Weekend Correction in the Crypto Market
Over the weekend, the cryptocurrency market witnessed a seismic shift, marking its most significant correction in months. This turbulence was reportedly stimulated by newly announced tariffs from the United States on its trading partners, specifically Canada, Mexico, and China. As the first two days of February closed, the market experienced a staggering 21% retracement from the highs reached just before the news broke, leading to a sense of unease among traders and investors alike.
The Tariff Announcement and Its Ripple Effect
Amid escalating trade tensions, President Donald Trump declared an additional 25% tariff on imports from Canada and Mexico and a 10% tariff on those from China. This announcement unleashed a wave of concern across various markets—none more so than the volatile world of cryptocurrencies. The news prompted Bitcoin (BTC) to plummet 12.5%, landing at $91,000 by the end of Sunday. Ethereum (ETH) didn’t fare any better, witnessing a shocking drop of over 35%, settling at $2,100, a level not seen since September of the previous year.
Altcoins Suffer as Fear of Trade War Grows
As fear of an impending global tariff war began to seep into the market sentiment, most altcoins followed Bitcoin’s downward trajectory. Many experienced sharp pullbacks to their monthly lows, with values collapsing back to the levels seen before the major breakout that had occurred in December. The total capitalization of the crypto market plummeted, reflecting a collective anxiety not felt since August 2024’s infamous “Red Monday.”
The Scale of Liquidations
The weekend’s market turmoil did not just impact prices; it also triggered a massive wave of leverage liquidations, sending shockwaves through the trading community. Initial estimates indicated that liquidations exceeded $2 billion—an alarming figure for any market. However, as further data came to light, it became evident that the actual liquidations could be substantially higher. CoinGlass reported that 743,002 traders faced liquidation in just a 24-hour span, contributing to a total exceeding $2.3 billion, with Ethereum’s liquidations amounting to a staggering $637 million.
Insights from Bybit’s CEO on Liquidations
On Monday morning, Ben Zhou, co-founder and CEO of Bybit, shed light on the true scale of the liquidations, asserting that the "real" total is "a lot more than $2 billion." Zhou’s insights suggested that Bybit alone contributed $2.1 billion to this total, indicating a dramatic increase from the figures recorded by CoinGlass. He explained that the discrepancy arose from limitations in how liquidation data is collated across exchanges, meaning that many liquidations may not have been captured.
"FYI, Bybit 24hr liquidation alone was $2.1B… due to API limitations, CoinGlass didn’t register all the liquidations," Zhou noted.
Potential Implications for Other Exchanges
Zhou surmised that the data discrepancies might extend beyond Bybit, likely affecting other platforms experiencing similar API limitations. This pattern has raised concerns that the total liquidations across the entire crypto market could range anywhere from $8 billion to $10 billion. Such figures would not only eclipse the current estimates but also put the weekend’s correction on par with some of the most turbulent days in crypto history.
Comparing to Past Events
As users began drawing parallels between the recent liquidation figures and events like the FTX collapse or the market crash initiated by the COVID-19 pandemic, Zhou emphasized the need for greater transparency in reporting liquidation data. He pledged to ensure that moving forward, Bybit would release comprehensive liquidation data consistently.
Market Sentiment
The entire situation illustrates how sensitive the crypto market has become to negative news, contrasting sharply with the ability to absorb positive developments. A report from Nansen highlighted this sentiment shift, suggesting that the market now appears more “reactive to negative sentiment than positive news.” As traders and investors navigate this volatile climate, it is evident that the recent tariff introduction has triggered not just price volatility but also a deeper systemic reassessment within the crypto ecosystem.
As analysts and participants aim to comprehend the ramifications of these events, the crypto market continues to evolve, ever responsive to both global economic news and internal market dynamics. This volatility, while daunting, reflects the tumultuous landscape of cryptocurrency—where fortunes can shift dramatically within a weekend, and the only constant is change itself.
