Bitcoin Price Declines as US-EU Trade Tensions Trigger $864 Million in Crypto Liquidations

Bitcoin and other significant cryptocurrencies experienced a downturn today as investor anxiety over a potential trade conflict between the United States and the European Union resulted in over $864 million in crypto liquidations.

Key Takeaways

Bitcoin's price dropped significantly amid fears of a US-EU trade war.
Over $864 million in liquidations were observed in the crypto market, with $783 million from long positions.
Key support levels for Bitcoin are being tested, which could indicate further volatility.
The Senate's delay in discussing the U.S. crypto market structure bill has added to market uncertainty.
Momentum indicators suggest a bearish trend for Bitcoin in the near term.

Bitcoin price forms bearish setup as US-EU trade war leads to $864M in crypto liquidations.

As the fear of a trade war looms, Bitcoin's price suffered a notable decrease, plummeting from $95,419 to $92,284, marking a loss of about 3% before stabilizing around $92,672. The fallout extended to other major cryptocurrencies, dragging the total crypto market capitalization down by 2.8% to $3.22 trillion.

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According to data from crypto.news, Bitcoin's price fell sharply during early Asian trading hours on Monday, dropping from $95,419 to $92,284. Although it later stabilized at around $92,672, this marked a 3% loss for the leading cryptocurrency. Other major cryptocurrencies, including Ethereum, BNB, XRP, and Solana, also saw declines, contributing to a total market cap reduction of 2.8% to $3.22 trillion during this trading session.

In the wake of this decline, over $864 million in liquidations occurred across the cryptocurrency market, with $783 million attributed to long liquidations. Data from CoinGlass indicates that a significant portion of these liquidations happened within just 12 hours. Long liquidations occur when a price drop compels traders with bullish positions to sell in order to meet margin requirements, creating a vicious cycle of further price decreases.

Market analysts linked this downturn to rising concerns about a potential tariff conflict between the U.S. and the EU, as tensions escalated over President Donald Trump's threats to impose tariffs on European nations unless certain demands were met. These tariffs could start at 10% on February 1 and increase to 25% by June if an agreement isn't achieved. European leaders have labeled these demands as blackmail, warning they could damage transatlantic relations and the foundation of NATO.

The geopolitical uncertainty has added volatility to a market already troubled by delays in the Senate's discussion of a highly anticipated crypto market structure bill. Following a withdrawal of support from major players like Coinbase, the Senate Banking Committee postponed its markup hearing for the Digital Asset Market Clarity Act, which was originally scheduled for last Thursday.

Additionally, there is growing bearish pressure as outflows from Bitcoin exchange-traded funds (ETFs) continue. Data from SoSoValue indicated that 12 spot Bitcoin ETFs saw net outflows of $394.68 million on Friday, January 16, after a successful four-day period during which $1.8 billion flowed into the funds.

Looking at the daily chart, Bitcoin's price is nearing a critical ascending trendline that has served as support since late November of last year. This support aligns with the 50-day simple moving average (SMA), representing a significant technical confluence level.

Bitcoin price is approaching a key trendline support on the daily chart.

If Bitcoin's price breaks below this support line, it may fall to the December 18 low of $84,500. Conversely, if it manages to rebound above the 50-day SMA, there could be a renewed rally targeting the $98,000 resistance area.

However, momentum indicators like the MACD and RSI lean toward a bearish outlook. The MACD line has formed a bearish crossover with the signal line, while the RSI is approaching the neutral zone after previously being in the overbought territory last week.

Bitcoin price, MACD, and RSI chart.