$875 Million Lost as Trump's European Tariffs Spark Crypto Downturn

President Donald Trump’s recent announcement regarding heightened tariffs on eight European nations triggered a significant cryptocurrency market downturn, leading to $875 million in liquidations within just 24 hours. Bitcoin fell by 3%, dropping to $92,000, as traders reduced their risk exposure.

Key Takeaways:

Trump’s announcement of increased tariffs on eight European countries led to an $875 million liquidation in the cryptocurrency market.
Bitcoin dropped 3% amid rising geopolitical tensions, prompting traders to hedge against risks.
European leaders swiftly condemned the tariffs, signaling potential retaliatory measures that could escalate tensions between allies.
Broader markets experienced declines, while gold prices soared as investors sought safe havens during this uncertainty.

This unexpected tariff development sent ripples across global markets during a low-activity holiday period, resulting in 90% of liquidated positions moving into long positions while European officials held urgent meetings, threatening strong retaliatory actions.

In a post on Truth Social, Trump declared that Denmark, Norway, Sweden, France, Germany, the UK, the Netherlands, and Finland would be subjected to a 10% tariff starting February 1, escalating to 25% by June 1, “until such time as a Deal is reached for the Complete and Total purchase of Greenland.”

This move faced immediate backlash from European leaders. French President Emmanuel Macron urged the activation of the EU’s “trade bazooka,” which is an anti-coercion tool designed to restrict US access to European markets.

Impact on Derivative Markets

As the tariff news broke during the US holiday period, leveraged crypto positions were quickly unwound, increasing market volatility due to lower liquidity. Data from CoinGlass indicated that $788 million of total liquidations originated from long positions, while short positions accounted for only $83 million. This uneven liquidation suggests traders were overly optimistic about price increases when geopolitical risks emerged.

Trump's Europe Tariffs - CoinGlass Data Table

The exchange Hyperliquid saw the highest liquidations, totaling $262 million, followed closely by Bybit at $239 million and Binance at $172 million, with long positions making up over 90% of all forced liquidations.

Despite a 13% recovery in Bitcoin futures open interest since early January, renewed pressure now looms. Analysts have pointed out that deleveraging might actually strengthen support for future price increases. “Currently, open interest is showing signs of a gradual recovery, indicating a slow return of risk appetite,” noted CryptoQuant analyst Darkfost, although the recent tariff announcement poses a risk to this progress.

Trump's Europe Tariffs - Open Interest In Bitcoin Term

In broader markets, US stock futures fell by 0.7% for the S&P 500 and by 1% for the Nasdaq, while European stock futures dropped by 1.1%, reflecting a generalized caution among investors. Conversely, gold prices surged by 1.5% to record highs as investors sought safety, and the dollar weakened by 0.3% against the yen.

Brian Jacobsen, chief economic strategist at Annex Wealth Management, stated, “The fact that this threat was on social media instead of being formalized into an executive order, along with its delayed implementation, may lead many investors to wait it out rather than panicking,” suggesting that volatility might decrease as markets adjust to the news.

European Leaders Respond to Tariffs

European officials swiftly condemned Trump’s announcement despite existing political divisions. UK Prime Minister Keir Starmer criticized the tariffs on allies as “completely wrong,” while Sweden’s Prime Minister Ulf Kristersson firmly stated, “We will not let ourselves be blackmailed.”

Spanish Prime Minister Pedro Sanchez warned that a US takeover of Greenland “would make Putin the happiest man on earth,” as it would legitimize Russia’s actions in Ukraine and pose significant threats to NATO.

EU foreign policy coordinator Kaja Kallas added that “China and Russia must be having a field day,” benefiting from the discord caused among allies.

In a rapid move, the European Parliament sought to halt the ratification of the EU-US trade agreement negotiated last July, with German MEP Manfred Weber declaring, “The 0% tariffs on US products must be put on hold.”

That agreement had previously removed tariffs on many US goods while imposing a 15% duty on EU products and 50% on steel. It had been criticized for favoring the US but defended for its ability to maintain stability in trade relations.

The EU is now prepared to reintroduce €93 billion in retaliatory tariffs that were previously stalled under last summer’s trade agreement. France is advocating for the activation of the anti-coercion tool that could withdraw US investment protections and restrict access to trade in services.

Deutsche Bank cautioned that the real market risk extends beyond the tariffs themselves. “The weaponization of capital rather than trade flows would be far more disruptive to markets,” warned George Saravelos, Deutsche Bank’s global head of FX research, highlighting that European investors hold approximately $8 trillion in US bonds and equities, which could shift dramatically if tensions rise.

Goldman Sachs estimates that the imposition of a 10% tariff could reduce European earnings-per-share growth by 2 to 3 percentage points, while ING’s Carsten Brzeski predicts that these tariffs may cut a quarter of a percentage point off European GDP this year.