Bitcoin’s price plummeted by 4% on 23 May 2025, dipping to $107,367 on Bitstamp, as markets reeled from US President Donald Trump’s escalating rhetoric on trade tariffs with the European Union. The sudden volatility wiped out nearly $350 million in leveraged positions within four hours, with total cryptocurrency liquidations exceeding $500 million over 24 hours. The sharp sell-off, driven by Trump’s threat of a 50% tariff on EU imports starting 1 June, underscores the crypto market’s sensitivity to macroeconomic shocks and trade policy uncertainty.
The crypto market had been riding high, with Bitcoin touching an all-time high of $109,000 just days earlier on 21 May, buoyed by a stock market recovery and positive sentiment following Trump’s inauguration. However, the mood shifted abruptly as Trump signalled a hardline stance on trade, accusing the EU of offering insufficient concessions in ongoing negotiations. His comments, coupled with reports of the EU preparing $108 billion in retaliatory tariffs, sent shockwaves through global markets. European indices, including the STOXX 600, fell 1.7%, while German carmakers like BMW and Volkswagen saw sharp declines, amplifying risk-off sentiment that spilled into cryptocurrencies.
Bitcoin’s drop reflects its growing correlation with traditional markets, particularly in times of geopolitical tension. Traders, caught off guard by the tariff news, faced massive liquidations, with long positions bearing the brunt. Data from CoinGlass highlighted the scale: $87 million in Bitcoin long positions were wiped out in a single day, dwarfing the $15 million in short liquidations. This imbalance suggests over-leveraged bullish bets were particularly vulnerable to the sudden shift in market dynamics. Analysts noted that Bitcoin’s role as a risk asset, rather than a safe haven like gold, exacerbated its losses as investors rotated capital back to US equities amid tariff-driven uncertainty.
The broader context of Trump’s trade policies adds complexity. While his administration recently paused steep tariffs on China, fostering hopes of de-escalation, the EU standoff signals a return to aggressive protectionism. Treasury Secretary Scott Bessent, speaking on Fox News, suggested the tariff threat was a tactic to pressure the EU into better trade terms, but markets interpreted it as a prelude to a broader trade war. The Kobeissi Letter, a trading resource, warned that excessive tariff pressure could unwind the basis trade, while insufficient pressure might stoke inflation fears, placing the Trump administration in a delicate balancing act.
For Bitcoin, the immediate outlook remains cautious. CryptoQuant analysts observed significant Bitcoin inflows to exchanges like Coinbase, indicating potential selling pressure. Meanwhile, the Federal Reserve’s reluctance to cut interest rates, despite declining inflation, limits upside for risk assets like cryptocurrencies. Traders are now eyeing whether Trump can navigate a middle ground—maintaining tariffs without spiking treasury yields—to stabilise markets. Until then, Bitcoin’s price action suggests more volatility ahead, with macroeconomic headwinds overshadowing its recent bullish momentum. Investors are advised to brace for further turbulence as trade talks unfold.
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