall?
According to the CoinMarketCap data, the crypto market has fallen to $3.08 trillion, down 2.05%. Bitcoin, trading at $91,167, has plunged by 1.97% over the past day. Despite a marginal 0.88% slip over the past week, the coin has seen a monthly surge of 2.87%.
As of press time, Ethereum is valued at $3.099, with a significant plummet of 3.5% in a day. Although the altcoin dipped by 0.95% in a week, it has surged by 3.55% in a month. XRP is also on a similar track, trading below the critical $2 mark. The token has seen significant declines of 2.57%, 6.35%, and 0.26% over the past day, week, and month, respectively.
What are the factors contributing to this downturn? Why is the crypto market down today? Let’s check.
Rising US-EU Tensions
Notably, the current crypto market fall is driven by a sudden change in the broader macro environment. Rising geopolitical tensions tied to President Trump’s proposal to acquire Greenland, along with tariff threats targeting European countries, have significantly impacted the industry.
On January 18, Trump announced that he would impose 10% tariff on eight European countries that oppose his Greenland acquisition plans. These countries include Denmark, France, Germany, Sweden, the Netherlands, Finland, Norway, and the UK. While the 10% tariff would be implemented from February 1, it could be raised to 25% by June 2026, unless negotiations over Greenland take place.
In addition, earlier today, Trump threatened France with a 200% tariff on French wine and champagne as Paris intends to decline his invitation to join his “Board of Peace.” He noted,
“I’ll put a 200 per cent tariff on his wines and champagnes. And he’ll join. But he doesn’t have to join.”
Fed Interest Rate Cut Uncertainty
The crypto market’s current downturn is also fueled by the growing uncertainty surrounding the Federal Reserve’s potential interest rate decisions. While the central bank has reduced rates during the last three FOMC meetings, the bank’s potential move is uncertain.
As per the CME FedWatch Tool, the central bank is less likely to lower the interest rate. The increasing odds indicate that the Fed is likely to maintain the current rate in January and March.
Crypto Liquidation Rise
For the crypto market, the real issue is not the Trump tariffs or the Fed rate cuts. But it is about how quickly investors react to these developments and reassess their investment strategies. Amid these geopolitical tensions and macroeconomic conditions, investors are withdrawing a large amount of risk assets like BTC.
Over the past 24 hours, about $361 million in cryptocurrencies were wiped off across multiple exchanges like Hyperliquid, Bybit, and Bitget. Of this, $322 million was liquidated from long positions, while just $39 million in short positions were removed. Bitcoin alone saw a significant liquidation event of $116 million, with $113 million in long and $3.2 million in short positions wiped off.
